EXHIBIT 2.7
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) Stephen Addington, George Jackson
Sparks, Robert Hatton, W. Todd Skaggs, Rhonda D. Cavender, Charles J. Helms,
Jr., Gilbert Wayne Lawrence, David A. Ison, Willie Begley, Michael P. Moore, and
Marvin Linwood Jones, who are the Shareholders (collectively, the
"Shareholders") of Hayman Holdings, Inc., a Kentucky corporation (the
"Company").
RECITALS
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A. 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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Stephen Addington 765
George Jackson Sparks 40
Robert Hatton 40
W. Todd Skaggs 40
Rhonda D. Cavender 25
Charles J. Helms, Jr. 15
Gilbert Wayne Lawrence 15
David A. Ison 15
Willie Begley 15
Michael P. Moore 15
Marvin Linwood Jones 15
B. The Shareholders wish to sell, and Purchaser wishes to purchase, all
of the Shares 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 have
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the 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 Charles J. Helms, Jr. in his capacity as agent
for all of the Shareholders other than Stephen Addington as provided in (S)
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) "Balance Sheet" shall have the meaning given in Section 3.7(a).
(e) "Bassco Option" shall mean the option held by the Subsidiary to
purchase unissued shares of the common stock of Kindill Holding representing
Fifty-Eight and One Tenth percent (58.1%) of the outstanding shares of common
stock of Kindill Holding on a fully diluted basis.
(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 seq. 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) 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.
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(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(1)
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), (m) 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) "Exclusive Sales Agreement" shall mean the Exclusive Sales
Agreement, dated October 1, 1997, among Kindill Holding, Kindill Mining and
Power Equity Sales.
(s) "Financial Statements" shall have the meaning given in (S)3.7(a),
copies of the Financial Statements being attached hereto as Annex 1.1(s).
(t) "Francis Release" shall mean the Release Agreement attached
hereto as Annex 1.1(t).
(u) "GAAP" shall mean generally accepted accounting principles in
effect from time to time.
(v) "Hayman Permits" shall have the meaning given in Section 3.34.
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(w) "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and the regulations and Premerger Notification and Report Form
promulgated thereunder.
(x) "Instrument" shall mean any written agreement, contract,
arrangement, mortgage, indenture, obligation or commitment.
(y) "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.
(z) "IRS" shall mean the Internal Revenue Service.
(aa) "Kindill Agreement" shall mean the Stock Purchase Agreement,
dated September 2, 1998, between the shareholders of Kindill Holding and
Purchaser, pursuant to which Purchaser shall acquire all of the outstanding
capital stock of Kindill Holding.
(bb) "Kindill Holding" shall mean Kindill Holding, Inc., a Kentucky
corporation.
(cc) "Kindill Mining" shall mean Kindill Mining, Inc., an Indiana
corporation.
(dd) "Leased Real Property" shall have the meaning given in Section
3.27(a).
(ee) "Leased Tangible Assets" shall have the meaning given in Section
3.12(b).
(ff) "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.
(gg) "Loss" shall have the meaning given in Section 10.2.
(hh) "Material" (whether or not capitalized) shall include any matter
which might influence Purchaser's decision to consummate the transactions
contemplated herein.
(ii) "Material Adverse Effect" shall mean an effect, event, occurrence
or state of facts that, individually or 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 or the Subsidiary, the material rights or remedies of Purchaser
thereunder (in any capacity).
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(jj) "Multi-employer Plan" shall mean any "multi-employer plan" within
the of Section 4001(a)(3) of ERISA.
(kk) "Notices" shall have the meaning given in Section 12.1.
(ll) "Other Documents" shall mean the Power Equity Agreement, the
Francis Release 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.
(mm) "Owned Real Property" shall have the meaning given in Section
3.27(b).
(nn) "Owned Tangible Assets" shall have the meaning given in Section
3.12(a).
(oo) "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.
(pp) "Permits" shall have the meaning given in Section 3.34(a).
(qq) "Person" shall mean any person, firm, trust, partnership,
corporation or other business entity.
(rr) "Plan" shall mean any Employee Benefit Plan other than a Multi-
employer Plan.
(ss) "Power Equity Agreement" shall mean the Option Agreement and
related agreements pursuant to which Kindill Holding and Kindill Mining are
acquiring from Power Equity Sales an option to terminate the Exclusive Sales
Agreement.
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(tt) "Power Equity Sales" shall mean Power Equity Sales, LLC, a
Kentucky limited liability company.
(uu) "Purchase Price" shall have the meaning given in Section 2.2.
(vv) "Qualified Plans" shall have the meaning given in Section
3.21(c).
(ww) "Real Property" shall mean the Owned Real Property and the
Leased Real Property, collectively.
(xx) "Related Party Transactions shall have the meaning given in
Section 3.29(a).
(yy) "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.
(zz) "Rules " shall have the meaning given in Section 11. 4.
(aaa) "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.
(bbb) "Shareholders' knowledge" shall have the meaning given in
Section 12.7.
(ccc) "SMCRA" shall mean the Surface Mining Control and Reclamation
Act of 1977, as amended.
(ddd) "Subsidiary" shall mean Bassco Valley, LLC, a Delaware limited
liability company.
(eee) "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 the 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.
(fff) "Taxing Authority" shall mean any U.S. federal, state, local or
foreign governmental authority responsible for the imposition of any relevant
Tax.
(ggg) "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
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Agreement; or, if no meanings are so ascribed, the meanings customarily
associated with such terms in the coal mining industry.
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.
(i) 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.
(j) 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.
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ARTICLE 2
PURCHASE AND SALE
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2.1 Purchase of the Shares. Subject to the terms and conditions of this
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Agreement, the Shareholders hereby agree to sell, transfer and deliver to
Purchaser, and Purchaser hereby agrees to purchase, the Shares.
2.2 Purchase Price. The purchase price (the "Purchase Price") for the
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Shares shall be Four Million Six Hundred Ninety-One Thousand Five Hundred
Seventy-Five Dollars ($4,691,575), which shall be paid to the Shareholders by
wire transfer of immediately available funds in accordance with Schedule 2.2.
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2.3 Allocation of Purchase Price. The Shareholders agree to allocate the
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Purchase Price for the Shares as provided in Schedule 2.2. The parties agree to
file any and all applicable 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 the
Purchaser that to the best of the knowledge of each of the Shareholders (except
with respect to the representations and warranties contained in (S)(S)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) Each of the Company and the Subsidiary is validly organized and
existing and in good standing under the laws of Kentucky and Delaware,
respectively. Each of the Company and the Subsidiary (i) is duly qualified to do
business and in good standing as a foreign corporation or a foreign limited
liability company, as the case may be, 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 or the Subsidiary, and (ii) 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 or the Subsidiary, as the case may be, Schedule
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3.1 lists the jurisdictions in which each of the Company and the Subsidiary is
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qualified to do business.
(b) The minute books of the Company and the Subsidiary correctly
reflect all actions taken by the Company's directors and shareholders and the
Subsidiary's members and managers in their capacity as such, and correctly
record all resolutions adopted by them. All actions required of the Company and
the Subsidiary have been taken, and all reports or returns required to
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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.
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: (i) have been duly authorized by all necessary
proceedings on the part of the Company and the Subsidiary, as the case may be;
(ii) do not require any Approval which has not been obtained or will not be
obtained prior to the Closing Date; (iii) 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; (iv) 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; (v) 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 (vi) 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, 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 A. 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.
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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 Two Thousand (2,000) shares of common stock, no par value
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 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 membership interests in 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 Subsidiary. As of the Closing, all of the membership interests of the
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Subsidiary will be owned by the Company free and clear of any Charges of any
kind. There are no rights granted to or in favor of any third party to acquire
any such membership interests, any additional membership interests or any other
securities of the Subsidiary (including securities convertible into or
exchangeable for membership interests), and there exists no restriction on the
payment of cash dividends by the Subsidiary. Neither the Company nor the
Subsidiary owns or controls, directly or indirectly, any capital stock of any
other corporation or any interest in any other Person, except for the Bassco
Option.
3.7 Financial Statements.
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(a) The unaudited consolidated balance sheets of the Company as of
December 31, 1997, are set forth as Schedule 3.7 (the "Balance Sheet" and the
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"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 September 17, 1996.
(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
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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. The Company and the Subsidiary do not have
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any material liabilities other than (i) as set forth on the Financial
Statements, (ii) as reflected in, reserved against or otherwise disclosed in the
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 or the Subsidiary.
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 the
Subsidiary, or (c) except as set forth in Schedule 3.10 any order, decree or
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judgment of any court 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 or the Subsidiary.
Except as disclosed in Schedule 3.10, no breach or event of default or event
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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 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 or the Subsidiary.
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 or the Subsidiary. 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, with such
exceptions as individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect on the Company or the Subsidiary, and no event
has occurred that allows or, after notice or lapse of time or both, would allow
revocation,
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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 or the Subsidiary.
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 3.14, except as could not reasonably be
expected to have a Material Adverse Effect on the Company or the Subsidiary, the
Company and the Subsidiary are in compliance in all respects with all
Environmental, Mining and Safety Requirements, and have filed 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
-12-
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.
(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
-13-
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 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 Balance Sheet or that have otherwise
accrued as of the date of the 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 or the Subsidiary; (f) with respect to periods
commencing a 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 1997 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 or the Subsidiary.
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, 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
-14-
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 Shareholders to perform their 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 or the Subsidiary. 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 or the
Subsidiary, 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 3.18),
except for such failures as could not reasonably be expected to have a Material
Adverse Effect on the Company or the Subsidiary.
(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 or the Subsidiary.
(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
-15-
which could reasonably be expected to have a Material Adverse Effect on the
Company or the Subsidiary.
(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) Since January 1, 1994, 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 or the
Subsidiary.
(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 9 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 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
-16-
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 or the Subsidiary.
3.21 Employee Benefits.
-----------------
(a) Schedule 3.21(a) includes a complete list of all material Employee
----------------
Benefit Plans.
(b) With respect to each Plan, the Company has delivered or made
available re 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 are no
amendments to any Plan that have been adopted or approved nor has the Company
the Subsidiary undertaken to make any such amendments or to adopt or approve any
new Plan
-17-
(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 [Qualified]
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 of 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 before the date hereof, have
been fully reflected in the Financial Statements. Each Employ Benefit Plan that
is an employee welfare benefit plan under Section 3(1) 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 (HE) 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 Company or the Subsidiary. 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"). 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
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 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 Company or the
Subsidiary has engaged in any transaction described in Section 4069 or Section
4204 or 4212 of ERISA.
-18-
(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 any 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 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
-19-
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 3.21, 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 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.
-20-
(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 or the Subsidiary.
(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 or the
Subsidiary, 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 or the Subsidiary, 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.
(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
-21-
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 or the Subsidiary, 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 or the
Subsidiary, 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 or the Subsidiary, 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 or the Subsidiary, 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 ' i g 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 or the Subsidiary, 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 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.
-22-
(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 or the Subsidiary, 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 IN 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, 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 or
the Subsidiary, 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 collectively "Related Party
Transactions"). A complete list of all Related Party Transactions is set forth
in Schedule 3.29.
-------------
(b) Other than as set forth in Schedule 3.29, and other than in or
-------------
through :he Company and the Subsidiary, none of the Company, the Subsidiary, the
Shareholder or any of their respective Affiliates conducts or engages in any
business related to the exploring, mining, transporting, marketing and selling
of coal.
3.30 Permit Blocking. Neither the Company nor the Subsidiary has been
---------------
notified nor expects to be notified by the Federal Office of Surface Mining or
the agency of any state administering the Surface Mining Control and Reclamation
Act of 1977, as amended (or any comparable state statute), that it is (i)
ineligible to receive additional surface mining permits; or (ii)
-23-
under investigation to determine whether its eligibility to receive such permits
should be revoked, i.e., "permit blocked," and, to the Shareholders' knowledge,
there is no basis therefor.
3.31 Powers of Attorney. There are no outstanding powers of attorney
------------------
executed on behalf of the Company or the Subsidiary, except as may exist in
customary form in loan or credit documentation with the Company's or the
Subsidiary's lenders with respect to the exercise by such creditors of rights
regarding collateral.
3.32 Notes and Accounts Receivables. Except as set forth in Schedule 3.32,
-------------------------------- --------------
all notes and accounts receivable of the Company and the Subsidiary shown on the
Current Balance Sheet or thereafter acquired by the Company and any of the
Subsidiary have been collected or are current and collectible in the ordinary
course (in the case of any such note in accordance with its terms, and in the
case of any such account within forty-five (45) days after billing) at the
aggregate recorded amounts thereof on the Company's and the Subsidiary's books,
less the bad debt reserves provided therefor on the Current Balance Sheet, as
such reserves may have been adjusted on the Company's or the Subsidiary's books
in the ordinary course of business to date. No note or account receivable of the
Company or the Subsidiary is subject to counterclaim or setoff.
3.33 Inventory. The Company's coal inventory consists solely of coal which
-----------
is usable or saleable at regular market prices in the ordinary course of the
Company's and the Subsidiary's respective businesses.
3.34 Permits and Bonds.
------------------
(a) The Company and the Subsidiary have all permits, licenses,
franchises, approvals, certificates or authorizations (collectively, the
"Permits") of any federal, state or local governmental or regulatory body
required in order to permit them to carry on their respective businesses as
presently conducted, all of which are in full force and effect, and none of
which will be adversely affected by the transactions contemplated herein. All
Permits held by the Company and the Subsidiary are listed on Schedule
--------
3.34(a)(1), (the "Hayman Permits"). No misrepresentations or willful or
negligent omissions were made of any material fact in obtaining 9C, any Hayman
Permits. No action or claim is pending, threatened or contemplated to revoke,
suspend, modify, alter, amend or terminate any Hayman Permit, or to declare any
of Hayman Permit invalid in any respect, and none of the Shareholders know of
any reason for such action. Except as set forth on Schedule 3.34(a)(2), neither
---------------------
the Company nor the Subsidiary has received any notice of noncompliance since
December 31, 1997.
(b) The Company and the Subsidiary have posted all reclamation and
performance bonds required to be posted in connection with their operations. All
reclamation and performance bonds posted by the Company and the Subsidiary in
- - ------------
connection with their operations are listed on Schedule 3.34(b)(1)
-------------------
(collectively, the "Bonds"). Except as disclosed on Schedule 3.34(b)(2): (i)
-------------------
each of the Company and the Subsidiary has properly carried out all reclamation
with respect to its coal mining and processing operations required to date by
law; and (ii) the operation of the Company's and the Subsidiary's respective
coal mining and processing operations, and the state of reclamation on all of
the Leased Real Property and Owned Real Property are "current" or in "deferred
status"
-24-
regarding reclamation obligations and otherwise are in material compliance with
all applicable mining, reclamation, health and safety, zoning, land use and all
other laws and regulations (including, without limitation, all aspects of the
Federal Coal Mine Health and Safety Act of 1969, as amended, and the Federal
Mine Safety and Health Act of 1977, as amended, and similar state laws and
regulations) and in accordance with reclamation plans submitted with respect to
the Hayman Permits.
3.35 Coal Supply Agreements. Schedule 3.35 lists all coal supply agreements
---------------------- --------------
to which the Company or the Subsidiary is bound. Neither the Company nor the
Subsidiary or any of their Shareholders know, or has any reasonable ground to
know, that any customer under any coal supply contract or purchase order listed
on Schedule 3.35 has terminated or expects to terminate, other than in
--------------
accordance with the terms of such contract or purchase order, its normal
business with the Company and the Subsidiary, as a result of the transactions
contemplated by Agreement.
3.36 Completeness of Statements. No statement, schedule, annex,
--------------------------
certificate, information, representation or warranty of the Company, the
Subsidiary or any of the Shareholders contained in this Agreement, or furnished
by or on behalf of the Company, the Subsidiary or any of the Shareholders to
Purchaser or any of its representatives or agents pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary in order to make a statement contained herein or
therein, in light of the circumstances in which they were made, not misleading.
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
-25-
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.
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, on request of
------------
Purchaser, cause the individuals identified as officers or directors of the
Company or the Subsidiary to resign as officers and/or directors of the Company
and the Subsidiary, and shall cause the Persons identified
-26-
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 Purchaser will bear all of the
expenses of so doing and Purchaser will see that the Shareholders are relieved
from any liability in connection therewith as quickly as practicable after the
Closing.
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.
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 the
------------------------
Subsidiary to pay and satisfy all of their debts, obligations and liabilities
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 the
Purchaser pursuant to Article 10 below with respect to any such debts,
obligations or liabilities.
-27-
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 or the Subsidiary 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, 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 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, including, without limitation, the
Power Equity Agreement and the Francis Release 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.
-28-
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 In-junction. 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
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 Kindill Agreement. Purchaser shall have consummated the transactions
-----------------
contemplated by the Kindill 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 Subsidiary Ownership. The Company shall have acquired one hundred
--------------------
percent (100%) of the membership interests of the Subsidiary.
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:
-29-
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.
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.
-30-
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 the Closing 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, 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 Right 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
-31-
time to time by reason of the provisions of this Agreement or otherwise. If any
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 such 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 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; and
(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 Shareholders with respect to Losses shall be deemed a reduction of the
Purchase Price received by such Shareholders for their Shares.
(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.
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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 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 rules 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 (S)12.14, the award of the arbitrators may grant any relief
that a court of general jurisdiction
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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 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. 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
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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:
Stephen Addington
1500 North Big Run Road
Ashland, Kentucky 41102
Telephone No.: (606) 928-3433
Telecopy No.: (606) 928-0450
and
Charles J. Helms, Jr.
Kindill Mining, Inc.
313 Frederica Street, Suite 301
P.O. Box 845
Owensboro, Kentucky 42302
Telephone No.: (502) 684-0363
Telecopy No.: (502) 691-9835
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 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) Charles J. Helms, Jr. is hereby appointed by the other
Shareholder other than Stephen Addington, and agrees to act, as Agent for such
Shareholders under this Agreement for the
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limited purpose of receiving notices to the Shareholders (other than Stephen
Addington) under this Agreement from the Purchaser and providing copies of all
notices received from the Purchaser, the Company or the Subsidiary under this
Agreement to said other Shareholders promptly upon receipt. If the Agent is
unable to deliver a copy of any notice to any Shareholder, the Agent will
promptly advise the Purchaser, the Company and the Subsidiary so that they can
otherwise seek to deliver the notice. Together with Stephen Addington, the Agent
shall appoint arbitrators on behalf of the Shareholders as provided in (S)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 the Shareholders asserted by
Purchaser, the Company or the Subsidiary, unless Stephen Addington or a majority
of the other 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.
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 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
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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, 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.
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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
--------------
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SHAREHOLDERS: /s/ Charles J. Helm, Jr.
------------------------
STEPHEN ADDINGTON*
/s/ Charles J. Helm, Jr.
------------------------
GEORGE JACKSON SPARKS*
/s/ Charles J. Helm, Jr.
------------------------
ROBERT HATTON*
/s/ Charles J. Helm, Jr.
------------------------
W. TODD SKAGGS*
/s/ Charles J. Helm, Jr.
------------------------
RHONDA D. GAVENDER*
/s/ Charles J. Helm, Jr.
------------------------
CHARLES J. HELMS, JR.
/s/ Charles J. Helm, Jr.
------------------------
GILBERT WAYNE LAWERENCE*
/s/ Charles J. Helm, Jr.
------------------------
DAVID A. ISON*
/s/ Charles J. Helm, Jr.
------------------------
WILLIE BEGLEY*
/s/ Charles J. Helm, Jr.
------------------------
MICHAEL P. MOORE*
/s/ Charles J. Helm, Jr.
------------------------
MARVIN LINWOOD JONES*
*Charles J. Helms, Jr. as attorney in fact for these Shareholders.
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