Exhibit 2.6
STOCK PURCHASE AGREEMENT
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This is a Stock Purchase Agreement, dated September 2, 1998 (this
"Agreement"), among (i) West Virginia-Indiana Coal Holding Company, Inc., a
Delaware corporation ("Purchaser"); and (ii) Ronnie G. Dunnigan, Gary L. Barker,
the Gary Lynn Barker Trust, the Tawnya Ann Barker Trust, the Steffanie April
Francis Green Trust, the Samuel Aaron Francis Trust, Royce K. Traylor, Carl D.
Heldt, Jack C. Fowler, Daniel R. Rambo, David R. Adams and Harry W. Hearn
(collectively, the "Shareholders"), who are the Shareholders of Kindill Holding,
Inc. (the "Company").
RECITALS
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A. The Company is engaged in the business of mining coal in Indiana.
B. The Shareholders collectively own one hundred percent (100%) of the
issued and outstanding shares of the capital stock of the Company (the "Shares")
in the following amounts:
SHAREHOLDERS SHARES CURRENTLY OWNED
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Ronnie G. Dunnigan 3,984
Gary L. Barker 1,754
Gary Lynn Barker Trust 877
Tawnya Ann Barker Trust 877
Samuel Aaron Francis Trust 896
Steffanie April Francis Green Trust 896
Royce K. Traylor 143
Carl D. Heldt 143
Jack C. Fowler 143
Daniel R. Rambo 143
David R. Adams 72
Harry W. Hearn 72
C. The Shareholders wish to sell, and Purchaser wishes to purchase, all
of the pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual benefits and covenants
contained herein, and subject to the terms and conditions set forth herein, the
parties agree as follows:
ARTICLE 1
DEFINITIONS
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1.1 Definitions. As used in this Agreement, the following terms shall ha
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following meanings:
(a) "Affiliate" of any Person shall mean (i) a Person that, directly
or indirectly, through one or more intermediaries, controls or is controlled by,
or is controlled by a Person that controls, such Person; (ii) any trust or
estate in which such Person has a beneficial interest or as to which such Person
serves as a trustee or in another fiduciary capacity; and (iii) any spouse,
parent or lineal descendent of such Person. As used in this definition,
"control" shall mean possession, directly or indirectly, of power to direct or
cause the direction of management or policies, whether through ownership of
securities, partnership or other ownership interests, by contract or otherwise.
(b) "Agent" shall mean Ronnie G. Dunnigan in his capacity as agent for
the Shareholders as provided in Section 12. 1 (c).
(c) "Approval" shall mean each and every authorization , approval,
consent, license, filing and registration by, with or from any nation or state
or other political subdivision thereof or by or with any regulatory or
governmental authority of any nation or state or other political subdivision
thereof or by or with any regulatory or governmental authority of any nation or
state or other political subdivision thereof or international organization, self
regulatory organization or stock exchange, necessary to authorize or permit the
execution, delivery or performance of this Agreement or any other document
contemplated hereby or for the validity enforceability hereof or thereof.
(d) "AWW" shall have the meaning given in Section 3.6
(e) "Bassco Option" shall mean the option held by Bassco Valley, LLC
to purchase unissued shares of the common stock of the Company representing
Fifty-Eight and One Tenth percent (58. 1 %) of the outstanding shares of common
stock of the Company on a fully diluted basis currently held by the
Shareholders.
(f) "Bonds" shall have the meaning given in Section 3.34(b).
(g) "Business Days" shall have the meaning given in Section 1.3(i).
(h) "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation & Liability Act, 42 USC (S)(S) 9601, et seg. and "CERCLIS" shall
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mean the Comprehensive Environmental Response, Compensation and Liability
Information System.
(i) "Charges" shall have the meaning given in Section 3.3.
(j) "Closing" shall mean the consummation of the transactions
contemplated in this Agreement in accordance with the provisions of Article 9.
(k) "Closing Date" shall have the meaning given in Section 7.8
(l) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(m) "Controlled Group Liability" shall mean any and all liabilities
(i) under Title IV or ERISA, (ii) under Section 302 of ERISA, (iii) under
Sections 412 and 4971 of the Code, (iv)
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as a result of a failure to comply with the continuation coverage requirements
of Section 601 et seq. of ERISA and Section 4980B of the Code, and (v) under
corresponding or similar provisions of foreign laws or regulations, other than
such liabilities that arise solely out of, or relate solely to, the Employee
Benefit Plans.
(n) "Employee Benefit Plan" shall mean any employee benefit plan,
program, policy, practices or other arrangement providing benefits to any
current or former employee, officer or director of the Company or the Subsidiary
or any beneficiary or dependent thereof that is sponsored or maintained by the
Company or the Subsidiary or to which the Company or the Subsidiary contributes
or is obligated to contribute, whether or not written, including, without
limitation, any employee welfare benefit plan within the meaning of Section 3(l)
of ERISA, any employee pension benefit plan within the meaning of Section 3(2)
of ERISA (whether or not such plan is subject to ERISA) and any bonus,
incentive, deferred compensation, vacation, stock purchase, stock option,
severance, employment, change of control or fringe benefit plan, program or
agreement, and "Employee Benefit Plans" means all such plans, programs,
policies, practices and arrangements, collectively.
(o) "Environmental, Mining and Safety Requirements" shall mean all
federal, state and local statutes, regulations, ordinances, permits, judicial
and administrative orders and determinations, and similar provisions having the
force and effect of law, all contractual obligations and all common law
concerning public health and safety, worker health and safety, mine health or
safety, surface and underground mining, mineral processing or transport, mine
reclamation, pollution or protection of the environment, including, without
limitation, all those relating to the presence, use, production, generation,
handling, transport, treatment, storage, disposal, distribution, release,
runoff, containment, control, or clean-up of any Hazardous Substances, Oils,
Pollutants or Contaminants (as such terms are defined in the National Oil and
Hazardous Substances Pollution Contingency Plan, 40 C.F.R. (S) 300.5) and any
mining wastes or byproducts.
(p) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended and all regulations promulgated thereunder as in effect from
time to time.
(q) "ERISA Affiliates," with respect to any entity, trade or business
that is a member of a group described in Section 414(b), (c), (in) or (o) of the
Code or Section 4001(b)(1) of ERISA that includes the first entity, trade or
business or that is a member of the same "controlled group" as the first entity,
trade or business pursuant to Section 4001(a)(14) of ERISA.
(r) "Financial Statements" shall have the meaning given in Section
3.7(a), copies of the Financial Statements being attached hereto as Annex
1.1(p).
(s) "GAAP" shall mean generally accepted accounting principles in
effect from time to time.
(t) "Hayman Agreement" shall mean that certain Stock Purchase
Agreement dated September 2, 1998, between Hayman Holdings, Inc. and Purchaser
pursuant to which
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Purchaser shall acquire all the outstanding capital stock of Hayman Holdings,
Inc. and thereby acquire the Bassco Option.
(u) "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and the regulations and Pre-merger Notification and Report Form
promulgated thereunder.
(v) "Instrument" shall mean any written agreement, contract,
arrangement, mortgage, indenture, obligation or commitment.
(w) "Intellectual Property" shall mean trade names, trademarks or
service marks, together with the good will associated therewith; copyrights;
pending or issued registrations for any of the foregoing; patents and patent
applications; unpatented inventions; trade secrets and other confidential or
proprietary information, computer programs, processes, formulas and methods; and
all other intangible property rights of any kind.
(x) "IRS" shall mean the Internal Revenue Service.
(y) "Kindill Mining" shall mean Kindill Mining, Inc. an Indiana
corporation.
(z) "Kindill Permits" shall have the meaning given in Section
3.34(a).
(aa) "Leased Real Property" shall have the meaning given in Section
3.27(a).
(bb) "Leased Tangible Assets" shall have the meaning given in Section
3.12(b).
(cc) "Liabilities" (whether or not capitalized) shall mean all
accounts payable, notes payable, liabilities, commitments, indebtedness or
obligations of any kind whatsoever, whether absolute, accrued, contingent,
matured or unmatured, of the Company, or to which any property or assets of the
Company are subject.
(dd) "Licenses" shall have the meaning given in Section 3. 11.
(ee) "Loss" shall have the meaning given in Section 10-2.
(ff) "Material" (whether or not capitalized) shall include any matter
which might influence Purchaser's decision to consummate the transactions
contemplated herein.
(gg) "Material Adverse Effect" shall mean an effect, event, occurrence
or state of facts that, individually or when aggregated with other effects,
events, occurrences or states of facts, is materially adverse to (i) the assets,
business, property, results of operations, condition (financial or otherwise) or
prospects of the specified entity and its subsidiaries taken as a whole, (ii)
the ability of the specified entity to perform its obligations under this
Agreement or any of the Other Documents, or (iii) the validity or enforceability
of this Agreement or any of the Other Documents or, when used with respect to
the Company, the material rights or remedies of Purchaser thereunder (in any
capacity).
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(hh) "Mid-Year Balance Sheet" shall have the meaning given in Section
3.7(a).
(ii) "Multi-employer Plan" shall mean any "multi-employer plan" within
the meaning of Section 4001(a)(3) of ERISA.
(jj) "Notices" shall have the meaning given in Section 12.1.
(kk) "Other Documents" shall mean the Royalty Termination Agreement
and all other agreements, certificates, opinions, Instruments or documents
contemplated by, required by or referred to in, this Agreement for the
consummation of the transactions contemplated hereby.
(ll) "Owned Real Property" shall have the meaning given in Section
3.27(b).
(mm) "Owned Tangible Assets" shall have the meaning given in Section
3.12(a).
(nn) "Permitted Charges" shall mean (i) Charges for taxes and
assessments or governmental charges not yet due or which are being contested in
good faith and by appropriate proceedings and for which adequate reserves have
been established and which are accurately reflected in the Financial Statements;
(ii) Charges in favor of landlords, carriers, warehousemen, mechanics, workmen
and materialmen and construction or similar liens arising by operation of law or
incurred in the ordinary course of business for sums not yet due or that are
being contested in good faith and for which adequate reserves have been
established and which are accurately reflected in the Financial Statements;
(iii) Charges in respect of pledges or deposits under worker's compensation laws
or similar legislation, unemployment insurance or other types of social security
or to secure the performance of tenders, statutory obligations, surety and
special Bonds, bids, leases, government contracts, performance and return of
money Bonds and similar obligations, each of which is accurately reflected in
the Financial Statements; (iv) Charges reflected in the Financial Statements;
(v) Charges to be discharged at or prior to Closing; (vi) rights reserved to or
vested in any governmental authority to control or regulate any Real Property or
interests therein in any manner, and all laws of any governmental authority;
(vii) Charges related to the Debt Instruments; and (viii) with respect to real
property used or held for mining purposes, easements, rights-of-way and other
Charges typically found on real property used for mining purposes, which Charges
do not materially impair mining operations conducted on, under or upon any
parcel or parcels of such Real Property.
(oo) "Permits" shall have the meaning given in Section 3.34(a).
(pp) "Person" shall mean any person, firm, trust, partnership,
corporation or other business entity.
(qq) "Plan" shall mean any Employee Benefit Plan other than a Multi
employer Plan.
(rr) "Purchase Price" shall have the meaning given in Section 2.2.
(ss) "Qualified Plans" shall have the meaning given in Section
3.21(c).
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(tt) "Real Property" shall mean the Owned Real Property and the
Leased Real Property, collectively.
(uu) "Related Party Transactions" shall have the meaning given in
Section 3.29(a).
(vv) "Return" shall mean any tax return, statement, report or form
(including) estimated tax returns and reports and information returns and
reports) required to be filed with any Taxing Authority with respect to Taxes.
(ww) "Rules" shall have the meaning given in Section 11.4.
(xx) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, as the same may
be amended from time to time.
(yy) "Shareholders' knowledge" shall have the meaning given in
Section 12.7.
(zz) "SMCRA" shall mean the Surface Mining Control and Reclamation
Act of 1977, as amended.
(aaa) "Subsidiary" shall mean Kindill Mining and AWW, collectively.
(bbb) "Tax" or "Taxes" shall mean any income, alternative or add-on,
ad valorem, transfer, withholding, franchise, profits, license, payroll,
employment, excise, severance, stamp, occupation, premium, property, land value
increment, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever
imposed on the Company or its Subsidiary and together with any interest or any
penalty, addition to tax or additional amount imposed with respect to any
interest or any penalty, addition to tax or additional amount imposed with
respect to any of the foregoing taxes by any Taxing Authority.
(ccc) "Taxing Authority" shall mean any U.S. federal, state, local or
foreign governmental authority responsible for the imposition of any relevant
Tax.
(ddd) "Royalty Termination Agreement" shall mean the agreement among
the Company, Kindill Mining, Power Equity Sales, LLC and Sam Francis, dated
September 2, 1998, terminating the Exclusive Sales Agreement, dated October 1,
1997, among the Company, Kindill Mining and Power Equity Sales, LLC!, attached
hereto as Annex 1.1 (ddd).
(eee) "Withdrawal Liability" shall mean liability to a Multi-employer
Plan as a result of a complete or partial withdrawal from such Multi-employer
Plan.
1.2 Additional Terms. Other capitalized terms used in this Agreement but
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not defined in Section 1.1 above shall have the meanings ascribed to them
wherever such terms first appear in this Agreement; or, if no meanings are so
ascribed, the meanings customarily associated with such terms in the coal mining
industry.
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1.3 Rules of Interpretation.
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(a) The singular includes the plural and the plural includes the
singular.
(b) The word "or" is not exclusive.
(c) A reference to a Person includes its permitted successors and
permitted assigns.
(d) Except as otherwise defined herein, accounting terms have the
meanings assigned to them by generally accepted accounting principles, as
applied by the accounting entity to which they refer.
(e) The words "include," "includes" and "including" are not limiting.
(f) A reference in a document to an Article, Section, Exhibit,
Schedule, Annex or Appendix is to the Article, Section, Exhibit, Schedule, Annex
or Appendix of such document unless otherwise indicated. Exhibits, Schedules,
Annexes or Appendices to any document shall be deemed incorporated by reference
in such document.
(g) References to any document, Instrument or agreement (a) shall
include all exhibits, schedules and other attachments thereto, (b) shall include
all documents, Instruments or agreements issued or executed in replacement
thereof, and (c) shall mean such document, Instrument or agreement, or
replacement or predecessor thereto, as amended, modified and supplemented from
time to time and in effect at any given time.
(h) The words "hereof," "herein" and "hereunder" and words of similar
import when used in any document shall refer to such document as a whole and not
to any particular provision of such document.
(g) References to "days" shall mean calendar days, unless the term
"Business Days" shall be used. "Business Days" shall mean all days other than
any Saturday, Sunday or legal holiday in Kentucky.
(h) This Agreement and the Other Documents are the result of
negotiations among, and have been reviewed by, Purchaser and the Shareholders.
Accordingly, this Agreement and the Other Documents shall be deemed to be the
product of all parties thereto, and no ambiguity shall be construed in favor of
or against any party.
ARTICLE 2
PURCHASE AND SALE
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2.1 PURCHASE OF THE SHARES. Subject to the terms and conditions of this
Agreement, the Shareholders hereby agree to sell, transfer and deliver to
Purchaser, and Purchaser hereby agrees to purchase, the Shares.
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2.2 Purchase Price. The purchase price (the "Purchase Price") for the
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Shares shall be Three Million Eight Hundred Eight Thousand Four Hundred Twenty-
Five Dollars ($3,808,425.00), which shall be paid to the Shareholders by wire
transfer of immediately available funds.
2.3 Allocation of Purchase Price. The Shareholders agree to allocate the
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Purchase Price with respect to the Shares among themselves as provided in
Schedule 2.3 attached hereto. The parties agree to file any and all applicable
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Tax Returns and other required tax schedules in accordance with such allocation
and Code Section 1060 and will not adopt or otherwise assert tax positions
inconsistent therewith. The parties each shall prepare and file completed Form
8594 for the taxable year in which the Closing takes place, which form shall be
consistent with the requirements set forth in this Section 2.3.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
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The Shareholders, jointly and severally, represent and warrant to Purchaser
that to the best of the knowledge of each of the Shareholders (except with
respect to the representations and warranties contained in Sections 3.1, 3.2,
3.3, 3.4, 3.5 and 3.6, which shall not be qualified with respect to the
knowledge of any Shareholder) as of the date hereof and as of the Closing Date:
3.1 Organization, Power, Authority, Etc.
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(a) The Company is validly organized and existing and in good standing
under the laws of the Commonwealth of Kentucky and the Subsidiary is validly
organized and existing and in good standing under the laws of the State of
Indiana. Each of the Company and the Subsidiary is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction where the
nature of its business makes such qualification necessary except for such
failures to be so qualified as would not, individually or in the aggregate, have
a Material Adverse Effect on the Company, and it has full corporate power and
authority to own and hold under lease its property and to conduct its business
substantially as presently conducted by it, except for such failures to have
power and authority as could not reasonably be expected to have a Material
Adverse Effect on the Company. Schedule 3.01 lists the jurisdictions in which
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each of the Company and the Subsidiary is qualified to do business.
(b) The corporate minute books of the Company and the Subsidiary
correctly reflect all corporate actions taken by the Company's and the
Subsidiary's directors and shareholders, and correctly record all resolutions
adopted by them. All corporate actions required of the Company and the
Subsidiary have been taken, and all reports or returns required to be filed by
the Company and the Subsidiary have been filed. Each of the Company and the
Subsidiary has full power and authority to enter into and perform its
obligations under this Agreement and each Other Document.
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3.2 Due Authorization.
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(a) The Shareholders have full right, power, authority, and capacity
to execute and deliver this Agreement and the Other Documents, and to perform
their respective obligations under this Agreement and the Other Documents.
(b) Except as set forth on Schedule 3.2, the execution, delivery and
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performance by the Company and the Subsidiary of this Agreement and each of the
Other Documents, as the case may be, including each of the transactions
contemplated hereby and thereby: (1) have been duly authorized by all necessary
proceedings on the part of the Company and the Subsidiary, as the case may be;
(2) do not require any Approval which has not been obtained or will not be
obtained prior to the Closing Date; (3) will not conflict with or result in any
violation of, any provision of the certificate of incorporation and by-laws (or
any equivalent organizational documents) of the Company or the Subsidiary, as
the case may be; (4) do not and will not conflict with any provision of any
Material Instrument of the Company or the Subsidiary or any present law or
governmental. regulation applicable to the Company or the Subsidiary, or their
assets, properties or operations or any court decree or order applicable to the
Company or the Subsidiary, or their assets, properties or operations; (5) do not
and will not result in or require the creation or imposition of any Charges on
any of the properties of the Company or the Subsidiary; and (6) do not require
any notices, filings or authorizations to be given, filed or obtained from any
governmental authority other than notices required under the HSR Act.
3.3 Title to Stock. The Shareholders have, and at the Closing will have,
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good and marketable (legal and beneficial) title to the Shares, free and clear
of all liens, pledges, proxies, voting trusts, licenses, security interests,
easements, rights-of-way, use restrictions, options, title defects, mortgages,
claims, charges, restrictions or encumbrances of any kind or nature whatsoever
(collectively, "Charges"), and there are no outstanding purchase agreements,
options (other than the Bassco Option), warrants or other rights of any kind
whatsoever entitling any Person to purchase or acquire an interest in any of the
Shares or restricting their transfer in accordance with this Agreement. Each
Shareholder owns of record and beneficially the Shares set forth by his name in
Recital B. Upon delivery of the certificates representing the Shares, and upon
receipt of the Purchase Price, good and valid title to the Shares will pass to
Purchaser, free and clear of all Charges.
3.4 Validity, Etc. Assuming due execution as necessary by Purchaser, this
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Agreement and each Other Document executed by the Shareholders, the Company or
the Subsidiary in accordance herewith constitutes the legal, valid and binding
obligations of each such Person executing such document enforceable in
accordance with its respective terms.
3.5 Capitalization of the Company.
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(a) As of the date hereof, the authorized capital stock of the Company
consists of thirty thousand (30,000) shares of common stock, par value ten cents
(10c) per share. There are no outstanding (A) securities or obligations of the
Company convertible into or exchangeable for any capital stock of the Company,
(B) warrants, rights or options to subscribe for or purchase from the Company
any capital stock or any such convertible or exchangeable securities or
obligations, except
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for the Bassco Option, or (C) obligations of the Company to issue such shares,
any such convertible or exchangeable securities or obligations, or any such
warrants, rights or options. No person has preemptive or similar rights with
respect to the securities of the Company. There are no obligations of the
Company or the Subsidiary to vote or to repurchase, redeem or otherwise acquire,
or to register under the Securities Act, any shares of capital stock of the
Company or the Subsidiary.
(b) Except as set forth on Schedule 3.5, all of the outstanding
capital stock of the Company has been duly authorized and validly issued, is
fully paid and nonassessable and is owned by the Shareholders, free and clear of
any Charges of any kind, there are no rights granted to or in favor of any third
party, other than the Company, to acquire any such capital stock, any additional
capital stock or any other securities of the Company (including securities
convertible into or exchangeable for capital stock), and there exists no
restriction on the payment of cash dividends by the Company.
3.6 Subsidiaries. Kindill Mining is the only direct subsidiary of the
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Company. Kindill Mining owns one-half of the issued and outstanding capital
stock of AWW. The other one-half interest in AWW is owned by Norfolk Southern
Railway Company, which operates and manages AWW. All of the issued and
outstanding capital stock of Kindill Mining has been duly authorized and validly
issued, is fully paid and non-assessable and is owned by the Company free and
clear of any Charges of any kind. All of the issued and outstanding capital
stock of AWW has been duly authorized and validly issued, is fully paid and non-
assessable and the shares of AWW which are owned by Kindill Mining are free and
clear of any Charges of any kind. There are no rights granted to or in favor of
any third party, other than the Company, to acquire any such capital stock, any
additional capital stock or any other securities in the Subsidiary (including
securities convertible into or exchangeable for capital stock), and there exists
no restriction on the payment of cash dividends by the Subsidiary. Except for
the Company's interest in Kindill Mining and Kindill Mining's interest in AWW,
neither the Company nor Kindill Mining or AWW owns or controls, directly or
indirectly, any capital stock of any other corporation or any interest in any
other Person.
3.7 Financial Statements.
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(a) The audited consolidated balance sheets of the Company as of
December 31, 1997 and 1996 and the related combined statements of operations and
cash flow of the Company for the years. then ended, and the unaudited combined
balance sheet of the Company as of June 30, 1998 (the "Mid-Year Balance Sheet")
and the statements of operations and cash flow of the Company for the six months
then ended are set forth as Annex 3.7, said unaudited statements being without
footnotes (all of such balance sheets and related statements, collectively, the
"Financial Statements"). The Financial Statements: (i) were prepared: (x) from
and in accordance with the books and records of the Company and the Subsidiary
and (y) in accordance with GAAP, consistently applied; and (ii) fairly present
the financial condition, results of operations and cash flows of the Company and
the Subsidiary at the dates and for the period to which they relate, subject, in
the case of unaudited statements, to normal year-end audit adjustments
(consisting only of normal recurring accruals).
(b) The Company was incorporated on April 25, 1997.
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(c) The reserves for future costs associated with workers'
compensation, Black Lung and unemployment compensation as stated in the
Financial Statements and in the books, records and Financial Statements of the
Company are fair and reasonable and in accordance with GAAP and the appropriate
financial accounting standards. The Company has accrued its and the
Subsidiary's obligations for retiree medical benefits in accordance with
Statement of Financial Accounting Standards No. 106.
3.8 Contingent Liabilities. Except for the guarantee of indebtedness of
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Western Leasing, Inc. to Senstar Capital Corporation, the Company and the
Subsidiary do not have any Material liabilities other than (i) as set forth on
the Financial Statements, (ii) as reflected in, reserved against or otherwise
disclosed in the Mid-Year Balance Sheet or the notes thereto, and (iii)
Liabilities and obligations which would not individually or in the aggregate
have a Material Adverse Effect on the Company.
3.9 Approvals. Except as set forth on Schedule 3.9 of the Disclosure
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Schedule, no approval is required to be obtained by the Company or the
Subsidiary for the consummation of the transactions contemplated by this
Agreement.
3.10 No Existing Violation, Default, Etc. Neither the Company nor the
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Subsidiary is, or upon consummation of the transactions contemplated hereby will
be, in violation of (a) its certificate of incorporation, by-laws or other
organization documents, (b) except as set forth in Schedule 3.10, any applicable
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law, rule, restriction, order, judgment, decree, ordinance, rule or regulation
of any governmental entity or administrative body, which violation has or could
reasonably be expected to have a Material Adverse Effect on the Company, or (c)
except as set forth in Schedule 3.10 any order, decree or judgment of any court
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or governmental agency or body having jurisdiction over the Company or the
Subsidiary, which violation has or could reasonably be expected to have a
Material Adverse Effect on the Company. Except as disclosed in Schedule 3.10, no
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breach or event of default or event that, with the giving of notice or the lapse
of time or both, would constitute a breach or event of default exists or, upon
the consummation by the Company of the transactions contemplated by this
Agreement, will exist under any Instrument to which the Company or the
Subsidiary is a party or by which the Company or the Subsidiary is bound or to
which any of the properties, assets or operations of the Company or the
Subsidiary is subject, which breach or event of default, or event that, but for
the giving of notice or the lapse of time or both, would constitute a breach or
event of default, has or could reasonably be expected to have a Material Adverse
Effect on the Company.
3.11 Licenses, Etc. The Company and the Subsidiary hold, own and possess
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all Material governmental, regulatory and other filings, licenses, Approvals,
registrations, Permits, consents, franchises and concessions (collectively,
"Licenses") necessary for the ownership of the property and conduct of the
businesses of the Company and the Subsidiary, as now conducted. Such Licenses
are held without any infringement upon rights of other Persons, any violation of
law or regulation or any breach of a contractual or other obligation except for
such infringements, violations or breaches as could not reasonably be expected
to have a Material Adverse Effect on the Company. None of such Licenses is being
or has been challenged or revoked and no statement of intention to challenge,
revoke or fail to renew any such License has been received by the Company or the
Subsidiary. The Company and the Subsidiary are in compliance with their
respective obligations under such Licenses,
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with such exceptions as individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect on the Company, and no event has
occurred that allows or, after notice or lapse of time or both, would allow
revocation, suspension, limitation or termination of such Licenses, except such
events as could not reasonably be expected to have a Material Adverse Effect on
the Company.
3.12 Tangible Personal Property.
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(a) Schedule 3.12(a) sets forth a true and complete list of all the
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principal items of machinery, equipment, vehicles, and other tangible personal
property now owned by the Company or the Subsidiary in their business (the
"Owned Tangible Assets"). Except as set forth on Schedule 3.12(a), as of the
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Closing Date and immediately following the consummation of the transactions at
Closing, the Company, or the Subsidiary as applicable, will have good and
marketable title to all of its fixed assets, operating assets and other tangible
personal property including, without limitation, its Owned Tangible Assets, free
and clear of all Charges. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated by this Agreement, will not result
in the creation of any Charge on any of the Owned Tangible Assets. The Owned
Tangible Assets shall be in good working order on the Closing Date, except for
normal wear and tear and deterioration associated with the operation of such
assets in the ordinary course of the Company's or the Subsidiary's business, and
are suitable for the purposes for which they are presently used.
(b) Schedule 3.12(b) sets forth a true and complete list of all the
----------------
principal items of machinery, equipment, vehicles, and other tangible personal
property now leased by each Company in its business, together with a brief
description of the principal terms of each lease (the "Leased Tangible Assets").
Except as set forth on Schedule 3.12(b), as of the Closing Date and immediately
----------------
following the consummation of the transactions at Closing, the Company, or the
Subsidiary as applicable, will have good and transferable leasehold interests in
all of its Leased Tangible Assets, in each case under valid leases enforceable
against the lessors thereunder. The execution and delivery of this Agreement,
and the consummation of the transactions contemplated by this Agreement, will
not result in the creation of any Charge on any of the Leased Tangible Assets or
result in any default under or violation of any applicable lease agreement. The
Leased Tangible Assets shall be in good working order on the Closing Date,
except for normal wear and tear and deterioration associated with the operation
of such assets in the ordinary course of the Company's or the Subsidiary's
business, and are suitable for the purposes for which they are presently used.
3.13 Sufficiency of Assets. The tangible real and personal property,
---------------------
including, without limitation, plants, buildings, structures, equipment,
machinery and vehicles, owned or leased by the Company or the Subsidiary or used
or employed by either of them in their respective business, are sufficient and
adequate to carry on their respective businesses as presently conducted.
3.14 Environmental Matters. Except as set forth in Schedule-3.14:
--------------------- -------------
(a) Without limiting Section 3. 10, except as could not reasonably be
expected to have a Material Adverse Effect on the Company, the Company and the
Subsidiary are in compliance in all respects with all Environmental, Mining and
Safety Requirements, and have filed
12
all notices and compliance reports required to be filed under any Environmental,
Mining and Safety Requirements (including, without limitation, notices and
reports indicating past or present treatment, storage or disposal, or reporting
a spill or release into the environment, of any Hazardous Substances, Oils,
Pollutants or Contaminants), and (i) neither the Company nor the Subsidiary has
received any written communication or other notice from any governmental
------------
authority alleging that the Company or the Subsidiary is not in compliance, in
all material respects, with Environmental, Mining and Safety Requirements, (ii)
all contract mining activities performed on Real Property for which the Company
or the Subsidiary retains liability under Environmental, Mining and Safety
Requirements have been conducted in compliance in all material respects with all
Environmental, Mining and Safety Requirements, (iii) no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
have been filed or commenced against or otherwise given to the Company or the
Subsidiary alleging any failure so to comply, and (iv) neither the Company nor
the Subsidiary has any material contingent liability with respect to its
business in connection with any Hazardous Substances, Oils, Pollutants, or
Contaminants or under any Environmental, Mining, or Safety Requirements.
(b) The Company and the Subsidiary maintain reserves for future costs
associated with reclamation and mine closings for all Real Property (including
any formerly owned or leased Real Property for which the Company or the
Subsidiary has retained or assumed liability either contractually or by
operation of law) in accordance with GAAP and the Company's and the Subsidiary's
reclamation projects and procedures are on schedule in accordance with SMCRA, in
all material respects and are being conducted in a manner that complies with all
other legal requirements in all material respects (including those governing
bonding and financial responsibility for reclamation and all Environmental,
Mining and Safety Requirements).
(c) (i) Neither the Company nor the Subsidiary has been notified
that it is a potentially responsible party, or that any governmental authority
or other individual is seeking information in connection with or advising the
Company or the Subsidiary that it is responsible for, or potentially responsible
for, costs under Environmental, Mining and Safety Requirements, including
CERCLA, for cleanup of, or investigatory, remedial or other corrective action
required with respect to Hazardous Substances, Oils, Pollutants or Contaminants
at any Real Property or at any other location; (ii) to the knowledge of the
Company, no Real Property is listed on any federal or state contaminated site
list, including the national priority list under CERCLA, the CERCLIS, or any
state counterparts; and (iii) neither the Company nor the Subsidiary has
knowledge of any release of Hazardous Substances, Oils, Pollutants or
Contaminants in quantities requiring investigation or cleanup at any of the
Owned Real Property or Leased Real Property or at any other location.
(d) The Company has provided Purchaser with (i) all information within
its possession regarding the environmental history of the operations of the
Company and the Subsidiary, including any audits, site assessments, sampling or
test results related to Hazardous Substances, Oils, Pollutants or Contaminants,
environmental impact statements, and liability studies prepared by or for the
Company or the Subsidiary, or by any third party, including governmental
agencies or insurance companies, and (ii) a list of all material Licenses held
by the Company and the Subsidiary under Environmental, Mining and Safety
Requirements.
13
(e) The Company and the Subsidiary have duly complied with, and their
respective businesses, operations, assets, equipment, leaseholds and facilities,
including, without limitation, the Real Property, are in full compliance with,
the provisions of all federal, state and local environmental, health and safety
laws, codes and ordinances, and all rules and regulations promulgated
thereunder, including, without limitation, all laws and regulations with respect
to reporting releases of Hazardous Substances and the registration, testing and
maintenance of underground storage tanks.
(f) Except in accordance with a valid License listed on Schedule 3.14,
-------------
there has been no emission, spill, release, discharge or threatened release into
or upon (i) the air; (ii) the soils or any improvements located thereon; (iii)
the surface water or ground water; or (iv) the sewer, septic system or waste
treatment, storage or disposal system servicing the Real Property, of any
Hazardous Substance, Oil, Pollutant or Contaminant at or from any of the Real
Property.
3.15 Taxes. Except as set forth on Schedule 3.15: (a) each of the Company
----- -------------
and the Subsidiary has duly filed all reports and returns relating to federal,
state, local or foreign income Tax required to be filed by it up to and
including the date hereof; (b) each of the Company and the Subsidiary has
maintained all required records with respect to Taxes and has duly paid all
Taxes shown as due on all Returns filed by it; and (c) reserves for Taxes
reflected in the Mid-Year Balance Sheet (other than for deferred Taxes) are not
less, by a material amount, than the Taxes that are attributable to periods up
to and including the periods contemplated by the Mid-Year Balance Sheet or that
have otherwise accrued as of the date of the Mid-Year Balance Sheet; (d) there
are no Tax liens upon any property or assets of the Company or the Subsidiary,
except liens for current Taxes not yet due; (e) no deficiencies have been
proposed, asserted or assessed against the Company or the Subsidiary in writing,
and no issue has been raised by any taxing authority in writing in any
examination about which any of the officers or directors of the Company or the
Subsidiary (and employees responsible for Tax matters of the Company or is
Subsidiary) have knowledge which, by application of the same or similar
principles, reasonably could be expected to result in a deficiency for any other
period not so examined, except for any deficiency which could not reasonably be
expected to have a Material Adverse Effect on the Company; (f) with respect to
periods commencing after December 31, 1992 and ending before January 1, 1998,
neither the Company, nor the Subsidiary or any of their respective predecessors
in interest has incurred any liability for Taxes that is unpaid; (g) there are
no outstanding agreements or waivers extending the statutory period of
limitation applicable to any Taxes or Returns of the Company or the Subsidiary
for any period; (h) all Returns for the Company and the Subsidiary in respect of
all years not barred by the statute of limitations have heretofore been made
available by the Company to Purchaser and such Returns are true, correct and
complete in all material respects; (i) neither the Company nor the Subsidiary
has, with regard to any assets or property held, acquired or to be acquired by
it, filed a consent to the application of Section 341(f)(2) of the Code; and (j)
no amount of compensation paid by the Company or the Subsidiary in 1097 or the
part of 1998 preceding the Closing Date is non-deductible for purposes of
federal, or any applicable state or local income Tax, except for any amount
which could not reasonably be expected to have a Material Adverse Effect on the
Company.
3.16 Litigation. Except as set forth in Schedule 3.16, there is no pending
---------- -------------
action, suit, proceeding, arbitration or investigation (nor any group of
actions, suits, proceedings, arbitrations or,
14
investigations arising out of the same event, transaction, occurrence or pattern
of activity by the Company or the Subsidiary) against or affecting the Company
or the Subsidiary or any of their respective properties, businesses, assets or
operations, or with respect to which the Company or the Subsidiary is
responsible by way of indemnity or otherwise, (i) that questions the validity of
this Agreement or any action to be taken pursuant to this Agreement or seeks to
impose material damages in connection with the transactions contemplated hereby,
or (ii) that could reasonably be expected to have, an adverse effect on the
Company or the Subsidiary in the amount of Two Hundred Fifty Thousand Dollars
($250,000.00) or more or that could materially affect the ability of the Company
to perform its obligations under this Agreement. Except as set forth in Schedule
---------
3.16, no such actions, suits, proceedings or investigations are threatened or
- - ----
contemplated.
3.17 Compliance with Laws.
--------------------
(a) Except as set forth on Schedule 3.17, each of the Company and the
-------------
Subsidiary is in compliance with every statute, rule, restriction, law,
regulation, order, judgment or decree of any governmental entity applicable to
it or by which it is bound, including, without limitation, the Fair Labor
Standards Act or regulations under such act or other laws and regulations
relating to wages, hours, labor agreements, the payment of Social Security and
similar taxes, unemployment or workers' compensation, including black lung
benefits, except for such failures as would not have a Material Adverse Effect
on the Company. Neither the Company nor the Subsidiary has received from any
governmental or regulatory authority any written notice alleging any material
violation of law or claiming any material liability of the Company or its
Subsidiarily as a result of any such alleged material violation.
(b) Except for acts, omissions or liabilities that could not
reasonably be expected to have a Material Adverse Effect on the Company, neither
the Company nor the Subsidiary is liable for any arrearages, taxes or penalties
with respect to any of their employees in regard to any violation or potential
violation of the Fair Labor Standards Act or regulations under such act or other
laws and regulations relating to wages, hours, labor agreements, payment of
Social Security and similar taxes, unemployment or workers' compensation
including Black Lung benefits and obligations and/or similar state laws and
regulations.
3.18 Labor Relations. Except as set forth in Schedule 3.18:
-------------
(a) The Company and the Subsidiary are in compliance in all respects
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, excluding Environmental,
Mining and Safety Requirements (which are addressed separately in Section 3.14),
except for such failures as could not reasonably be expected to have a Material
Adverse Effect on the Company.
(b) The Company and the Subsidiary are in compliance with all
provisions of applicable collective bargaining agreements, and arbitration,
administrative and judicial decisions interpreting and/or affecting such
agreements, except for such failures as could not reasonably be expected to have
a Material Adverse Effect on the Company.
15
(c) There is no unfair labor practice charge or complaint or any other
labor employment matter against or involving the Company or the Subsidiary
pending or, to the Shareholders' knowledge, threatened before the National Labor
Relations Board or any court of law which could reasonably be expected to have a
Material Adverse Effect on the Company.
(d) There is no labor organizing activity, strike, dispute, lockout,
slowdown or stoppage actually pending or, to the Shareholders' knowledge,
threatened against the Company or the Subsidiary.
(e) There has been no certified collective bargaining representative
of the Company's or the Subsidiary's employees, no demand made to the Company or
the Subsidiary for recognition by any collective bargaining representative, and
no petition for an election filed with the National Labor Relations Board or any
other governmental authority or Person with respect to the Company's or the
Subsidiary's employees.
(f) There are no charges, investigations, administrative proceedings
or formal complaints of discrimination (including discrimination based upon sex,
age, marital status, race, color, religion, national origin, sexual preference,
disability, handicap or veteran status) pending or threatened before the Equal
Employment Opportunity Commission or any federal, state or local agency or court
against the Company or the Subsidiary, except for those which could not
reasonably be expected to have a Material Adverse Effect on the Company.
(g) Neither the Company nor the Subsidiary has any liability for
current or future obligations under the Industry Retiree Health Benefit Coal Act
of 1992, as amended.
3.19 Contract Miners, Truckers and Others. Schedule 3.19 contains a
------------------------------------ -------------
complete and accurate list of all Persons with whom the Company or the
Subsidiary has at any time since January 1, 1998, had any contract,
understanding or agreement (oral or written but exclusive of any employment
agreement with any hourly or salaried employees) or joint venture agreement or
partnership to perform services relating to the operations and facilities of the
Company or the Subsidiary, including, but not limited to, contracts,
understandings and/or agreements involving sludge and/or slurry, the mining of
coal, the preparation of coal, or the loading or hauling by truck, railroad,
barge or otherwise of coal or refuse in connection with any coal mining
operations. To the Shareholders' knowledge, each such person and each
subcontractor thereof has all insurance required by the terms of any agreement
between such person and the Company or the Subsidiary. Neither the Company nor
the Subsidiary or their respective Affiliates are either a common or joint
employer with respect to, or have exercised any control over the employees or
labor relations of any such person.
3.20 Contracts and Commitments.
-------------------------
(a) Except as set forth on Schedule 3.20, neither the Company nor the
-------------
Subsidiary is a party to any: (i) collective bargaining agreement or contract
with any labor union; (ii) bonus, pension, profits sharing, retirement or other
form of deferred compensation plan; (iii) stock purchase, stock option, stock
appreciation or similar plan; (iv) contract for the employment of any officer,
individual employee or other person on a full-time or consulting basis involving
annual
16
compensation by the Company or the Subsidiary in excess of One Hundred Thousand
Dollars ($100,000.00); (v) agreement or indenture relating., to borrowing money
in excess of Two Hundred Fifty Thousand Dollars ($250,000.00) or to mortgaging,
pledging or otherwise placing a lien on any material portion of the Company's or
the Subsidiary's assets; (vi) guaranty of any obligation for borrowed money in
excess of Two Hundred Fifty Thousand Dollars ($250,000.00); (vii) lease or
agreement under which it is lessee of, or holds or operates any personal
property owned by any other party, for which the annual rental exceeds One
Hundred Thousand Dollars ($100,000.00); (viii) contract or group of related
contracts with the same party for the supply of coal to any Person in an amount
of more than One Million Dollars ($1,000,000.00) or providing for deliveries
extending beyond December 31, 1998; (ix) contract or group of related contracts
with the same party for the purchase of inventories, supplies or services, under
which the undelivered balance of such inventories, supplies or services has a
price in excess of Two Hundred Fifty Thousand Dollars ($250,000.00); (x)
contract or group of related contracts with the same party for the sale of
products or services (other than coal sales contracts referred to in (viii)
above) under which the undelivered balance of such products or services has a
sales price in excess of Two Hundred Fifty Thousand Dollars ($250,000.00); (xi)
any agreement to acquire, by merging, consolidating with or by purchasing a
substantial equity interest in or substantial portion of the assets of, any
business or corporation, partnership or other business organization or otherwise
acquire any material assets; (xii) tariff agreements and other transportation
contracts for the shipment of coal made in the ordinary course of business; or
(xiii) contract which prohibits or following the Closing will prohibit the
Company or the Subsidiary in any material respect from freely engaging in any
business anywhere in the world.
(b) Purchaser either has been supplied with or has been given access
to a true and correct copy of all written contracts which are referred to in
Schedule 3-20, together with all material amendments, waivers or other changes
- - -------------
thereto.
(c) Neither the Company nor the Subsidiary, or, to the Shareholders'
knowledge, any third party thereto, is in default, breach or violation under any
contract listed in Schedule 3.20, except for such defaults, breaches or
---------------
violations which could not reasonably be expected to have a Material Adverse
Effect on the Company.
3.21 Employee Benefits.
-----------------
(a) Schedule 3,21(a) includes a complete list of all material Employee
----------------
Benefit Plan.
(b) With respect to each Plan, the Company has delivered or made
available to Purchaser a true, correct and complete copy of: (i) each writing
constituting a part of such Plan including, without limitation, all plan
documents, employee communications, benefit schedules, trust agreements, and
insurance contracts and other funding vehicles; (ii) the most recent Annual
Report (Form 5500 Series) and accompanying schedule, if any; (iii) the current
summary plan description and any material modifications thereto, if any (in each
case, whether or not required to be furnished under ERISA); (iv) the most recent
annual financial report, if any; (v) the most recent actuarial report, if any;
and (vi) the most recent determination letter from the IRS, if any. There are no
17
amendments to any Plan that have been adopted or approved nor has the Company or
the Subsidiary undertaken to make any such amendments or to adopt or approve any
new Plan.
(c) Schedule 3.21(c) identifies each Plan that is intended to be a
----------------
"Qualified Plan" within the meaning of Section 401(a) of the Code ("Qualified
Plans"). Except as set forth in Schedule 3.21, the IRS has issued a favorable
--------------
determination letter with respect to each Qualified Plan and the related trust
that has not been revoked, and, to the Shareholders' knowledge, there are no
existing circumstances or events that have occurred that could adversely affect
the qualified status of any Qualified Plan or the related trust. No Plan is
intended to meet the requirements of Code Section 501(c)(9).
(d) All contributions required to be made to any Plan by applicable
law or regulation or by any plan document or other contractual undertaking, and
all premiums due or payable with respect to insurance policies funding any Plan,
for any period through the date hereof have been timely made or paid in full or,
to the extent not required to be made or paid on or before the date hereof, have
been fully reflected in the Financial Statements. Each Employee Benefit Plan
that is an employee welfare benefit plan under Section 3(l) of ERISA is either
(i) funded through an insurance company contract and is not a "welfare benefit
fund" within the meaning of Section 419 of the Code, (ii) self-insured and
considered unfunded, or (iii) a combination of (i) and (ii).
(e) With respect to each Employee Benefit Plan, the Company and the
Subsidiary have complied, and are now in compliance, in all material respects
with all provisions of ERISA, the Code and all laws and regulations applicable
to such Employee Benefit Plans and each Employee Benefit Plan has been
administered in all material respects in accordance with its terms, except where
such noncompliance could not reasonably be expected to have a Material Adverse
Effect upon the Subsidiary or the Company. To the Shareholders' knowledge, there
is not now, nor do any circumstances exist that could give rise to, any
requirement for the posting of security with respect to a Plan or the imposition
of any lien on the assets of the Company or the Subsidiary under ERISA or the
Code.
(f) No Employee Benefit Plan is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code.
(g) Except as set forth on Schedule 3.21(g), no Employee Benefit Plan
----------------
is a Multi-employer Plan or a plan that has two or more contributing sponsors at
least two of whom are not under common control, within the meaning of Section
4063 of ERISA (a "Multiple Employer Plan"). Except as set forth on Schedule
--------
3.21(g), neither the Company, nor the Subsidiary or any of their respective
- - -------
ERISA Affiliates have, at any time during the last six years, contributed to or
been obligated to contribute to any Multi-employer Plan or Multiple Employer
Plan. Neither the Company, nor the Subsidiary or any ERISA Affiliates have
incurred any Withdrawal Liability.
(h) To the Shareholders' knowledge, there does not now exist, nor do
any circumstances exist that could result in, any Controlled Group Liability
that would be a Liability of the Company, or the Subsidiary. following the
Closing. Without limiting the generality of the foregoing, none of the Company
or the Subsidiary, their Affiliates or any ERISA Affiliate of the
18
Company or the Subsidiary has engaged in any transaction described in Section
4069 or Section 4204 or 4212 of ERISA.
(i) Except as set forth on Schedule 3.21(i), the Company and the
----------------
Subsidiary have no liability for life, health, medical or other welfare benefits
to former employees or beneficiaries or dependents thereof, except for health
continuation coverage as required by Section 4980B of the Code or Part 6 of
Title I of ERISA and at no expense to the Company or the Subsidiary.
(j) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of an y payment or benefit to any
employee, officer or director of the Company or the Subsidiary. Without limiting
the generality of the foregoing, no amount paid or payable by the Company or the
Subsidiary in connection with the transactions contemplated hereby (either
solely as a result thereof or as a result of such transactions in conjunction
with any other event) will be an "excess parachute payment" within the meaning
of Section 280G of the Code.
(k) To the Shareholders' knowledge, none of the Company, the
Subsidiary or any other Person, including any fiduciary, has engaged in any
"prohibited transaction" (as defined in Section 4975 of the Code or Section 406
of ERISA), which could subject any of the Employee Benefit Plans or their
related trusts, the Company, the Subsidiary, or any Person that the Company or
the Subsidiary has an obligation to indemnify, to any material tax or penalty
imposed under Section -4975 of the Code or Section 502 of ERISA.
(l) There are no pending or threatened claims (other than claims for
benefits in the ordinary course), lawsuits or arbitrations which have been
asserted or instituted, and to the Shareholders' knowledge, no set of
circumstances exists which may reasonably give rise to a claim or lawsuit,
against the Plans, any fiduciaries thereof with respect to their duties to the
Plans or the assets of any of the trusts under any of the Plans which could
reasonably be expected to result in any material Liability of the Company or the
Subsidiary to the Department of Treasury, the Department of Labor, any Multi-
employer Plan, any Plan or any participant in a Plan.
(m) The Company, the Subsidiary, and each member of their respective
business enterprises have complied with the Worker Adjustment and Retraining
Notification Act.
(n) For purposes of this Section 3.21, the term "employee" shall be
considered to include individuals rendering personal services to the Company or
the Subsidiary as independent contractors.
3.22 Banks, Directors and Officers, Life insurance and Employees. Schedule
----------------------------------------------------------- --------
3.22 sets forth (a) a list of all banks with which the Company or the Subsidiary
- - ----
has an account, deposit, certificate of deposit, or safe deposit box along with
identifying numbers and the names of all persons authorized to draw thereon or
having access thereto; (b) the names of all incumbent directors and officers of
the Company and the Subsidiary and of all incumbent trustees and committee
members under any of the Plans (as that term is defined in Section 3.22) or
related trusts; (c) a
19
description and identification of any insurance policies held or paid for by the
Company or the Subsidiary on the lives of any of their respective key employees,
officers, directors or shareholders; and (d) the names and job descriptions of
all of the Company's and the Subsidiary's employees whose total compensation
from the Company and the Subsidiary for the fiscal year ending December 31,
1998, will exceed Twenty-Five Thousand Dollars ($25,000.00), together with a
statement of the full amount paid or payable to each such person in respect of
such year, a summary of the basis on which each such person is compensated if
the basis is other than a fixed salary rate, and any changes in any of the
foregoing since December 31, 1990. Except for any currently effective collective
bargaining agreements listed on Schedule 3.26(a), no person is employed by the
Company or the Subsidiary other than at the will of the Company or the
Subsidiary for an indefinite period of time, and at the option of either the
Company or the employee, such employee's employment with the Company may be
terminated with or without cause, and with or without notice, at any time.
3.23 No Material Adverse Change. Except as set forth on Schedule 3.23,
-------------------------- -------------
since December 31, 1997, except as contemplated by this Agreement: (a) neither
the Company nor the Subsidiary has incurred any liability, guarantee or
obligation (indirect, direct or contingent), or entered into any oral or written
agreement or other transaction, that is not in the ordinary course of business
or that could reasonably be expected to be material to the Company; and (b)
there has been no Material Adverse Effect on the Company or the Subsidiary, nor
any developments that could reasonably be expected to result in a Material
Adverse Effect on the Company or the Subsidiary.
3.24 Insurance. Schedule 3.24 sets forth a list and description of all
--------- -------------
policies of fire, liability, product liability, workers compensation, health and
other forms of insurance presently in effect with respect to the Company's and
the Subsidiary's business, true and complete copies of which have previously
been made available to Purchaser. All such policies are valid, outstanding and
enforceable policies. No notice of cancellation, termination or rejection of any
material claim has been received by the Company or the Subsidiary with respect
to any such policy in the last year. The activities and operations of the
Company and the Subsidiary have been conducted in a manner so as to conform in
all material respects to all applicable provisions of such insurance policies.
The Company and the Subsidiary have been covered during the past five (5) years
(or such shorter period as the entity has been in existence or has been a
subsidiary of the Company) by insurance in scope and amount customary and
reasonable for the businesses in which they have engaged during such period.
3.25 Intellectual Property Rights.
----------------------------
(a) Schedule 3.25 lists all material Intellectual Property owned or
-------------
licensed by the Company or the Subsidiary. Except as set forth on Schedule
--------
3.25, such Intellectual Property is vested in or validly granted to the Company
- - ----
or the Subsidiary free and clear of all Charges and is not restricted in any
material way. Neither the Company nor the Subsidiary has performed any act or
permitted any omission which has resulted or could reasonably be expected to
result in the cessation of the Company's or the Subsidiary's valid and
enforceable rights in such Intellectual Property. Except as set forth on
Schedule 3.25, neither the Company nor the Subsidiary has granted or is
- - -------------
obligated to grant any license, sub-license or assignment in respect to any of
such Intellectual
20
Property. Neither the Company nor the Subsidiary is in breach of any license,
sublicense or assignment granted to it with respect to any such Intellectual
Property.
(b) The Company and the Subsidiary own, or have the defensible right
to use, all of the Intellectual Property used in their respective businesses as
currently conducted, except where the failure to own or have the right to use
such Intellectual Property could not reasonably be expected to have a Material
Adverse Effect on the Company.
(c) To the Shareholders' knowledge, (i) the operation of the
businesses ' of the Company and the Subsidiary do not infringe upon the
Intellectual Property rights of any other Person, and (ii) the Intellectual
Property of the Company and the Subsidiary is not infringed by the operations of
any other Person.
3.26 Proprietary Information. Prior to or in conjunction with the Closing,
-----------------------
the Shareholders shall have fully disclosed to Purchaser all customer lists,
trade secrets, processes, inventions, formulas, methods, know-how and other
proprietary information used or developed by the Company and the Subsidiary in
connection with their respective business. Neither the Company nor the
Subsidiary has disclosed or permitted the disclosure of any such proprietary
information to any other Person, and the use by the Company and the Subsidiary
of such proprietary information does not violate any other Person's proprietary
rights.
3.27 Real Property.
-------------
(a) Schedule 3.27(a) sets forth a true and complete list of all leases
----------------
and other agreements (including wheelage and right-of-way agreements) by which
the Company or the Subsidiary has a leasehold interest or other contractual
right in or to any real property, or has the right to receive income from any
third party as a result of the use or occupancy of any real property by such
third party (collectively, the "Leased Real Property"). For each Leased Real
Property, the list includes: (i) an identification of the lease, sublease or
license agreement therefor (or any other agreement with respect to the use or
occupancy thereof) and any and all amendments or modifications thereof or side
letters with respect thereto (collectively, the "Leases"); (ii) the approximate
size of the premises leased thereunder (if available); (iii) the term of the
lease, including any extension options; (iv) the use of such premises and the
nature of any improvements located thereon; (v) the recording information of any
Leases which have been recorded in the applicable real estate records offices;
and (vi) the current rental or royalty (minimum and production) rate as well as
the amount of royalty paid and subject to recoupment. Except as could not
reasonably be expected to have a Material Adverse Effect on the Company, the
Company and the Subsidiary have good and valid leasehold title to lawfully and
exclusively conduct mining operations on the Leased Real Property used for
mining purposes, free and clear of all Charges except for Permitted Charges.
Except as could not reasonably be expected to have a Material Adverse Effect on
the Company, the Company and the Subsidiary have good and marketable leasehold
title to the Leased Real Property other than the Leased Real Property used for
mining purposes, free and clear of all Charges except for Permitted Charges.
21
(b) Schedule 3.27(b) sets forth a true and complete list of all real
----------------
property that the Company and the Subsidiary own in fee, whether surface or
mineral (collectively, the "Owned Real Property"; the Owned Real Property and
the Leased Real Property are, collectively, the "Real Property"). For each
parcel of Owned Real Property, the list includes: (i) the entity in which title
is vested and the deed or other Instrument by which such entity acquired title
(including the Instrument date, the recording information and, if title is
vested in more than one entity, the percentage ownership of such entity); (ii)
the approximate acreage thereof; and (iii) the use thereof and the nature of any
improvements thereon. Except as could not reasonably be expected to have a
Material Adverse Effect on the Company, the Company and the Subsidiary have good
and valid fee title to lawfully and exclusively conduct mining operations on the
Owned Real Property used for mining purposes, free and clear of all Charges
except for Permitted Charges. Except as could not reasonably be expected to have
a Material Adverse Effect on the Company, the Company and the Subsidiary have
good and marketable fee title to the Owned Real Property other than the Owned
Real Property used for mining purposes, free and clear of all Charges except for
Permitted Charges.
(c) Except as set forth on Schedule 3.27(a): (i) there is no past due
----------------
payment obligation or other material default under any of the Leases; (ii)
neither the Company nor the Subsidiary or any Shareholder has received any
notice (oral or written) of, or has knowledge of, any act, omission or condition
which constitutes a material default, or with the passage of time and/or the
giving of notice, would constitute a material default under any of the Leases;
(iii) except as could not reasonably be expected to have a Material Adverse
Effect on the Company, neither the Company nor the Subsidiary has mined any coal
that did not belong to it, nor mined any coal in such a reckless or imprudent
manner as to give rise to any material claims for Loss or waste by any lessor
under any Lease; and (iv) except as could not reasonably be expected to have a
Material Adverse Effect on the Company, the Leases are in good standing and in
full force and effect, valid and enforceable against the parties thereto in
accordance with their terms.
(d) Subject to all of the lessors listed on Schedule 3.27(a) giving
----------------
their consent to the transactions contemplated herein, the consummation of such
transactions will not constitute a default under the terms of any of the Leases.
(e) Except as set forth on Schedules 3.27(a) or (b), the Company and
------------------------
the Subsidiary are in actual and peaceful possession of: (i) the Real Property
other than the Real Property used for mining purposes; and (ii) that portion of
the Real Property used for mining purposes on which the Company or the
Subsidiary is actively conducting coal mining operations.
(f) Except as could not reasonably be expected to have a Material
Adverse Effect on the Company, no applicable zoning or building law, ordinance,
administrative regulation, urban redevelopment law, or any other law,
regulation, rule, order, decree or use restriction, prohibits or interferes
with, limits or impairs the use, operation, maintenance of or access to, or
affects the value of, the Real Property, as now used, operated or maintained by
the Company or the Subsidiary. Except as set forth on Schedules 3.27(a) or (b),
------------------------
no notice of any violation of any applicable zoning or building law, ordinance,
administrative regulation, or any other law, regulation, rule, order, decree or
use restriction has been received by the Company or the Subsidiary, and neither
the Company nor
22
the Subsidiary does not know of the threat of any such notice, and no
condemnation proceeding has been instituted or is threatened with respect to any
Real Property.
(g) All parcels of land included in the Real Property are, and except
as could not reasonably be expected to have a Material Adverse Effect on the
Company, all improvements located on any parcel of Real Property are, suitable,
sufficient and appropriate in all respects for their current and contemplated
uses. Each parcel or contiguous parcels, as applicable, of Real Property is
located adjacent to roads or streets with adequate lawful ingress and egress
available between such roads or streets and such Real Property for all purposes
related to the operations of the Company and the Subsidiary. To the best of the
Shareholders' knowledge, no material portion of any Real Property lies in any
flood plain area (as defined by the U.S. Army Corps of Engineers or otherwise)
or includes any wetlands protected by any applicable law.
(h) Except as set forth in Schedules 3.27(a) or (b) and except for
------------------------
Permitted Charges, neither the Company nor the Subsidiary has granted any
outstanding options or has entered into any outstanding contracts with others
for or in connection with the sale, mortgage, pledge, hypothecation, assignment,
sublease, lease or other transfer of all or any part of the Real Property.
Except as could not reasonably be expected to have a Material Adverse Effect on
the Company, no Person or entity has any right or option to acquire, or right of
first refusal or opportunity (or any similar right) with respect to, the
interest of the Company and the Subsidiary in any Real Property.
3.28 Securities Law Matters. Neither the Company nor the Subsidiary has
----------------------
made, directly or indirectly, any offer or sale of the common shares or
securities of the same or a similar class, or taken any other action as a result
of which the offer and sale of any such common shares or securities contemplated
hereby could fail to be entitled to exemption from the registration requirements
of the Securities Act. As used herein, the terms "offer" and "sale" have the
meanings specified in Section 2(3) of the Securities Act.
3.29 Related Party Transactions.
--------------------------
(a) Except as disclosed in Schedule 3.29, neither the Company nor the
-------------
Subsidiary or any of the Shareholders, has, either directly or indirectly, a
material interest in (i) any Person that purchases from or sells, leases,
licenses or furnishes to the Company or the Subsidiary any goods, property,
technology or intellectual or other property rights or services, or has other
material business relations with the Company or the Subsidiary; or (ii) any
Person who is a party to a contract or agreement to which the Company or the
Subsidiary are also parties or by which they may be bound or affected (the
matters set forth in clauses (i) and (ii) are
[PAGES 25 AND 26 ARE MISSING]
23
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser represents and warrants to the Shareholders as follows:
4.1 Organization. Purchaser is a corporation duly organized and validly
------------
existing under the laws. of the State of Delaware, and has full corporate power
and authority to own and lease its properties as such properties are now owned
and leased, and to conduct its business as and where its business is now
conducted.
4.2 Authority.
---------
(a) Purchaser has full right, power, authority and capacity to execute
and deliver this Agreement and the Other Documents, and to perform its
obligations under this Agreement and the Other Documents. This Agreement and
the Other Documents constitute valid and legally binding obligations of
Purchaser, enforceable in accordance with their terms.
(b) The execution and delivery of this Agreement and the Other
Documents. the consummation of the transactions contemplated hereby and thereby,
and the performance and fulfillment of the obligations and undertakings
hereunder and thereunder by Purchaser will not violate any provision of, result
in the breach of, cause or permit the acceleration of or result in the
termination or cancellation of: (i) any performance required by the terms of
Purchaser's articles of incorporation or bylaws; (ii) any contract, agreement,
arrangement or undertaking to which Purchaser is a party or by which it may be
bound; (iii) any judgment, decree, writ, injunction, order or award of any
arbitration panel, court or governmental authority; or (iv) any applicable law,
ordinance, rule or regulation of any governmental body.
(c) The execution, delivery, performance and consummation of the
transactions contemplated by this Agreement and the Other Documents have been
duly authorized by all requisite corporate action. All other consents,
approvals, authorizations, releases or orders required of or for Purchaser for
the authorization, execution, delivery, performance and consummation of the
transactions contemplated by, this Agreement and the Other Documents will be
obtained by the Closing.
ARTICLE 5
COVENANTS OF THE SHAREHOLDERS
-----------------------------
The Shareholders hereby covenant and agree with Purchaser that:
5.1 Consents. The Shareholders shall: (i) procure, upon reasonable terms
--------
and conditions, all consents and approvals; (ii) complete all filings,
registrations and certificates; and (iii) satisfy all other requirements
prescribed by law, including obtaining any Approval necessary under antitrust
laws, which are necessary to consummate the transactions contemplated in this
Agreement and the Other Documents.
24
5.2 Post-Closing Assistance. In case at any time after the Closing any
-----------------------
further action is necessary or desirable to consummate the transactions
contemplated by this Agreement and the Other Documents, the Shareholders will
promptly take or cause to be taken such further action (including the execution
and delivery of such further Instruments and documents) as Purchaser may
reasonably request.
5.3 Cooperation. The Shareholders shall cooperate fully, completely and
-----------
promptly with Purchaser in connection with satisfying all conditions to, and
effecting the transactions contemplated by, this Agreement and the Other
Documents.
5.4 Representations and Warranties. The Shareholders shall not cause or
------------------------------
permit any representations or warranties made in this Agreement, including,
without limitation, representations and warranties contained in Article 3 of
this Agreement, to be untrue or incomplete as of the Closing.
5.5 Publicity. Except as required by applicable law, without the prior
---------
written consent of Purchaser, none of the Shareholders shall disclose or
publish, or permit the disclosure or publication of, any information concerning
the execution and delivery of this Agreement and the Other Documents, or the
transactions contemplated by this Agreement and the Other Documents, to any
Person.
5.6 Resignations. At the Closing, the Shareholders shall cause the
------------
individuals identified as officers or directors of the Company, Kindill Mining
or the AWW to resign as officers and/or directors of the Company, Kindill Mining
and the AWW, and shall cause the Persons identified as trustees or committee
members of the Plans to resign as trustees and/or committee members of the
Plans, which resignations shall be effective immediately after the Closing.
5.7 Permits. In the event that not all of the Permits are available for
-------
use by the Company and the Subsidiary immediately following the transactions
contemplated by this Agreement, the Shareholders, Purchaser, the Company and the
Subsidiary shall cooperate in any reasonable arrangement designed to provide
Purchaser, the Company and the Subsidiary the benefits under any such Permits
until such Permits are available for use by the Company and the Subsidiary,
provided that the Company, the Subsidiary and the Purchaser shall bear all of
the expenses of so doing and shall indemnify the Shareholders for any Losses
relating thereto in accordance with Article 10.
ARTICLE 6
COVENANTS OF PURCHASER
----------------------
Purchaser covenants and agrees with the Shareholders that from the date
hereof through the Closing:
6.1 Cooperation. Purchaser shall cooperate fully, completely and promptly
-----------
with the Shareholders in connection with satisfying all conditions to, and
effecting the transactions contemplated by, this Agreement and the Other
Documents.
25
6.2 Representations and Warranties. Purchaser will not cause or permit
------------------------------
any of its representations and warranties made in this Agreement, including,
without limitation, its representations and warranties contained in Article 4 of
this Agreement, to be untrue or incomplete as of the Closing.
6.3 Publicity. Except as required by applicable law, without the prior
---------
written consent of the Shareholders, Purchaser shall not disclose or publish, or
permit the disclosure or publication of, any information concerning the
execution and delivery of this Agreement, or the transactions contemplated by
this Agreement, to any Person.
6.4 Ownership and Control. As soon as practicable after the Closing, and
---------------------
in any event within thirty (30) Business Days after the Closing Date, Purchaser
shall take all necessary and appropriate action, pursuant to all applicable
statutes or regulations, to give notice to any appropriate agencies, of the
change in ownership and control of the Company resulting from the Purchase
pursuant to this Agreement.
6.5 Post-Closing Liabilities. Purchaser will cause the Company and
------------------------
Kindill Mi 1 9 to assume all of the debts, obligations and Liabilities of the
Company and Kindill Mining, as the case may be, following the Closing, and will
protect the Shareholders from and indemnify them against, such debts,
obligations and Liabilities, except in the case of any Shareholders to the
extent such Shareholders are obligated to indemnify Purchaser pursuant to
Article 10 below with respect to any such debts, obligations or Liabilities.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF PURCHASER
--------------------------------------
The obligations of Purchaser to consummate the transactions contemplated
herein shall be subject to the satisfaction of the following conditions at or
before the Closing:
7.1 Representations, Warranties and Covenants. The representations and
-----------------------------------------
warranties of the Shareholders contained herein shall be true on the Closing
Date, with the same effect as though made at such time, except to the extent of
changes permitted by the terms of this Agreement. The Shareholders, the Company
and the Subsidiary shall have performed all obligations and complied with all
covenants required by this Agreement to be performed or complied with by them
prior to the Closing.
7.2 No Material Adverse Effect. No Material Adverse Effect with respect
--------------------------
to the Company shall have occurred since the date of this Agreement.
7.3 Opinion of Counsel for the Shareholders. Purchaser shall have
---------------------------------------
received an opinion from Greenebaum Doll & McDonald PLLC, counsel for the
Shareholders, dated the Closing Date, substantially in the form attached hereto
as Annex 7.3.
7.4 Statutory Requirements. All statutory requirements for the valid
----------------------
consummation by Purchaser of the transactions contemplated in this Agreement and
the Other Documents shall have
26
been fulfilled, and all Approvals required to be obtained to permit the
consummation by Purchaser of the transactions contemplated by this Agreement and
the Other Documents, and to permit the businesses presently carried on by the
Company and the Subsidiary to continue unimpaired in all material respects
immediately following the Closing, shall have been obtained.
7.5 Ancillary Agreements. The Shareholders, the Company and the
--------------------
Subsidiary shall have executed all Other Documents, and all such executed
agreements shall have been delivered to Purchaser.
7.6 Deliveries. At or before the Closing, the Shareholders shall (i)
----------
deliver to Purchaser all Instruments necessary or otherwise reasonably requested
by Purchaser to duly and properly transfer and convey title to the Shares as
contemplated by this Agreement and (ii) make all other deliveries contemplated
in this Agreement.
7.7 Financing. Purchaser shall have arranged financing with such lenders,
---------
in such amounts, at such rates, and upon such terms as Purchaser deems, in
Purchaser's sole discretion, necessary and sufficient to consummate the
transactions contemplated in this Agreement and the Other Documents.
7.8 Closing. The Closing shall occur on or before September 2, 1998, (the
-------
"Closing Date"), unless the Closing Date is extended by the mutual written
agreement of the parties hereto.
7.9 Third-Party Consents and Approvals. The parties shall have obtained
----------------------------------
all third-party consents and approvals (all on terms and conditions satisfactory
to Purchaser in its sole and absolute discretion) that are necessary for: (a)
the consummation of the transactions contemplated by this Agreement and the
Other Documents; and (b) the assignment and transfer of the Shares to Purchaser;
provided, however, that, notwithstanding the foregoing, neither Purchaser nor
any Shareholder shall be required to pay any remuneration to third parties in
exchange for such party's consent or approval, or to file any lawsuit or other
action to obtain any such consent or approval.
7.10 No Injunction. No injunction or order of any court or administrative
-------------
agency or Instrumentality shall be in effect, and no statute, rule or regulation
of any governmental authority or competent jurisdiction shall have been
promulgated or enacted, as of the Closing which restrains or prohibits the
transactions contemplated by this Agreement and the Other Documents.
7.11 No Pending Action. No action, suit or other proceeding by any Person
-----------------
to restrain or prohibit the transactions contemplated by this Agreement and the
Other Documents shall be pending.
7.12 Due Diligence. Purchaser shall be satisfied, in its sole discretion,
-------------
with the results of its due diligence of the Company and the Subsidiary and
their respective assets and Liabilities, including, without limitation: (i) all
rights, title, interests and Liabilities of the Company and the Subsidiary; (ii)
the terms and conditions of all agreements to which the Company or the
Subsidiary is a party (including but not limited to the terms and conditions of
all lease agreements under which the Company or the Subsidiary has any -
interest, especially terms authorizing Purchaser to conduct highwall mining
under such lease agreements); (iii) the mineability, quantity and quality of the
coal
27
reserves of the Company and the Subsidiary; and (iv) the magnitude of the
reclamation obligations (regardless of whether such obligations are "current" or
in "deferred status ").
7.13 Board Approval. Purchaser's board of directors shall have approved
--------------
this Agreement, and the transactions contemplated hereunder.
7.14 Hayman Agreement. Purchaser shall have consummated the transactions
----------------
contemplated by the Hayman Agreement.
7.15 Fairness Opinion. Purchaser shall have received an opinion of
----------------
Rothschild Inc. that the transactions contemplated by this Agreement and the
Other Documents are fair from a financial point of view to Purchaser.
7.16 Royalty Termination Agreement. The Royalty Termination Agreement
-----------------------------
shall have been executed and delivered by all of the parties thereto in a manner
satisfactory to Purchaser.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS
---------------------------------------------
The obligations of the Shareholders to consummate the transactions
contemplated herein shall be subject to the satisfaction of the following
conditions at or before the Closing:
8.1 Representations, Warranties and Covenants. The representations and
-----------------------------------------
warranties of Purchaser contained herein shall be true on the Closing Date, with
the same effect as though made at such time, except to the extent of changes
permitted by the terms of this Agreement. Purchaser shall have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by it prior to the Closing.
8.2 Statutory Requirements. All statutory requirements for the valid
----------------------
consummation by the Shareholders of the transactions contemplated in this
Agreement and the Other Documents shall have been fulfilled, and all Approvals
required to be obtained in order to permit the consummation by the Shareholders
of the transactions contemplated in this Agreement and the Other Documents shall
have been obtained.
8.3 Deliveries. At or before the Closing, Purchaser shall make all of its
----------
deliveries contemplated in this Agreement.
8.4 Third-Party Consents and Approvals. The parties shall have obtained
----------------------------------
all third-party consents and approvals that are necessary for: (a) the
consummation of the transactions contemplated by this Agreement and the Other
Documents; and (b) the assignment and transfer of the Shares to Purchaser;
provided, however, that notwithstanding the foregoing, neither Purchaser nor the
Shareholders shall be required to pay any remuneration to third parties in
exchange for such party's consent or approval, or to file any lawsuit or other
action to obtain any such consent or approval.
28
8.5 No Injunction. No injunction or order of any court or administrative
-------------
agency or Instrumentality shall be in effect, and no statute, rule or regulation
of any governmental authority or competent jurisdiction shall have been
promulgated or enacted, as of the Closing which restrains or prohibits the
transactions contemplated by this Agreement and the Other Documents.
8.6 No Pending Action. No action, suit or other proceeding by any Person
-----------------
to restrain or prohibit the transactions contemplated by this Agreement and the
Other Documents shall be pending.
8.7 Closing. The Closing shall occur on or before the Closing Date, as
-------
such date may be extended by the mutual written agreement of the parties hereto.
ARTICLE 9
THE CLOSING/TERMINATION
-----------------------
9.1 Date and Place. The Closing shall be held on the Closing Date at
--------------
10:00 a.m. simultaneously in the offices of Brown, Todd & Heyburn PLLC, 2700
Lexington Financial Center, 250 West Main Street, Lexington, Kentucky 40507 and
Greenebaum Doll & McDonald PLLC, 3300 National City Tower, Louisville, Kentucky
40202, or at such other place or time on the Closing Date as the parties may
mutually agree.
9.2 Deliveries. At or before the Closing, the parties shall make all of
----------
the deliveries contemplated in this Agreement.
9.3 Termination. In the event the Closing shall not be held by the
-----------
Closing Date, as it may be extended by mutual written agreement of the parties
hereto, any party may terminate this Agreement upon written notice to the other
parties. If this Agreement is terminated pursuant to this Section 9.3, all
parties shall be released from all further obligations under this Agreement and
the Other Documents and shall have no further obligation to negotiate any such
agreements; provided, however, that termination pursuant to this Section 9.3
shall not relieve the defaulting or breaching party hereunder from any liability
to the other party hereto resulting from the default or breach hereunder of such
defaulting or breaching party occurring prior to the date of termination.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS AND WARRANTIES -- INDEMNIFICATION
-------------------------------------------------------------
10.1 Survival. Each of the parties' representations, warranties, covenants
--------
and agreements (including undisclosed Liabilities) set forth in this Agreement
shall survive the Closing for a period of one (1) year, with the exception,
however; of the warranties and representations made by the Shareholders in
Section 3.3, which shall survive indefinitely.
10.2 Indemnity by the Shareholders. Subject to the limitations set forth
-----------------------------
in Section 10.5 below, each of the Shareholders shall jointly and severally
indemnify the Company, the Subsidiary and Purchaser against, and hold the
Company, the Subsidiary and Purchaser harmless from, and shall pay to the
Company, the Subsidiary or Purchaser, as applicable, the full amount of. any
loss, claim, damage, liability or expense (including reasonable attorneys' fees,
but excluding all special,
29
exemplary punitive and consequential damages) (each a "Loss") resulting to the
Company, the Subsidiary or Purchaser, either directly or indirectly, from: (a)
any material inaccuracy in any representation or warranty, or any breach of any
covenant or agreement, by the Company, the Subsidiary, or the Shareholders
contained in this Agreement or in any of the Other Documents; and (b) any
liability for any fee or commission owed to a broker or other Person pursuant to
an agreement signed by the Company, the Subsidiary or the Shareholders with
respect to the transactions contemplated by this Agreement.
10.3 Indemnity by Purchaser. Purchaser shall indemnify and hold the
----------------------
Shareholders harmless from and against, and shall pay to the Shareholders the
full amount of, any Loss resulting to the Shareholders, either directly or
indirectly, from: (a) any material inaccuracy in any representation or
warranty, or any breach of any covenant or agreement, by Purchaser contained in
this Agreement or any of the Other Documents; (b) any liability for any fee or
commission owed to a broker or Other Person pursuant to an agreement signed by
Purchaser with respect to the transactions contemplated by this Agreement; and
(c) any liability of the Shareholders arising from the Shareholders' maintaining
any rights or obligations under Permits until such Permits are available for use
by the Company and the Subsidiary as contemplated by Section 5.7.
10.4 Remedies; Rights of Offset. Upon the occurrence of any event for
--------------------------
which Purchaser or any Shareholder is entitled to indemnification under this
Agreement, they shall have all the rights and remedies at law and in equity
available to them. Without limiting the foregoing, the Shareholders hereby agree
to pay promptly upon receipt of notice from the Company, the Subsidiary or
Purchaser the amounts which the Shareholders may owe to the Company, the
Subsidiary or Purchaser from time to time by reason of the provisions of this
Agreement or otherwise. If the Shareholders fail or refuse to pay any such
amounts promptly after the request of the Company, the Subsidiary or Purchaser,
then the Company, the Subsidiary and Purchaser, at their election, may offset
any such amounts against any payments due and owing to the Shareholders. The
party or parties suffering any Loss shall be obligated to take all reasonable
actions to mitigate the damages suffered with respect to the Loss.
10.5 Limitations on Indemnity Obligations.
------------------------------------
(a) The Shareholders' liability under this Article 10 shall be
limited to the following Losses incurred by Purchaser, the Company or the
Subsidiary:
(i) The Shareholders shall, in the aggregate, be liable for
Losses pursuant to this Section 10 only to the extent that the cumulative
aggregate amount of all such Losses exceeds Two Hundred Fifty Thousand Dollars
($250,000) (the "Deductible");
(ii) The aggregate amount of Losses for which each of the
Shareholders shall be liable pursuant to this Section 10 shall not exceed the
portion of the Purchase Price received by the Shareholder for his or her Shares;
(iii) The Shareholders' liability for Losses shall be net of any
insurance proceeds to which Purchaser, the Company or the Subsidiary is entitled
under any applicable
30
insurance and net of any other compensatory payments received by Purchaser, the
Company or the Subsidiary, so long as doing so does not cancel or void any
insurance coverage or policy of Purchaser, the Company or the Subsidiary.
(iv) The Shareholders' liability for Losses shall be limited to
the net amount thereof after all tax benefits realized by Purchaser, the Company
or the Subsidiary in connection therewith, and the amount of indemnification
paid by the Shareholders with respect to Losses shall be deemed a reduction of
the Purchase Price received by the Shareholders for their Shares; and
(v) The trustees of trusts which are Shareholders shall have no
personal liability of any nature except for wrongful distributions to the
beneficiaries of such trusts after receipt of notice of a claim for
indemnification hereunder.
(b) Purchaser's liability under this Article 10 shall be limited to
the following Losses incurred by the Shareholders:
(i) Purchaser shall be liable for Losses pursuant to this
Section 10 only to the extent that the cumulative aggregate amount of all such
Losses exceeds the Deductible, provided, however, that Purchaser, the Company
and the Subsidiary shall be liable for all claims under Sections 6.5 and 10.3(c)
without regard to the Deductible;
(ii) The aggregate amount of Losses for which Purchaser shall be
liable pursuant to this Section 10 shall not exceed the Purchase Price; and
(iii) Purchaser's liability for Losses shall be limited to
the net amount thereof after all tax benefits realized by the Shareholders in
connection therewith.
10.6 Control of Indemnified Matters. If a third-party claim is made
------------------------------
against an indemnified party that may result in a Loss to the indemnified party,
the indemnifying party will be entitled to participate in the defense thereof,
and if it so chooses, to assume the defense thereof with counsel selected by the
indemnifying party and reasonably satisfactory to the indemnified party. If the
indemnifying party elects to assume the defense of such third-party claim, the
indemnifying party will not be liable to the indemnified party for legal
expenses subsequently incurred by the indemnified party in connection with the
defense thereof. If the indemnifying party assumes such defense, the indemnified
party shall have the right to participate in the defense thereof and to employ
counsel, AT ITS OWN EXPENSE, SEPARATE FROM THE COUNSEL EMPLOYED BY THE
indemnifying party, it being understood that the indemnifying party shall
control such defense. The indemnifying party shall be liable for the fees and
expenses of counsel employed by the indemnified party for any period during
which the indemnifying party has not assumed the defense thereof. If the
indemnifying party chooses to defend or prosecute any third-party claim, all of
the parties hereto shall cooperate in the defense or prosecution thereof. Such
cooperation shall include the retention and (upon the indemnifying party's
request) the provision to the indemnifying party of records and information
which are reasonably relevant to such third-party claim, and making employees
available on a mutually convenient and reasonable basis to provide additional
information and explanation of any material provided hereunder. Whether or not
the indemnifying party shall have assumed the defense
31
of a third-party claim, the indemnified party shall not admit any liability with
respect to, or settle, compromise or discharge, such third-party claim without
the indemnifying party's prior written consent (which consent shall not be
unreasonably withheld). Notwithstanding any provision in this Section 10.6, an
indemnifying party shall have no right to participate in or in any way assume
the defense of a third-party claim if such third-party claim seeks an order,
injunction, non-monetary claim or other equitable relief against the indemnified
party.
ARTICLE 11
ARBITRATION
-----------
11.1 Dispute Resolution. All controversies, disputes or claims arising
------------------
among the parties in connection with, or with respect to, any provision of this
Agreement or any of the Other Documents, which has not been resolved within
twenty (20) days after either Purchaser or the Shareholders have notified the
other in writing of such controversy, dispute or claim, shall be submitted for
arbitration in accordance with the Real Property of the American Arbitration
Association or any successor thereof. Arbitration shall take place at an
appointed time and place in Lexington, Kentucky.
11.2 Selection of Arbitrators. Purchaser and the Shareholders each shall
------------------------
select one (1) arbitrator (who shall not be counsel for such party), and the two
(2) so designated shall select a third arbitrator. If either party shall fail to
designate an arbitrator within seven (7) calendar days after arbitration is
requested, or if the two (2) arbitrators shall fail to select a third arbitrator
within fourteen (14) calendar days after arbitration is requested, then such
arbitrator shall be selected by the American Arbitration Association or any
successor thereto upon application of either party. Judgment upon any award of
the majority of arbitrators shall be binding and shall be entered in a court of
competent jurisdiction. Subject to the provisions of this Agreement, including
but not limited to Section 12.14, the award of the arbitrators may grant any
relief that a court of general jurisdiction has authority to grant, including,
without limitation, an award of damages and/or injunctive relief, and shall
assess, in addition, the cost of the arbitration, including the reasonable fees
of the arbitrator, reasonable attorneys' fees and costs of all prevailing
parties, against all non-prevailing parties.
11.3 Temporary Injunctive Relief. Nothing herein contained shall bar the
---------------------------
right of any of the parties to seek and obtain temporary injunctive relief from
a court of competent jurisdiction in accordance with applicable law against
threatened conduct that will cause loss or damage, pending completion of the
arbitration, and the prevailing party therein shall be entitled to an award of
its reasonable attorneys' fees and costs.
11.4 Arbitration Rules. All disputes and claims shall be determined by
-----------------
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "Rules") in effect on the date hereof, except that
such Rules shall be modified by this Agreement.
11.5 Arbitration Proceedings. All arbitral proceedings arising under, or
-----------------------
in connection with, this Agreement shall be governed by the Federal Rules of
Civil Procedure. Notwithstanding the previous sentence, the arbitrators' award
shall be made no later than ninety (90) days after their
32
appointment. Subject to the parties' right to be treated fairly, the arbitrators
may shorten the periods of time otherwise applicable to the arbitral proceedings
under the Rules or the Federal Rules of Civil Procedure to permit the award to
be made within the time limitation set forth in the previous sentence.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 Notices and Agent. All Notices under this Agreement ("Notices") shall
-----------------
be given: (i) by personal delivery; (ii) by facsimile transmission; (iii) by
registered or certified mail, postage prepaid, return receipt requested; or (iv)
by nationally recognized overnight or other express courier services, as
follows:
(a) If to Purchaser:
West Virginia - Indiana Coal Holding Company, Inc.
1500 North Big Run Road
Ashland, Kentucky 41102
Attention: Walter Reed
Telephone No.: (606) 928-3433
Telecopy No.: (606) 928-0450
With a copy to:
Paul E. Sullivan, Esq.
Brown, Todd & Heyburn PLLC
2700 Lexington Financial Center
Lexington, Kentucky 40507
Telephone No.: (606) 231-0000
Telecopy No.: (606) 231-0011
(b) If to the Shareholders:
Ronnie G. Dunnigan, Esq.
3100 Maria Drive
Lexington, Kentucky 40516
Telephone No.: (606) 293-2786
Telecopy No.: (606) 299-5092
33
With a copy to:
John H. Stites, III, Esq.
Greenebaum Doll & McDonald PLLC
3300 National City Tower
Louisville, Kentucky 40202-3197
Telephone No.: (502) 587-3544
Telecopy No.: (502) 540-2144
All Notices shall be effective and shall be deemed delivered: (i) if by personal
delivery, on the date of delivery if delivered during normal business hours of
the recipient, and if not delivered during such normal business hours, on the
next Business Day following delivery; (ii) if by facsimile transmission or
overnight courier service, on the next Business Day following dispatch of such
facsimile (providing receipt thereof is confirmed by the sending operator) or
overnight courier package; and (iii) if by mail, on the third (3rd) Business Day
after dispatch thereof. Either party may change its address by Notice to the
other party.
(c) Ronnie G. Dunnigan is hereby appointed by the other Shareholders,
and hereby agrees to act, as Agent for the Shareholders under this Agreement for
the limited purpose of receiving Notices to the Shareholders under this
Agreement from the Purchaser and providing services to the Shareholders as set
forth below in this Section. The Agent hereby agrees to deliver copies of all
Notices received from the Purchaser, the Company or the Subsidiary under this
Agreement to the Shareholders promptly upon receipt. If the Agent is unable to
deliver a copy of any notice to any Shareholder, the Agent will promptly notify
Purchaser, the Company and the Subsidiary so that they can otherwise seek to
deliver the notice. The Agent shall appoint arbitrators on behalf of the
Shareholders as provided in Section 11.2 and shall otherwise, acting with
Greenebaum Doll & McDonald PLLC as counsel to the Shareholders, oversee and
handle the investigation, defense and resolution of any claims for
indemnification against Shareholders asserted by Purchaser, the Company or the
Subsidiary, unless a majority of the Shareholders elect to otherwise defend and
handle any such claim for indemnification.
12.2 Waivers. No waiver or failure to insist upon strict compliance with
-------
any obligation, covenant, agreement or condition of this Agreement shall operate
as a waiver of, or an estoppel with respect to, any subsequent or other failure.
12.3 Expenses. Each party shall assume its respective expenses incurred in
--------
connection with the transactions contemplated by this Agreement and the Other
Documents. The Shareholders agree that the Company has not and will not bear any
costs or expenses related to this Agreement, provided that the Company and the
Subsidiary may pay their counsel. Greenebaum Doll & McDonald PLLC, an amount not
exceeding $50,000 at the Closing for general services rendered since June 1,
1998 and for assistance to the Company and the Subsidiary in preparing the
Schedules hereto and in otherwise facilitating the transactions contemplated
under this Agreement.
12.4 Headings: Interpretation. The headings in this Agreement have been
-------------------------
included solely for ease of reference and shall not be considered in the
interpretation or construction of this
34
Agreement. All references herein to the masculine, neuter or singular shall be
construed to include the masculine, feminine, neuter or plural, as applicable.
12.5 Annexes and Schedules. The Annexes and Schedules to this Agreement
---------------------
are incorporated herein by reference and expressly made a part hereof.
12.6 Entire Agreement. All prior negotiations and agreements by and among
----------------
the parties hereto with respect to the subject matter hereof are superseded by
this Agreement and the Other Documents, and there are no representations,
warranties, understandings or agreements with respect to the subject matter
hereof other than those expressly set forth in the Agreement, the Other
Documents or an Annex or Schedule delivered in connection herewith or therewith.
No amendment, modification or other change to this Agreement shall be
enforceable unless in writing and signed by the party against whom enforcement
is sought.
12.7 Representations and Warranties, Etc. The representations and
------------------------------------
warranties of each party contained herein shall not be deemed to be waived or
otherwise affected by any investigation made by any other party hereto. As used
in this Agreement, the term "Shareholders' knowledge." and all other references
to matters which are known by or to the Shareholders, shall refer to matters
which are known, or which with the exercise of reasonable care should have been
known, by the Shareholders after consultation with the Company's and the
Subsidiary's current corporate officers, directors, plant managers, shift
supervisors and foreman, and after their due investigation of corporate records
(except that if the Shareholders are required to make "due inquiry" with respect
to any matter, they shall make such additional inquiry as a reasonable person
would make under the circumstances).
12.8 Governing Law. This Agreement shall be governed by, and construed
-------------
and interpreted in accordance with, the laws of the Commonwealth of Kentucky.
Each party agrees that any action brought in connection with this Agreement
against another shall be filed and heard in Fayette County, Kentucky, and each
party hereby submits to the jurisdiction of the Circuit Court of Fayette County,
Kentucky, and the U.S. District Court for the Eastern District of Kentucky,
Lexington Division.
12.9 Brokers. The parties covenant and agree with one another that they
-------
have not dealt with any broker or finder in connection with any of the
transactions contemplated in this Agreement and, insofar as they know, no broker
or other Person is entitled to a commission or finders' fee in connection with
these transactions. Each party shall indemnify and hold the other parties
harmless from and against any claim by any agent or broker claiming by or
through it or any of its Affiliates for any fee or other compensation due or
allegedly due that broker or other Person.
12.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, including by means of facsimile, each of which shall be an
original, but all of which together shall constitute one and the same
Instrument.
12.11 Benefit and Binding Effect. This Agreement shall be binding
--------------------------
upon, and shall inure to the benefit of, the Shareholders and their heirs,
personal representatives, successors and assigns,
35
and Purchaser and each of its successors and assigns; provided, however, that no
party to this Agreement shall assign his or its rights or obligations hereunder
without the express written consent of the other parties, which consent shall
not be unreasonably withheld, and no party shall be released of its obligations
under this Agreement as a result of such assignment. However, notwithstanding
anything to the contrary in this Section 12.11, Purchaser may assign its rights
under this Agreement to an Affiliate of Purchaser.
12.12 Specific Performance. Subject to Article 11, the parties shall be
--------------------
entitled to specific performance, injunctive relief and other equitable relief
for breaches of the other parties' covenants and agreements, and such relief may
be awarded by the arbitrators pursuant to Article 11. Therefore, it is agreed
the parties will not, in any action to enforce this Agreement, assert that there
is an adequate remedy at law for the default under which such action or
proceeding is based.
12.13 Severability. If any provision of this Agreement or its application
------------
will be invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of all other applications of that provision, and of all other
provisions and applications hereof, will not in any way be affected or impaired.
If any court shall determine that any provision of this Agreement is in any way
unenforceable, such provision shall be reduced to whatever extent is necessary
to make such provision enforceable.
12.14 No Consequential Damages. Except as prohibited by law, each party
------------------------
waives any right it may have to claim or recover any special, exemplary,
punitive or consequential damages, or any damages other than, or in addition to,
actual damages.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date set forth in the preamble hereto.
PURCHASER: WEST VIRGINIA-INDIANA COAL HOLDING
COMPANY, INC.
By: /S/ Illegible
-------------------------------
Title:Vice President
----------------------------------
SHAREHOLDERS: /s/ Ronnie G. Dunnigan
----------------------------------
RONNIE G. DUNNIGAN
/s/ Gary L. Barker
----------------------------------
GARY L. BARKER
36
/s/ Illegible
----------------------------------
GARY LYNN BARKER TRUST, BY TRUSTEE*
/s/Illegible
-----------------------------------
TAWNYA ANN BARKER TRUST, BY TRUSTEE**
/s/Illegible
-----------------------------------
STEFFANIE APRIL FRANCIS GREEN TRUST, BY TRUSTEE
/s/Illegible
-----------------------------------
SAMUEL AARON FRANCIS TRUST, BY TRUSTEE
/s/Illegible
-----------------------------------
ROYCE K. TRAYLOR*
/s/Illegible
-----------------------------------
CARL D. HELDT*
/s/Illegible
-----------------------------------
JACK C. FOWLER
/s/Illegible
-----------------------------------
DANIEL R. RAMBO*
/s/Illegible
-----------------------------------
DAVID R. ADAMS*
/s/Illegible
-----------------------------------
HARRY W. HEARN*
*Ronnie G. Dunnigan as attorney in fact for these Shareholders.
37