EXECUTION VERSION

TRANSFER RESTRICTIONS AGREEMENT

This TRANSFER RESTRICTIONS AGREEMENT (this ?Agreement?), dated as of June 13, 2006, is by and among (i) Alliance Holdings GP, L.P., a Delaware limited partnership (?AHGP?), (ii) Alliance GP, LLC, a Delaware limited liability company (the ?General Partner?), (iii) C-Holdings, LLC, a Delaware limited liability company (?C-Holdings?), (iv) Joseph W. Craft III (?Craft?), in his individual capacity, (v) Alliance Resource Holdings II, Inc., a Delaware corporation (?ARH II?), (vi) Alliance Resource Holdings, Inc., a Delaware corporation (?ARH?) and wholly owned by ARH II, (vii) Alliance Resource GP, LLC, a Delaware limited liability company (the ?SGP?) and wholly owned by ARH, and (viii) each of the individuals and trusts identified as Management Holders on the signature pages hereto (collectively, the ?Management Holders?).

Recitals

A. The SGP entered into that certain Amended and Restated Contribution Agreement, dated as of April 14, 2006, by and among AHGP, the General Partner, Alliance Management Holdings, LLC (?AMH?), AMH II, LLC (?AMH II?), the SGP, ARM GP Holdings, Inc. and Alliance Resource Management GP, LLC (as the same may be amended, modified or supplemented from time to time in accordance with its terms, the ?Contribution Agreement?), pursuant to which, in connection with the initial public offering of the AHGP Common Units, the SGP contributed to AHGP all of the common units of Alliance Resource Partners, L.P. held by the SGP in exchange for AHGP Common Units (the ?Contribution Agreement AHGP Common Units?);

B. Pursuant to that certain Purchase and Exchange Agreement, dated as of June 13, 2006, by and among ARH II, Craft, and each other stockholder of ARH II listed therein (as the same may be amended, modified or supplemented from time to time in accordance with its terms, the ?Purchase and Exchange Agreement?), each such stockholder of ARH II, other than Craft, conveyed all of such stockholder?s ARH II shares of common stock in a transaction whereby (i) a portion of such stockholders? shares were conveyed to Craft in exchange for AHGP Common Units held by Craft (collectively, the ?Purchase and Exchange Agreement AHGP Common Units?), which AHGP Common Units were obtained by Craft in connection with the AMH Liquidation and the AMH II Liquidation, and (ii) the balance of the stockholders? shares were redeemed by ARH II, for cash; as a result of the transactions contemplated by the Purchase and Exchange Agreement, Craft has become the record and beneficial owner of all of the issued and outstanding shares of capital stock of ARH II;

C. In connection with the dissolution and liquidation of each of AMH and AMH II, pursuant to separate Plans of Dissolution and Liquidation, dated as of June 13, 2006, AMH and AMH II distributed their assets and property, including the AHGP Common Units held by AMH and AMH II, to the Management Holders who are members, respectively, of AMH and AMH II

on the date hereof (the ?AMH Liquidation? and the ?AMH II Liquidation?, as the case may be; and the AHGP Common Units distributed by AMH and AMH II, respectively, in connection with the AMH Liquidation and the AMH II Liquidation are referred to herein as, respectively, the ?AMH Liquidation AHGP Common Units? and the ?AMH II Liquidation AHGP Common Units?);

D. In connection with the transactions contemplated by the AMH Liquidation, AMH II Liquidation and the Purchase and Exchange Agreement, the Management Holders who are members of AMH II have agreed to contribute, pro rata, to a newly-formed company known as Alliance Management Holdings III, LLC (?AMH III?) 600,000 AMH II Liquidation AHGP Common Units distributed to such Management Holders in connection with the AMH II Liquidation for the purpose of establishing an employee incentive retention program or plan to be maintained by AMH III (such 600,000 units, the ?Employee Incentive Units?); and

E. To induce the parties hereto, as applicable, to enter into the transactions contemplated by the AMH Liquidation, the AMH II Liquidation and the Purchase and Exchange Agreement, such parties have agreed to be bound by restrictions on the transfer of the Restricted Securities, subject to the terms and conditions hereof.

NOW, THEREFORE, for and in consideration of the foregoing recitals, mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

ARTICLE I.

DEFINITIONS

?Affiliate? shall have the meaning ascribed to such term in Rule 12b-2 of the general rules and regulations under the Securities Exchange Act of 1934, as in effect on the date of this Agreement.

?Agreement? has the meaning specified in the introductory paragraph hereto.

?AHGP? has the meaning set forth in the introductory paragraph hereto.

?AHGP Common Units? means the common units of AHGP.

?AHGP IPO? means the initial public offering of AHGP Common Units, which securities began trading on NASDAQ on May 10, 2006.

?AMH? has the meaning set forth in the recitals hereto.

?AMH Liquidation? has the meaning set forth in the recitals hereto.

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?AMH Liquidation AHGP Common Units? has the meaning set forth in the recitals hereto.

?AMH II? has the meaning set forth in the recitals hereto.

?AMH II Liquidation? has the meaning set forth in the recitals hereto.

?AMH II Liquidation AHGP Common Units? has the meaning set forth in the recitals hereto.

?AMH III? has the meaning set forth in the recitals hereto.

?Approved Transfer? has the meaning specified in Section 2.02(c)(v).

?ARH II? has the meaning set forth in the introductory paragraph hereto.

?BOK Loan Documents? means that certain Loan Agreement, dated on or about June 9, 2006, by and among ARH II, Bank of Oklahoma, N.A. and certain other banks a party thereto, as lenders, and Bank of Oklahoma, N.A., as agent, pursuant to which such banks have agreed to make available to ARH II a revolving credit facility in the amount of up to $77,000,000 in order to, among other things, enable ARH II to fund the cash purchase price due to the ARH II stockholders under the Purchase and Exchange Agreement, together with all other documents, guarantees, pledge agreements (including the pledge entered into by the SGP in favor of such lenders), promissory notes and other documents and instruments entered into by ARH II or any other party guarantying or securing the indebtedness thereunder, and any other loan document, security agreement or guaranty entered into with any financial institution in connection with the refinancing, in whole or in part, of the indebtedness under such Loan Agreement, in each case as any thereof shall be amended, amended and restated, modified, supplemented or renewed from time to time in accordance with the terms thereof.

?BOK Pledge? has the meaning set forth in Section 2.04.

?Business Day? means any day other than a Saturday, Sunday, or a legal holiday for commercial banks in New York, New York.

?C-Holdings? has the meaning set forth in the introductory paragraph hereto.

?Contribution Agreement? has the meaning set forth in the recitals hereto.

?Contribution Agreement AHGP Common Units? has the meaning set forth in the recitals hereto.

?Craft? has the meaning set forth in the introductory paragraph hereto.

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?Craft Approval Notice? has the meaning specified in Section 2.02(b)(i).

?Craft Denial Notice? has the meaning specified in Section 2.02(b)(ii).

?Craft Holder? has the meaning specified in Section 2.06.

?Craft Transaction? has the meaning specified in Section 2.06.

?Craft Transaction Notice? has the meaning specified in Section 2.06(a).

?De Minimis Holder? shall mean a Holder who holds less than a specified number of Restricted Securities, which number shall be determined from time to time by a majority of the members of the Disinterested GP Board, in which case notice thereof shall be delivered to the Holders by the Disinterested GP Board as soon as reasonably practicable following any such determination.

?Disinterested GP Board? means the members of the GP Board other than (i) Craft, (ii) any spouse, parent, child, grandchild, sibling or other relative of Craft who is a member of the GP Board, if any, and (iii) any other member of the GP Board who shall have received from Craft or any Affiliate of Craft any compensation during any of the three (3) prior years (other than compensation paid to such member by the General Partner or the managing general partner of Alliance Resource Partners, L.P. with respect to such member?s services as a member of the Board of Directors, or any committee, thereof).

?Disinterested GP Board Notice? has the meaning specified in Section 2.02(c)(v).

?Drag-Along Holder? has the meaning specified in Section 2.06(c).

?Employee Incentive Units? has the meaning set forth in the recitals hereto.

?Entity? means any corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization, government or any agency, instrumentality or political subdivision thereof, or any other form of entity.

?Equity Rights? shall mean (i) all shares of capital stock, all limited liability company interests, all rights to the income, gain, loss or deduction of any partnership or other entity, all profit sharing rights or stock appreciation rights or phantom stock rights (or any similar interest), (ii) all options or warrants (or similar rights) that are exercisable or exchangeable for or convertible into of the items described in clause (i) hereof, and (iii) all debt instruments or other instruments or securities that are convertible into or exchangeable for any of the items described in clause (ii) or (iii) hereof.

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