EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
By and among
PINNOAK RESOURCES, LLC
PINNACLE LAND COMPANY, LLC,
OAK GROVE LAND COMPANY, LLC
and
WPP LLC
June 30, 2003
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND INTERPRETATIONS.......................................................1
1.1 Definitions.....................................................................................1
1.2 Interpretations.................................................................................1
ARTICLE II PURCHASE AND SALE OF ASSETS..........................................................2
2.1 Purchase and Sale...............................................................................2
2.2 Purchase Price..................................................................................3
2.3 The Closing.....................................................................................3
2.4 Deliveries at the Closing.......................................................................3
2.5 Escrow 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PINNOAK AND SELLERS...............................4
3.1 Representations as to PinnOak, Sellers and Transaction..........................................4
3.2 Representations and Warranties Concerning the Assets............................................6
3.3 Limitations of Representations and Warranties...................................................8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER..............................................8
4.1 Representations and Warranties of the Buyer.....................................................8
ARTICLE V [Intentionally Omitted]...............................................................9
ARTICLE VI POST-CLOSING COVENANTS...............................................................9
6.1 General 9
6.2 Delivery and Retention of Records..............................................................10
6.3 Confidentiality................................................................................10
6.4 Notice Pursuant to USS Agreement...............................................................11
ARTICLE VII [Intentionally Omitted]............................................................11
ARTICLE VIII REMEDIES FOR BREACHES OF AGREEMENT................................................11
8.1 Survival of Representations, Warranties and Certain Covenants..................................11
8.2 Indemnification Provisions for Benefit of the Buyer............................................12
8.3 Indemnification Provisions for Benefit of PinnOak and Sellers..................................13
8.4 Matters Involving Third Parties................................................................14
8.5 Determination of Amount of Adverse Consequences................................................14
8.6 Arbitration....................................................................................15
8.7 Tax Treatment of Indemnity Payments............................................................16
ARTICLE IX TAX MATTERS.........................................................................16
9.1 Post-Closing Tax Returns.......................................................................16
9.2 Pre-Closing Tax Returns........................................................................16
9.3 Allocation of Ad Valorem Taxes.................................................................16
9.4 Claims for Refund..............................................................................17
9.5 Cooperation on Tax Matters.....................................................................17
i
9.6 Certain Taxes..................................................................................18
9.7 Confidentiality................................................................................18
9.8 Audits 18
9.9 Control of Proceedings.........................................................................19
9.10 Powers of Attorney.............................................................................19
9.11 Remittance of Refunds..........................................................................19
9.12 Purchase Price Allocation......................................................................20
9.13 Closing Tax Certificate........................................................................20
ARTICLE X [Intentionally Omitted]..............................................................20
ARTICLE XI MISCELLANEOUS.......................................................................20
11.1 Insurance......................................................................................20
11.2 Press Releases and Public Announcements........................................................21
11.3 No Third Party Beneficiaries...................................................................21
11.4 Succession and Assignment......................................................................21
11.5 Counterparts...................................................................................22
11.6 Notices 22
11.7 Governing Law..................................................................................23
11.8 Consent to Jurisdiction and Service of Process; Appointment of Agent for Service of Process...23
11.9 Waiver of Jury Trial...........................................................................24
11.10 Entire Agreement...............................................................................25
11.11 Severability...................................................................................25
11.12 Transaction Expenses...........................................................................25
ii
EXHIBITS
Exhibit A: Definitions and Interpretations
Exhibit B-1: Form of Special Warranty Deed (AL)
Exhibit B-2: Form of Special Warranty Deed (WV)
Exhibit C: Form of Lease Agreements
Exhibit D: Form of Escrow Agreement
Exhibit E: Form of Access Easement and Restriction Agreement (AL)
Exhibit F: Form of Access Easement and Restriction Agreement (WV)
Exhibit G: Alabama Permitted Encumbrances
Exhibit H: West Virginia Permitted Encumbrances
Exhibit I: PinnOak Balance Sheet
Exhibit J: PinnOak Sources and Uses Table
iii
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") dated as of June
30, 2003 by and among PINNOAK RESOURCES, LLC, a Delaware limited liability
company ("PinnOak"), PINNACLE LAND COMPANY, LLC, a Delaware limited liability
company ("Pinnacle"), OAK GROVE LAND COMPANY, LLC, a Delaware limited liability
company ("Oak Grove" and, collectively with Pinnacle, "Sellers"), and WPP LLC, a
Delaware limited liability company, ("Buyer"). Sellers and Buyer are sometimes
referred to collectively herein as the "Parties" and individually as a "Party."
RECITALS
WHEREAS, PinnOak owns a 100% membership interest in each of the
Sellers;
WHEREAS, Sellers own the Coal Reserves that were acquired from USM
pursuant to deeds executed and delivered by USM pursuant to that certain Asset
Purchase Agreement dated May 23, 2003, by and among PinnOak and the USS Entities
(the "USS Agreement");
WHEREAS, each Seller is qualified to do business in the states where it
owns such property;
WHEREAS, this Agreement contemplates a transaction in which Buyer will
purchase Sellers' right, title and interests in and to the Coal Reserves,
appurtenant surface rights and Access Easements in return for the consideration
specified herein and Affiliates of Sellers will lease the same back from Buyer
(and the obligations of such Affiliates under such leases will be guaranteed by
PinnOak) on the terms and conditions herein specified.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
1.1 Definitions. Unless otherwise provided to the contrary in this
Agreement, capitalized terms in this Agreement shall have the meanings set forth
in Section 1.1 of Exhibit A.
1.2 Interpretations. Unless expressly provided to the contrary in this
Agreement, this Agreement shall be interpreted in accordance with the provisions
set forth in Section 1.2 of Exhibit A.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, Sellers agree to sell to Buyer and Buyer agrees to purchase from
Sellers all of Sellers' right, title and interest in the following (all of which
are collectively referred to as the "Assets"):
(a) The coal reserves within the Pinnacle No. 50 Mine located in
McDowell and Wyoming Counties, West Virginia (the "WV Coal Reserve"), the
location of which coal reserves is more specifically depicted in Exhibit B-1;
(b) The coal reserves within the Oak Grove Mine located in
Jefferson County, Alabama (the "AL Coal Reserve" and, collectively with the WV
Coal Reserve, the "Coal Reserves"), the location of which coal reserves is more
specifically depicted in Exhibit B-2;
(c) the easements, in the form of Exhibit E and Exhibit F attached
hereto, pursuant to which each Seller grants to Buyer's then-current lessee of
the applicable Coal Reserve a non-exclusive easement over the Retained Property
for the purpose of allowing any such lessee access, ingress, egress and rights
of way with respect to such Coal Reserve (collectively, the "Access Easements");
and
(d) copies of records in the possession of Sellers pertaining to
the Coal Reserves, including maps, files, reserve information and other similar
materials pertaining to the Coal Reserves (the "PinnOak Records").
For avoidance of doubt, the Assets shall not include any of the following: (a)
the inventories owned by Sellers or any Affiliate of Sellers (including
inventories of extracted coal and other raw materials and supplies) that are
located on or are in transit to the Mines (although Buyer shall receive all
royalty attributable to any inventories of extracted coal, to the extent such
inventories are sold after the Closing Date), (b) preparation plants, buildings,
infrastructure, machinery, equipment, vehicles, furniture, supplies, replacement
parts, tools and any other tangible personal property or other assets relating
to the operation of the Mines that are owned or leased by either Seller or any
Affiliate of either Seller, whether located on or in transit to the Mines or
located elsewhere, (c) any leases, licenses, coal sale agreements, supply
agreements, railroad agreements and any other agreements or contracts not
specifically listed in Exhibit B-1 or Exhibit B-2 to which either Seller or its
Affiliates are a party, whether written or oral, (d) any governmental licenses
or permits relating to the Assets or the operation of any business conducted by
either Seller or its Affiliates, (e) any accounts, accounts receivable, notes
and notes receivable, reclamation and performance bonds, deposit, pre-paid
rentals and royalties, cash and cash equivalents and other securities and
instruments, and (f) the Retained Property (as defined in Section 9.3(a) below).
The foregoing list of excluded Assets is not exhaustive, it being the intent of
the Parties to exclude from the
2
transaction contemplated hereby any asset or interest of Sellers not
specifically identified above as an Asset.
2.2 Purchase Price. In consideration for the Assets, Buyer agrees to
deposit with the Escrow Agent pursuant to the terms of the Escrow Agreement on
the date hereof (the "Closing Date") $58,000,000 (the "Purchase Price") payable
by wire transfer of immediately available funds.
2.3 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place via facsimile delivery of documents
and receipt of documents previously sent by overnight courier service, if any.
All of the deliveries of documents that are contemplated by this Agreement to be
made at the Closing shall be delivered to the applicable Party or Parties by (i)
overnight courier service for delivery on the Closing Date or (ii), if delivery
by overnight courier service on the Closing Date is not practicable, then by
facsimile on the Closing Date, with original executed documents delivered on the
next succeeding business day. Any documents to be delivered to a Party on the
Closing Date will be delivered and held in escrow until the Parties communicate
via telephone to confirm delivery of all documents and consummation of all other
actions contemplated by this Article II.
2.4 Deliveries at the Closing. At the Closing, (a) Sellers will deliver
to Buyer, and Buyer will deliver to Sellers, the various certificates,
instruments, and documents referred to in Section 9.13, (b) Sellers will execute
and deliver to the Escrow Agent one or more special warranty deeds substantially
in the form attached as Exhibit B-1 and Exhibit B-2 that are necessary to convey
the Coal Reserves, together with any transfer tax declarations, disclosures or
forms required by applicable law, (c) two Affiliates of Sellers will execute and
deliver to the Escrow Agent and Buyer will execute and deliver to the Escrow
Agent the Lease Agreements substantially in the form attached as Exhibit C with
regard to the separate leases of the AL and WV Coal Reserves, (d) Sellers will
deliver to Buyer within sixty (60) days after the Closing Date copies of all of
the PinnOak Records, (e) each Seller will execute and deliver to Buyer the
applicable Access Easement, (f) PinnOak and each Seller will deliver to Buyer a
certificate as to resolutions approving the transactions contemplated by this
Agreement, good standing of such entity and authority of officers to sign
documents in connection with this Agreement, (g) Buyer will deliver to PinnOak
and each Seller a certificate as to resolutions approving the transactions
contemplated by this Agreement, good standing of Buyer and authority of officers
to sign documents in connection with this Agreement and (h) Buyer will deliver
the Purchase Price by wire transfer to the Escrow Agent.
2.5 Escrow. On July 11, 2003 (the "Escrow Release Date"), the Escrow
Agent shall deliver the appropriate deliveries to the applicable Parties
pursuant to the terms of the Escrow Agreement. Title to the Coal Reserves shall
not pass to Buyer until the Escrow Release Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PINNOAK AND SELLERS
3
3.1 Representations as to PinnOak, Sellers and Transaction. PinnOak and
Sellers represent and warrant to Buyer as follows:
(a) Organization of PinnOak and Sellers. PinnOak and each Seller
are limited liability companies duly organized, validly existing, and in good
standing under the Laws of the State of Delaware. PinnOak and each Seller are
duly qualified and in good standing to do business in each jurisdiction in which
the nature of the business conducted by them or the ownership or leasing of
their properties makes such qualification necessary, except where the failure to
qualify would not have a Material Adverse Effect and would not affect PinnOak's
or either Seller's ability to consummate the transactions contemplated by this
Agreement. PinnOak owns a 100% membership interest in each Seller, and such
membership interests have been duly authorized and validly issued in accordance
with the limited liability company agreements of each Seller and are fully paid
and non-assessable. PinnOak owns the membership interests free and clear of all
Encumbrances, except for Encumbrances in connection with the New Credit
Facility.
(b) Authorization of Transaction. PinnOak and each Seller have
full limited liability company power and authority to execute and deliver this
Agreement and to perform their obligations under this Agreement. This Agreement
constitutes the valid and legally binding obligation of PinnOak and each Seller
enforceable in accordance with its terms and conditions, subject, however, to
the effects of bankruptcy, insolvency, reorganization, moratorium or similar
Laws affecting creditors' rights generally, and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(c) Noncontravention. Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will (i) violate any
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any Governmental Authority to which PinnOak, either
Seller, or any of the Assets, is subject or any provision of PinnOak's or either
Seller's Organizational Documents or (ii) other than the notice that must be
provided to USS pursuant to Section 10.15 of the USS Agreement, conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which PinnOak or either Seller is a party or by which
PinnOak or either Seller or any of the Assets are bound or to which any of their
assets (including the Assets) are subject, except (x) for required consents to
transfer and related provisions and any other third party approvals or consents
contemplated by this Agreement, and (y) where the violation, conflict, default,
breach, acceleration, termination, modification, cancellation, failure to give
notice, right to payment or other compensation, Encumbrance or other occurrence
would not have a Material Adverse Effect on the ability of PinnOak or either
Seller to consummate the transactions contemplated by this Agreement. Neither
PinnOak nor either Seller need give notice to, make any filing with, or obtain
any authorization, consent, or approval of any Governmental Authority in order
for the Parties to consummate the transactions contemplated by this Agreement,
except where the failure to give notice, to file, or to
4
obtain any authorization, consent, or approval would not have a Material Adverse
Effect or would not materially adversely affect the ability of PinnOak or either
Seller to consummate the transactions contemplated by this Agreement.
(d) Brokers' Fees. Neither PinnOak, Sellers nor any of their
Affiliates have any liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated by
this Agreement for which Buyer could become liable or obligated.
(e) Solvency. As of the date of this Agreement, and after
consummation of the transactions contemplated by this Agreement, neither PinnOak
nor either Seller is insolvent or unable to pay its debts and has not made a
general assignment with or for the benefit of its creditors, and no proceeding
under any bankruptcy, insolvency or reorganization law has been commenced by or
with respect to PinnOak or either Seller.
(f) Compliance with USS Agreement. PinnOak is in compliance in all
material respects with Section 10.15 of the USS Agreement. PinnOak's Debt to
Applicable EBITDA Ratio (as defined in the USS Agreement), after giving pro
forma effect to the transactions contemplated by this Agreement, is equal to or
less than 4 to 1, and no consent from USS is necessary to consummate this
transaction.
(g) New Credit Facility. PinnOak and Sellers have entered into a
credit agreement with Wells Fargo Foothill, Inc. (the "New Credit Facility")
under which $25 million of credit will be made available pursuant to a borrowing
base facility. PinnOak and Sellers are required by the lenders under the New
Credit Facility to have $5 million of excess capacity at the closing of the New
Credit Facility.
(h) PinnOak Balance Sheet. Attached as Exhibit I is management's
good faith estimate of the expected July 1, 2003 balance sheet of PinnOak,
assuming the closing of the transactions contemplated by the USS Agreement and
the New Credit Facility (the "Balance Sheet"). The Balance Sheet was prepared by
management in good faith and accurately reflects in all material respects the
estimated expected financial condition of PinnOak as of the date thereof;
provided that the Balance Sheet does not reflect purchase accounting adjustments
or other normal year-end adjustments or contain footnotes.
3.2 Representations and Warranties Concerning the Assets. PinnOak and
each Seller represent and warrant to Buyer as follows:
(a) Title to the Coal Reserves. The Assets are free and clear of
all Encumbrances, except for (i) Permitted Encumbrances and (ii) Encumbrances
which do not have a Material Adverse Effect. PinnOak and each Seller have
delivered or made available to Buyer all material title reports, title insurance
policies, title commitments, title opinions and title abstracts relating to the
Coal Reserves (the "Title Information") which are in the possession and control
of PinnOak or either Seller. All Title Information
5
is true and accurate except to the extent such inaccuracy would not have a
Material Adverse Effect.
(b) No Adverse Claims. There are no adverse claims to any of the
Coal Reserves except for (i) Permitted Encumbrances and (ii) those claims which
would not have a Material Adverse Effect. There are no eminent domain, zoning or
condemnation proceedings pending, or to PinnOak's and Sellers' Knowledge,
threatened against any of the Coal Reserves, except such proceedings that would
not have a Material Adverse Effect.
(c) Tax Matters. Except as would not have a Material Adverse
Effect:
(i) There is no dispute or claim concerning any Tax liability
with respect to the Assets claimed or raised by any authority in
writing and for which Buyer would be responsible.
(ii) There are no outstanding agreements or waivers extending
the statutory period of limitations applicable to any Tax Returns
required to be filed by or with respect to the Assets and for
which Buyer may be responsible.
(iii) Each Seller and, to each Sellers Knowledge, its
predecessor in title, has filed all Tax Returns with respect to
the Assets owned by each such Seller and that were required to be
filed and such Tax Returns (with respect to such assets) are
accurate in all respects. All Taxes shown as due with respect to
the Assets on any such Tax Returns filed by either Seller have
been paid.
(iv) No special assessments for improvements are outstanding or
have been completed as of the date of this Agreement.
(d) Litigation. None of the Assets (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is
the subject of any action, suit, proceeding, hearing, or investigation of, in,
or before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction, or is the subject of any pending or, to
Sellers' Knowledge, threatened claim, demand, or notice of violation or
liability from any Person, except where any of the foregoing would not have a
Material Adverse Effect.
(e) Environmental Matters.
(i) With respect to the Assets, PinnOak and each Seller are in
compliance with all applicable federal, state and local Laws
(including common law) relating to the protection of the
environment as in effect on or before the date of this Agreement,
including, without limitation, the Surface Mining Control and
Reclamation Act of 1977, 30 U.S.C. section 1201 et seq., the
Comprehensive Environmental Response,
6
Compensation, and Liability Act of 1980, as amended, 42 U.S.C.
section 9601, et seq. ("CERCLA"), the Resource Conservation and
Recovery Act of 1976, as amended, 42 U.S.C. section 6901, et seq.,
the Clean Air Act, as amended, 42 U.S.C. section 7401, et seq.,
the Federal Water Pollution Control Act, as amended, 33 U.S.C.
section 1251, et seq., and the Oil Pollution Act of 1990, 33
U.S.C. section 2701, et seq. and the statutes, regulations, rules
and orders of all agencies responsible for supervision and
enforcement of environmental and mining laws of Alabama and West
Virginia (collectively, the "Environmental Laws" and individually
an "Environmental Law"), except for such instances of
noncompliance that do not have a Material Adverse Effect.
(ii) Sellers' Affiliates that are parties to the Lease
Agreements have obtained all or, pending obtainment, are operating
under USS' permits, licenses, franchises, authorities, consents,
and approvals, and have made all filings and maintained all
material information, documentation, and records, as necessary
under applicable Laws including Environmental Laws for operating
the Assets and the related business as it is presently conducted,
or contemplated to be conducted, and all such permits, licenses,
franchises, authorities, consents, approvals, and filings remain
in full force and effect, except for such matters that do not have
a Material Adverse Effect.
(iii) Except as does not have a Material Adverse Effect, (A)
there are no pending or, to PinnOak's and Sellers' Knowledge,
threatened claims, demands, actions, administrative proceedings or
lawsuits against PinnOak or either Seller or their predecessor in
title with respect to the Assets under any Environmental Laws and
Seller has no Knowledge (without any obligation of due inquiry) of
facts which would give rise to the same and (B) none of the Assets
are subject to any outstanding injunction, judgment, order, decree
or ruling, under any Environmental Laws.
(iv) Neither PinnOak nor either Seller has received any written
notice that PinnOak, Sellers or their predecessor in title, with
respect to the Assets, is or may be a potentially responsible
party under CERCLA or any analogous state law in connection with
any site actually or allegedly containing or used for the
treatment, storage or disposal of Hazardous Substances.
3.3 Limitations of Representations and Warranties.
(a) BUYER ACKNOWLEDGES THAT NEITHER PINNOAK NOR EITHER SELLER HAS
MADE REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, EXCEPT AS EXPRESSLY SET
FORTH IN THIS AGREEMENT.
7
(b) WITHOUT LIMITING THE ABOVE, NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS AGREEMENT, NEITHER PINNOAK NOR EITHER SELLER MAKES, AND
DISCLAIMS ANY, REPRESENTATION OR WARRANTY, WHETHER EXPRESS OR IMPLIED, AND
WHETHER BY COMMON LAW, STATUTE, OR OTHERWISE REGARDING ALL GEOLOGICAL DATA,
RESERVE OR RESOURCE DATA, SUFFICIENCY OF MINING RIGHTS (EXCEPT AS EXPRESSLY SET
FORTH IN SECTION 3.2(a) ABOVE), PROCESSING CAPABILITIES OF THE ASSETS,
MINEABILITY OF COAL, QUALITY OF COAL RESERVES AND INVENTORIES. THE ACREAGES OF
THE COAL RESERVES SET FORTH IN THIS AGREEMENT ARE APPROXIMATIONS AND ANY
REPRESENTATION OR WARRANTY WITH RESPECT THERETO IS DISCLAIMED.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Representations and Warranties of the Buyer. Buyer hereby
represents and warrants to PinnOak and each Seller as follows:
(a) Organization of the Buyer. Buyer is a limited liability
company duly organized, validly existing, and in good standing under the Laws of
the State of Delaware.
(b) Authorization of Transaction. Buyer has full limited liability
company power and authority to execute and deliver this Agreement and to perform
its obligations under this Agreement. This Agreement constitutes the valid and
legally binding obligation of the Buyer, enforceable in accordance with its
terms and conditions, subject, however, to the effects of bankruptcy,
insolvency, reorganization, moratorium, or similar Laws affecting creditors'
rights generally and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Buyer need
not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any Governmental Authority in order to consummate the
transactions contemplated by this Agreement, except notices, filings,
authorizations, consents or approvals, the failure of which to make or obtain
would not have a material adverse effect on the ability of Buyer to consummate
the transactions contemplated by this Agreement.
(c) Noncontravention. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any Governmental Authority to which
Buyer is subject or any provision of its Organizational Documents or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any Party the right to accelerate, terminate, modify,
or cancel, or require any notice, approval or consent under any agreement,
contract, lease, license, instrument, or other arrangement to which Buyer is a
party or by which it is bound or to which any of its assets is subject, except
for such
8
violations, defaults, breaches, or other occurrences that do not, individually
or in the aggregate, have a material adverse effect on the ability of Buyer to
consummate the transactions contemplated by this Agreement.
(d) Solvency. As of the date of this Agreement, and after
consummation of the transactions contemplated by this Agreement, Buyer is not
insolvent or unable to pay its debts and has not made a general assignment with
or for the benefit of its creditors, and no proceeding under any bankruptcy,
insolvency or reorganization law has been commenced by or with respect to Buyer.
ARTICLE V
PRE-CLOSING COVENANTS [INTENTIONALLY OMITTED]
ARTICLE VI
POST-CLOSING COVENANTS
6.1 General. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action (including the execution and delivery of such
further instruments and documents) as the other Parties reasonably may request,
all at the sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under Article VIII).
6.2 Delivery and Retention of Records. On or before sixty (60) days
after the Closing Date, at Buyer's request, Sellers will deliver or cause to be
delivered to Buyer at its office in Huntington, West Virginia or such other
mutually agreeable location, the PinnOak Records. Each Seller (and its
successors and assigns) may retain a copy of the PinnOak Records to the extent
that they relate to the operation of their respective businesses. Buyer agrees
to (a) hold the PinnOak Records and not to destroy or dispose of any portion
thereof for a period of ten years from the Closing Date or such longer time as
may be required by Law, provided that, if it desires to destroy or dispose of
such PinnOak Records during such period, it will first offer in writing at least
sixty (60) days before such destruction or disposition to surrender them to the
Sellers and if the Sellers do not accept such offer within twenty (20) days
after receipt of such offer, Buyer may take such action and (b) following the
Closing Date to afford (i) each Seller, (ii) each Seller's successors and
assigns and (iii) any of their accountants, and counsel, during normal business
hours, upon reasonable request, at any time, full access to the PinnOak Records
and to Buyer's employees at no cost to either Seller (other than for reasonable
out-of-pocket expenses); provided that such access will not be construed to
require the disclosure of PinnOak Records that would cause the waiver of any
attorney-client, work product or like privilege; provided, further, that in the
event of any litigation nothing herein shall limit any Party's rights of
discovery under applicable Law. Nothing herein shall impose any liability upon
Buyer in the event of destruction or loss of any PinnOak
9
Records as a result of casualty. Buyer agrees to provide either Seller and its
successors and assigns and their Affiliates involved in the coal mining business
reasonable access to the PinnOak Records after the Closing Date in order for
either Seller to comply with its obligations under this Agreement (including
without limitation the preparation of any required tax returns and to comply
with any indemnity obligations), to conduct any historical audit of the
financial statements of such Seller in accordance with generally accepted
accounting principles, in connection with any dispute under the USS Agreement or
to enforce its rights thereunder and, to the extent required, to perform any
obligations or to receive any benefits associated with any of its other assets
and liabilities.
6.3 Confidentiality. From and after the Closing Date and subject to the
last sentence of Section 11.2 hereof, unless otherwise required by federal or
state securities laws, any non-public information concerning either Seller or
its Affiliates that Buyer may obtain from Sellers, their Affiliates or their
respective representatives (whether before or after the date of this Agreement),
shall be kept confidential by Buyer, and Buyer shall not disclose any such
information to any third party other than its officers, directors, employees and
advisors whose knowledge thereof is necessary in order to facilitate the
consummation of the transactions contemplated hereby or use such information to
the detriment of Sellers and their Affiliates; provided that (a) Buyer may use
and disclose any such information once it has been publicly disclosed (other
than by Buyer in breach of its obligations under this Section 6.3) or that
rightfully has come into the possession of Buyer (other than from Sellers, their
Affiliates or their respective representatives) and (b) to the extent that Buyer
may disclose such information pursuant to a subpoena or court order it shall use
all commercially reasonable efforts, and shall have afforded Sellers a
reasonable opportunity to obtain an appropriate protective order, or other
satisfactory assurance of confidential treatment, for the information compelled
to be disclosed. The Parties hereby acknowledge and agree that the provisions of
this Section 6.3 supercede the provisions set forth in any prior confidentiality
agreements between the Parties.
6.4 Notice Pursuant to USS Agreement. PinnOak agrees to deliver the
notice and any other documents required to be delivered to USS pursuant to
Section 10.15 of the USS Agreement.
6.5 Use of Proceeds. PinnOak and Sellers agree to use the proceeds from
the Purchase Price in a manner consistent in all material respects with that set
forth on Exhibit J, subject to disbursements made in accordance with the Escrow
Agreement.
ARTICLE VII
CONDITIONS PRECEDENT [INTENTIONALLY OMITTED]
ARTICLE VIII
REMEDIES FOR BREACHES OF AGREEMENT
10
8.1 Survival of Representations, Warranties and Certain Covenants. The
representations and warranties of PinnOak and Sellers contained in Article III,
as well as the certificates delivered pursuant to Section 2.4, shall survive the
Closing under this Agreement for a period of two years after the Closing Date.
The representations and warranties of Buyer contained in Article IV, as well as
the certificates delivered pursuant to Section 2.4, shall survive the Closing
for a period of two years after the Closing Date. The covenants contained in
this Agreement to be performed after the Closing shall survive the Closing
indefinitely.
8.2 Indemnification Provisions for Benefit of the Buyer.
(a) PinnOak and Sellers shall indemnify and hold Buyer harmless
from and against any and all Adverse Consequences whatsoever arising out of or
resulting from:
(i) Any breach of warranty or misrepresentation by PinnOak or
either Seller or the nonperformance of any covenant or obligation
to be performed by PinnOak or either Seller to the extent that and
only to the extent that (A) there is an applicable survival period
pursuant to Section 8.1; and that (B) Buyer makes a written claim
for indemnification against PinnOak or Sellers pursuant to Section
11.6 within such survival period;
(ii) Any liability arising out of the ownership, conduct or
operation of the Assets prior to the Closing Date to the extent
that Buyer makes a written claim for indemnification against
Sellers pursuant to section 11.6 within two years of the Closing
Date;
(iii) Any claim which may be asserted against Buyer or any of
the Assets by any of PinnOak's or Sellers' employees, independent
contractors, their employees, or agents with respect to
liabilities incurred by or on PinnOak's or Sellers' behalf prior
to the Closing Date, whether covered by a collective bargaining
agreement or not, including labor costs, severance pay, pension
benefits, employee benefits, workers' compensation, vacation and
holiday benefits, sick pay, multiemployer withdrawal liability,
any and all employee benefits, and any other costs associated
therewith; and/or
(iv) Any attempt (whether or not successful) by any person to
cause or require Buyer to pay or discharge any debt, obligation or
liability relating to PinnOak or either Seller not associated with
the Assets.
(b) Limitations of Indemnification. The following limitations
shall apply with regard to PinnOak's and Sellers' obligations to indemnify Buyer
Indemnitees pursuant to this Section 8.2:
11
(i) Sellers' liability under this Agreement shall not exceed
20% of the Purchase Price paid in accordance with Section 2.2 (the
"Liability Cap"). The limitations on PinnOak's and Sellers'
indemnification obligations set forth in the prior sentence shall
not apply to losses resulting from fraud or willful misconduct by
PinnOak or either Seller.
(ii) PinnOak and Sellers will have no liability under this
Agreement, unless and until the aggregate Adverse Consequences for
which Buyer Indemnitees are entitled to recover under this
Agreement exceeds 1% of the Purchase Price paid in accordance with
Section 2.2 (the "Threshold Amount"); provided, however, once such
amount exceeds the Threshold Amount, Buyer Indemnitees will be
entitled to recover all amounts to which they are entitled in
excess of the Threshold Amount, subject to the limitations set
forth in (i) above.
(iii) Buyer acknowledges and agrees that the indemnification
provisions in this Article VIII and the termination rights in
Section 10.1 shall be the exclusive remedies of the Buyer, Buyer
Indemnitees and their Affiliates with respect to the transactions
contemplated by this Agreement.
8.3 Indemnification Provisions for Benefit of PinnOak and Sellers.
(a) Buyer shall indemnify and hold PinnOak and Sellers forever
harmless from and against all Adverse Consequences whatsoever arising out of or
resulting from:
(i) Any breach of warranty or misrepresentation by Buyer
contained herein, or the non-performance of any covenant or
obligation to be performed by Buyer to the extent that and only to
the extent that (A) there is an applicable survival period
pursuant to Section 8.1; and that (B) PinnOak or either Seller
makes a written claim for indemnification against Buyer pursuant
to Section 11.6 within such survival period; or
(ii) The ownership, conduct or operation of the Assets from and
after the Closing Date.
(b) Limitations of Indemnification. The following limitations
shall apply with regard to Buyer's obligations to indemnify Seller Indemnitees
pursuant to this Section 8.3:
(i) Buyer's and its Affiliates' liability under this Agreement
shall not exceed the Liability Cap. The limitations on Buyer's
indemnification obligations set forth in the prior sentence shall
not apply to losses resulting from fraud or willful misconduct by
Buyer.
12
(ii) Buyer and its Affiliates will have no liability for any
Adverse Consequences, unless and until the aggregate Adverse
Consequences for which Seller Indemnitees are entitled to recover
under this Agreement exceeds the Threshold Amount; provided,
however, once such amount exceeds the Threshold Amount, Seller
Indemnitees will be entitled to recover all amounts to which they
are entitled in excess of the Threshold Amount, subject to the
limitations set forth in (i) above.
(iii) PinnOak and each Seller acknowledge and agree that the
indemnification provisions in this Article VIII and the
termination rights in Section 10.1 shall be the exclusive remedies
of PinnOak, Sellers, Seller Indemnitees and their Affiliates with
respect to the transactions contemplated by this Agreement.
8.4 Matters Involving Third Parties.
(a) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") that may give rise to
a right to claim for indemnification against any other Party (the "Indemnifying
Party") under Section 8.2 or Section 8.3, then the Indemnified Party shall
promptly (and in any event within five (5) business days after receiving notice
of the Third Party Claim) notify the Indemnifying Party thereof in writing.
(b) The Indemnifying Party will have the right to assume and
thereafter conduct the defense of the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party; provided, however, that
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably)
unless the judgment or proposed settlement involves only the payment of money
damages not exceeding the Liability Cap and does not impose an injunction or
other equitable relief upon the Indemnified Party.
(c) Unless and until the Indemnifying Party assumes the defense of
the Third Party Claim as provided in subsection 8.4(b), the Indemnified Party
may defend against the Third Party Claim in any manner it reasonably may deem
appropriate.
(d) In no event will the Indemnified Party consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party which consent shall
not be withheld unreasonably.
8.5 Determination of Amount of Adverse Consequences. The Adverse
Consequences giving rise to any indemnification obligation hereunder shall be
limited to the actual loss suffered by the Indemnified Party (i.e., reduced by
any insurance proceeds or other payment or recoupment received, realized or
retained by the Indemnified Party as a result of the events giving rise to the
claim for indemnification), net of any reduction in Taxes of the Indemnified
Party (or the affiliated group of which it is a member)
13
occasioned by such loss or damage. Upon the request of the Indemnifying Party,
the Indemnified Party shall provide the Indemnifying Party with information
sufficient to allow the Indemnifying Party to calculate the amount of the
indemnity payment in accordance with this Section 8.5. An Indemnified Party
shall take all reasonable steps to mitigate damages in respect of any claim for
which it is seeking indemnification and shall use reasonable efforts to avoid
any costs or expenses associated with such claim and, if such costs and expenses
cannot be avoided, to minimize the amount thereof.
8.6 Arbitration. In the event the Parties are unable to agree on
liability for any asserted indemnification obligation or the amount of any
indemnification obligation hereunder, the determination thereof shall be
arbitrated as follows:
(a) Arbitration Demand. Either Party may demand arbitration in
writing within thirty (30) days after the Indemnifying Party either (i) disputes
in writing the liability or amount of an asserted indemnification obligation or
(ii) fails to pay the same within thirty (30) days of demand for payment of
same, which demand for arbitration shall include the name of the arbitrator
appointed by the Party demanding arbitration, together with a statement of the
matter in controversy and the amount sought as the indemnity obligation.
(b) Arbitration Procedure. Within thirty (30) days after such
demand, the other Party shall advise the first Party in writing of the name of
its arbitrator and its response to the first Party's statement. The two
arbitrators so selected shall name a third party arbitrator from a list
submitted by the American Arbitration Association within fifteen (15) days or,
in lieu of such agreement on a third arbitrator by the two arbitrators so
appointed, a third arbitrator shall be appointed by the American Arbitration
Association. Unless otherwise provided herein, each Party shall bear his own
arbitration costs and expenses.
The arbitration hearing shall be held at Huntington, West Virginia, on
fifteen (15) days' notice to the parties, in compliance with and pursuant to the
provisions of the rules of the American Arbitration Society. The sole issues
before the arbitrators will be: (1) whether an indemnity obligation has been
properly triggered and asserted by the Parties; (2) whether one Party owes the
other Party an indemnity obligations; and (3) if issues 1 and 2 have been
answered affirmatively, the amount of the indemnity obligation owed. In regard
to this issue 3, the amount of any indemnity obligation that the arbitrators
determine to be owed must be either the amount specified by Buyer or the amount
specified by Seller.
The arbitration hearing shall be concluded within three (3) days unless
otherwise ordered by the arbitrators and the award thereon shall be made within
fifteen (15) days after the close of the submission of evidence. An award
rendered by a majority of the arbitrators appointed pursuant to this agreement
shall be final and binding on all parties to the proceeding during the period of
this Agreement, and judgment on such award may be entered by either Party in the
highest court, state or federal, having jurisdiction.
14
The Parties stipulate that the provisions hereof shall be a complete
defense to any suit, action or proceeding instituted in any federal, state, or
local court or before any administrative tribunal with respect to any
controversy or dispute arising during the period of this Agreement and which is
arbitrable as herein set forth. The arbitration provisions hereof shall, with
respect to such controversy or dispute, survive the termination or expiration of
this Agreement.
8.7 Tax Treatment of Indemnity Payments. All indemnification payments
made under this Agreement, including any payment made under Article VIII, shall
be treated as purchase price adjustments for Tax purposes.
ARTICLE IX
TAX MATTERS
9.1 Post-Closing Tax Returns. Buyer shall prepare or cause to be
prepared and file or cause to be filed any Post-Closing Tax Returns with respect
to the Assets. Except as set forth in Section 9.3 below, Buyer shall pay (or
shall cause to be paid) any Taxes due with respect to such Post-Closing Tax
Returns.
9.2 Pre-Closing Tax Returns. Seller shall prepare or cause to be
prepared and file or cause to be filed all Pre-Closing Tax Returns with respect
to the Assets. Seller shall pay (or cause to be paid) any Taxes due with respect
to such Tax Returns.
9.3 Allocation of Ad Valorem Taxes . Ad valorem real property taxes on
the Assets for all years prior to the current tax upon shall be paid by PinnOak
and Sellers. Ad valorem real property taxes on the Assets for the current year
shall be paid as provided in the Lease Agreements. It is acknowledged by the
Parties that:
(a) Without limiting Section 2.1 or any other provision of this
Agreement, it is the intent of the Parties that the Assets not include:
(i) the surface, buildings and improvements thereon which are
owned by either Seller or an Affiliate of either Seller (the
"Retained Property"); and
(ii) certain property rights and interests of other parties
(the "Other Interests");
(b) The Retained Property will at sometime hereafter be subject to
assessment for taxation as personal property or as part of the leasehold estate
being created under the Lease Agreements.
(c) The Other Interests will at sometime hereafter be subject to
assessment separate from the Assets; and
15
(d) The County Assessor (or other appropriate assessing official)
of the Counties in the jurisdictions in which the Coal Reserves, Retained
Property and Other Interests are located may not separately assess the Coal
Reserves from the Retained Property or Other Interests until the applicable next
assessment date (being July 1st in West Virginia and October 1 in Alabama)
following the Closing Date. Accordingly, there may be at least one year during
which the Coal Reserves may be assessed together with the Retained Property and
Other Interests. For example, with respect to the WV Coal Reserves, if the
Closing is in June 2003, the WV Coal Reserves and Retained Property in West
Virginia may not be separately assessed until July 1, 2003 (for tax year 2004).
As a result, the taxes for the year 2003 on the WV Coal Reserves would be
combined with the taxes on the Retained Property and Other Interests in West
Virginia. If the Coal Reserves, the Retained Property and Other Interests are
not separately assessed, then Buyer shall submit to PinnOak and Sellers, as soon
as possible after Buyer's receipt of the applicable tax bill, a statement for
PinnOak's and Sellers' pro rata share of such taxes calculated by reasonably
prorating the amount of Taxes for land with respect to other real property
composing the tax parcel of which the Coal Reserves are a part and determining
the portion of the Taxes applicable to the Other Interests and Retained Property
based upon their relative values. PinnOak and Sellers may, within five (5) days
after receipt of such statement, notify Buyer that they disagree with the
proration set forth therein, in which case PinnOak, Sellers and Buyer shall
thereafter cooperate in good faith to resolve the disagreement. If PinnOak,
Sellers and Buyer are unable to resolve the disagreement within ten (10) days
following PinnOak's and Sellers' notice of disagreement to Buyer, the
disagreement shall be referred for resolution to a nationally recognized
accounting firm mutually acceptable to PinnOak and Buyer. PinnOak and Sellers
shall give to Buyer after PinnOak's and Sellers' receipt of Buyer's statement
therefor and at least fifteen (15) days prior to the date payable without
interest or penalty, a check payable to the appropriate County's Treasurer for
the amount specified in the statement or, upon delivery of a paid receipt
evidencing prior payment by Buyer to any such County's Treasurer of such sums as
are due, PinnOak and Sellers shall reimburse Buyer for the amount specified.
Upon such payment by PinnOak and Sellers, PinnOak and Sellers shall have such
rights to be reimbursed for the portion of any refunds applicable to the Other
Interests and Retained Property.
9.4 Claims for Refund. Buyer shall not file any claim for refund of
taxes with respect to the Assets for whole or partial taxable periods beginning
before the Closing Date.
9.5 Cooperation on Tax Matters.
(a) Buyer, PinnOak and each Seller shall cooperate fully, as and
to the extent reasonably requested by the other parties, in connection with the
filing of Tax Returns and any audit, litigation or other administrative or
judicial proceeding relating to liability for Taxes and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Buyer, PinnOak and each Seller
shall (i) retain all books and records that are in its possession with respect
to Tax matters pertinent to the Assets relating to any whole or partial taxable
period beginning before the Closing Date until the expiration of the
16
statute of limitations (and, to the extent notified by Buyer, PinnOak or
Sellers, any extensions thereof) of the respective taxable periods, and to abide
by all record retention agreements entered into with any taxing authority, and
(ii) give the other Party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other Party so
requests, Buyer, PinnOak or Seller, as the case may be, shall allow the other
party to take possession of such books and records.
(b) Buyer, PinnOak and each Seller further agree, upon request, to
use their commercially reasonable efforts to obtain any certificate or other
document from any Governmental Authority or any other Person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed upon the Assets
(including, but not limited to, with respect to the transactions contemplated
hereby).
9.6 Certain Taxes. Sellers and Buyer shall cooperate in the
preparation, execution, and filing of all returns, questionnaires, applications
or other documents regarding any transfer (including without limitation, stock
transfer), recording, documentary, sales, use, stamp, registration and other
similar taxes and fees ("Transfer Taxes" that become payable in connection with
the transaction contemplated by this Agreement. Seller will prepare and buyer
will file when recording its deeds all necessary tax returns and other
documentation with respect to all such Transfer Taxes, and, if required by
applicable Law, each Seller will, and will cause its Affiliates to, join in the
execution of any such tax returns and other documentation. Notwithstanding
anything set forth in this Agreement to the contrary, Sellers will be obligated
to bear and shall pay at Closing, any Transfer Taxes incurred in connection with
the transactions contemplated by this Agreement. Sellers agree to indemnify,
defend and hold Buyer harmless for all such Transfer Taxes.
9.7 Confidentiality. Any information shared in connection with Taxes
shall be kept confidential, except as may otherwise be necessary in connection
with the filing of Tax Returns or reports, refund claims, Tax audits, Tax claims
and Tax litigation, or as required by Law.
9.8 Audits. PinnOak, Sellers and Buyer shall provide prompt written
notice to the others of any pending or threatened Tax audit, assessment or
proceeding that it becomes aware of related to the Assets, Retained Property or
Other Interests for whole or partial periods for which it may be indemnified by
the other party hereunder or for which the other party may be responsible. Such
notice shall contain factual information (to the extent known) describing the
asserted Tax liability in reasonable detail and shall be accompanied by copies
of any notice or other document received from or with any tax authority in
respect of any such matters. If an indemnified party has knowledge of an
asserted Tax liability with respect to a matter for which it may be indemnified
hereunder and such party fails to give the indemnifying party prompt notice of
such asserted Tax liability, then (a) if the indemnifying party is precluded by
the failure to give prompt notice from contesting the asserted Tax liability in
any forum, the indemnifying party shall have no obligation to indemnify the
indemnified party for any Taxes arising out of such asserted Tax liability, and
(b) if the indemnifying party is not so precluded from contesting, but such
failure to give prompt notice results in a detriment to the
17
indemnifying party, then any amount which the indemnifying party is otherwise
required to pay the indemnified party pursuant to this Section shall be reduced
by the amount of such detriment, provided, the indemnified party shall
nevertheless be entitled to full indemnification hereunder to the extent, and
only to the extent, that such party can establish that the indemnifying party
was not prejudiced by such failure. Section 9.10 shall control the procedure for
Tax indemnification matters to the extent it is inconsistent with any other
provision of this Agreement.
9.9 Control of Proceedings. The party responsible for the Tax under
this Agreement shall control audits and disputes related to such Taxes
(including action taken to pay, compromise or settle such Taxes). Reasonable out
of pocket expenses with respect to such contests shall be borne by PinnOak,
Sellers and Buyer in proportion to their responsibility for such Taxes as set
forth in this Agreement. Except as otherwise provided by this Agreement, the
noncontrolling Party shall be afforded a reasonable opportunity to participate
in such proceedings at its own expense.
9.10 Powers of Attorney. Buyer shall provide PinnOak, Sellers and their
Affiliates with such powers of attorney or other authorizing documentation as
are reasonably necessary to empower them to execute and file Tax Returns they
are responsible for hereunder, file refund and equivalent claims for Taxes they
are responsible for, and contest, settle, and resolve any audits and disputes
that they have control over under Section 9.8 (including any refund claims which
turn into audits or disputes).
9.11 Remittance of Refunds. If Buyer or any Affiliate of Buyer receives
a refund of any Taxes attributable to a Pre-Closing Tax Period that PinnOak or
either Seller is responsible for hereunder, or if PinnOak or either Seller or
any Affiliate of PinnOak or either Seller receives a refund of any Taxes
attributable to a Post-Closing Tax Period that Buyer is responsible for
hereunder, the Party receiving such refund shall, within fifteen (15) days after
receipt of such refund, remit it to the party who has responsibility for such
Taxes hereunder, provided that notwithstanding anything herein to the contrary,
if Buyer or any Affiliate of Buyer receives any refund arising out of the
ownership or operation of the Assets prior to Closing, Buyer shall, within
fifteen (15) days after receipt of such refund, remit it to Sellers, provided
further that notwithstanding anything herein to the contrary, if PinnOak or
either Seller or any Affiliate of PinnOak or either Seller receives any refund
arising out of the ownership or operation of the Assets after Closing, PinnOak
and Sellers shall, within fifteen (15) days after receipt of such refund, remit
it to Buyer. For the purpose of this Section 9.11, the term "refund" shall
include a reduction in Tax and the use of an overpayment as a credit or other
tax offset, and receipt of a refund shall occur upon the filing of a return or
an adjustment thereto using such reduction, overpayment or offset or upon the
receipt of cash.
9.12 Purchase Price Allocation. Prior to Closing, PinnOak, Sellers and
Buyer shall attempt to agree upon the allocation of the Purchase Price among the
Assets for all purposes (including Tax and financial accounting purposes). The
Buyer, Sellers and their applicable Affiliates will file all Tax Returns
(including amended Tax Returns
18
and claims for refund) and information reports in a manner consistent with such
agreed upon allocation.
9.13 Closing Tax Certificate. At the Closing, PinnOak and each Seller
shall deliver, to Buyer a certificate signed under penalties of perjury (i)
stating that it is not a foreign corporation, foreign partnership, foreign trust
or foreign estate, (ii) providing its U.S. Employer Identification Number and
(iii) providing its address, all pursuant to Section 1445 of the Code. At the
Closing, Buyer shall deliver to PinnOak and each Seller a statement providing
its U.S. Employment Identification Number and its address.
ARTICLE X
TERMINATION OF AGREEMENT [INTENTIONALLY OMITTED]
ARTICLE XI
MISCELLANEOUS
11.1 Insurance. Buyer acknowledges and agrees that, following the
Closing, the Insurance Policies of Sellers and their Affiliates may be
terminated or modified to exclude coverage of all or any portion of the Assets
by Sellers or their Affiliates and, as a result, Buyer acknowledges that the
Assets will not be insured by Sellers. Buyer further acknowledges that Sellers
only maintained such Insurance Policies (including self insurance and deductible
levels) that they deemed necessary in their sole discretion or that were
required by Law. Notwithstanding Section 11.1, if any claims are made or losses
occur prior to the Closing Date that relate solely to the Asset and such claims,
or the claims associated with such losses, properly may be made against the
policies retained by Sellers or their Affiliates pursuant to Section 11.1 or
under policies otherwise retained by Sellers or their Affiliates after the
Closing, then, subject to any limitations under the Insurance Policies
(including, without limitation, time restrictions on "claims made" policies),
Seller shall use its reasonable commercial efforts so that Buyer can file,
notice, and otherwise continue to pursue these claims pursuant to the terms of
such policies; however nothing in this Agreement shall require either Seller to
maintain or to refrain from asserting claims against or exhausting any retained
policies and neither Seller shall be required to proceed against any direct or
indirect self-insured primary insurance programs or policies of, or maintained
by such Seller or any of its Affiliates, including arrangement with carriers for
claims administration service under cost-plus reimbursement agreements, assumed
retention, deductible or retrospective rating plans or other plans or
arrangements to the extent that risk of loss thereunder is ultimately assumed or
paid by such Seller.
11.2 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Party; provided
that any Party may make any public disclosure it believes in good faith is
required by applicable Law or
19
any listing or trading agreement concerning its publicly traded securities (in
which case the disclosing Party will advise the other Parties before making the
disclosure). Notwithstanding the foregoing, the parties (and each employee,
representative, or other agent of the parties) may disclose to any and all
persons, without limitation of any kind, the Tax treatment and any facts that
may be relevant to the Tax structure of the transaction, provided, however, that
no party (and no employee, representative, or other agent thereof) shall
disclose any other information that is not relevant to understanding the Tax
treatment and Tax structure of the transaction (including the identity of any
party and any information that could lead another to determine the identity of
any party), or any other information to the extent that such disclosure could
result in a violation of any federal or state securities law.
11.3 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
11.4 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the other Party.
11.5 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original but which together will constitute one and
the same instrument.
11.6 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given two business days
after it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
If to the Buyer: WPP LLC
c/o Natural Resource Partners L.P.
Suite 300, 1035 Third Avenue
Huntington, WV 25727
Attn: Nick Carter
Tel: (304) 522-5757
Fax (304) 522 5401
With copy to: WPP LLC
-------------
c/o Natural Resource Partners L.P.
Suite 3600
601 Jefferson Street
Houston, TX 77002
Attn: Wyatt Hogan
Tel: (713) 751-7516
Fax: (713) 650-0606
20
If to PinnOak or Sellers: c/o PinnOak Resources, LLC
-------------------------
601 Technology Drive
Pointe Plaza, Suite 300
Cannonsburg, PA 15317-9523
Attention: Benjamin Statler
Tel: (724) 743-3255
Fax: (724) 743-3251
and
Questor Management Company, LLC
2000 Town Center, Suite 2450
Southfield, MI 48075
Attention: Chief Operating Officer
Tel: (248) 213-2200
Fax: (248) 213-2215
and
Skadden, Arps, Slate, Meagher &
Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Attention: Peter C. Krupp
Tel: (312) 407-0855
Fax: (312) 407-0411
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the addresses set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Party notice in the manner herein set forth.
11.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic Laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the state
of Delaware or any other jurisdiction) that would cause the application of the
Laws of any jurisdiction other than the state of Delaware.
11.8 Consent to Jurisdiction and Service of Process; Appointment of
Agent for Service of Process. EACH PARTY TO THIS AGREEMENT HEREBY CONSENTS TO
THE JURISDICTION OF THE UNITED STATES DISTRICT COURT
21
FOR THE DISTRICT OF DELAWARE AND ANY DELAWARE STATE COURT LOCATED IN THE CITY OF
WILMINGTON AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF
OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY
BUSINESS OR OTHER DISPUTES BETWEEN THE PARTIES (WHETHER SUCH ACTIONS OR
PROCEEDINGS ARE BASED IN STATUTE, TORT, CONTRACT OR OTHERWISE), SHALL BE
LITIGATED IN SUCH COURTS. EACH PARTY (A) CONSENTS TO SUBMIT ITSELF TO THE
PERSONAL JURISDICTION OF SUCH COURTS FOR SUCH ACTIONS OR PROCEEDINGS, (B) AGREES
THAT IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION
OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (C) AGREES THAT IT WILL NOT
BRING ANY SUCH ACTION OR PROCEEDING IN ANY COURT OTHER THAN SUCH COURTS. EACH
PARTY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE EXCLUSIVE AND IRREVOCABLE JURISDICTION AND VENUE OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREE TO BE BOUND BY ANY NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION
WITH SUCH ACTIONS OR PROCEEDINGS. A COPY OF ANY SERVICE OF PROCESS SERVED UPON
THE PARTIES SHALL BE MAILED BY REGISTERED MAIL TO THE RESPECTIVE PARTY EXCEPT
THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY
SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY A
PARTY REFUSES TO ACCEPT SERVICE, EACH PARTY AGREES THAT SERVICE UPON THE
APPROPRIATE PARTY BY REGISTERED MAIL SHALL CONSTITUTE SUFFICIENT SERVICE.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
11.9 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS
BEING ESTABLISHED. EACH PARTY ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON
SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ANY OF THE OTHER
PARTIES. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
EACH PARTY ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO
A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING
INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR
RELATED FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS AND REPRESENTS
22
THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED HEREBY. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
ACCORDINGLY, EACH PARTY ACKNOWLEDGES THAT IT HAS WAIVED ITS RIGHT TO SUE OR BE
SUED IN TEXAS AND TO A JURY TRIAL. EACH PARTY HAS DISCUSSED THIS AGREEMENT WITH
ITS COUNSEL AND AGREES TO BE BOUND BY ITS TERMS.
11.10 Entire Agreement. This Agreement (including the documents
referred to in this Agreement) constitutes the entire agreement among the
Parties and supersedes any prior understandings, agreements, or representations
by or among the Parties, written or oral, to the extent they have related in any
way to the subject matter of this Agreement. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Buyer and Seller.
11.11 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
11.12 Transaction Expenses. Each of Buyer and the Sellers will bear
their own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
23
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
WPP LLC,
a Delaware limited liability company
By: NRP (Operating) LLC,
its sole managing member,
By: /s/ Nick Carter
------------------------------------
Title: President
------------------------------------
PINNOAK RESOURCES, LLC,
a Delaware limited liability company
By: /s/ Benjamin M. Statler
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
PINNACLE LAND COMPANY, LLC,
a Delaware limited liability company
By: /s/ Benjamin M. Statler
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
OAK GROVE LAND COMPANY, LLC,
a Delaware limited liability company
By: /s/ Benjamin M. Statler
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
EXHIBIT A
DEFINITIONS AND INTERPRETATIONS
1.1 Definitions. Unless otherwise provided to the contrary in this
Agreement, capitalized terms in this Agreement shall have the following
meanings:
"Access Easements" has the meaning set forth in Section 2.1(c).
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses, but excluding lost
profits, punitive, exemplary, special or consequential damages.
"Affiliate" means, with respect to any specified Person, any other
person which directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person. For
the purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise.
"Agreement" has the meaning set forth in the preface.
"AL Coal Reserves" has the meaning set forth in Section 2.1.
"Assets" has the meaning set forth in Section 2.1.
"Buyer" has the meaning set forth in the preface.
"Buyer Indemnitees" means, collectively, Buyer and its Affiliates and
its and their officers, directors, employees, agents and representatives.
"Closing" has the meaning set forth in Section 2.3.
"Closing Date" has the meaning set forth in Section 2.2.
"Coal Reserves" has the meaning set forth in Section 2.1(b).
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Law.
"Encumbrance" means any mortgage, pledge, lien, encumbrance, servitude,
restriction, easement, right-of-way, charge, other security interest, including
any and all coal or mineral leases or surface leases on any Assets and including
rights or obligations under any collective bargaining agreement.
"Environmental Condition" means any condition at, on, under, within, or
migrating to or from the Coal Reserves, in each case arising out of any
Environmental Law and requiring Remedial Work.
"Environmental Law" or "Environmental Laws" has the meaning set forth
in Section 4.l(f)(i).
"Escrow Agent" means the escrow agent under the Escrow Agreement.
"Escrow Agreement" shall mean the form of Escrow Agreement attached
hereto as Exhibit C.
"Escrow Release Date" has the meaning set forth in Section 2.5.
"Governmental Authority" means the United States and any state, county,
city or other political subdivision, agency, court or instrumentality.
"Hazardous Substance" means any material defined as a "hazardous
substance" or "hazardous waste" under any Environmental Law.
"Indemnified Party" has the meaning set forth in Section 8.4(a).
"Indemnifying Party" has the meaning set forth in Section 8.4(a).
"Insurance Policies" means those material policies of insurance which
Seller or any of its Affiliates maintained with respect to the Assets prior to
Closing.
"Knowledge" means, in the case of Sellers, the actual knowledge of
Benjamin M. Statler, Wally Schrage, Ronnie Marcum and Michael Nemser upon due
inquiry and, in the case of Buyer, the actual knowledge of Nick Carter, Kevin
Wall, Dwight Dunlap and Wyatt Hogan upon due inquiry.
"Laws" means any statute, code, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any applicable
Governmental Authority.
"Lease Agreements" mean the leases of the Coal Reserves substantially
in the form set forth in Exhibit C.
"Liability Cap" has the meaning set forth in Section 8.2(b).
"Material Adverse Effect" means any change or effect that, individually
or in the aggregate with other changes or effects, is materially adverse to the
ownership or value of
2
the Assets taken as a whole, provided that in determining whether a Material
Adverse Effect has occurred, the following changes or effects shall not be
considered: (i) the coal mining industry generally (including, but not limited
to, the price of coal and the costs associated with the mining, production and
delivery of coal); (ii) United States or global economic conditions or financial
markets in general, including changes in interest rates; (iii) the transactions
contemplated by this Agreement; (iv) changes in Law, or any judgments, orders or
decrees that apply generally to similarly situated persons; and (v) any change
in or effect on the Assets which is cured (including by payment of money) before
the earlier of the Closing and the termination of this Agreement pursuant to
Section 10.1.
"Mines" means the Pinnacle No. 50 Mine located in McDowell and Wyoming
Counties, West Virginia and the Oak Grove Mine located in Jefferson County,
Alabama and related operations conducted on the Coal Reserves under the Lease
Agreements.
"New Credit Facility" has the meaning set forth in Section 3.1(g).
"Obligations" means duties, liabilities and obligations, whether
vested, absolute or contingent, known or unknown, asserted or unasserted,
accrued or unaccrued, liquidated or unliquidated, due or to become due, and
whether contractual, statutory or otherwise.
"Ordinary Course of Business" means the ordinary course of business in
all material respects consistent with the affected party's past custom and
practice (including with respect to quantity and frequency).
"Organizational Documents" means the articles of incorporation,
certificate of incorporation, charter, bylaws, articles or certificate of
formation, regulations, operating agreement, certificate of limited partnership,
partnership agreement, and all other similar documents, instruments or
certificates executed, adopted, or filed in connection with the creation,
formation, or organization of a Person, including any amendments thereto.
"Other Interests" has the meaning set forth in Section 9.3(a)(ii).
"Permitted Encumbrances" means any of the following: (i) any liens for
Taxes and assessments not yet due and payable or, if due and payable, that are
being contested in good faith in the Ordinary Course of Business; (ii) any
obligations or duties vested in any municipality or other Governmental Authority
to regulate any Asset in any manner including obligations, duties, restrictions
and limitations under all applicable Laws (including, without limitation,
zoning, building and other similar Laws); (iii) liens reserved for either
Seller's performance under leases, subleases, license and similar instruments,
(iv) with respect to the AL Coal Reserves, all Encumbrances listed on Exhibit G;
(v) with respect to the WV Coal Reserves, all Encumbrances listed on Exhibit H;
(vi) Encumbrances and other conveyances (including deeds, easements, leases and
licenses) of record in the chain of title of Seller or its Affiliates and their
predecessors in title; (vii) Encumbrances apparent from an inspection of the
Assets; and (viii) easements, rights of way, restrictions and other similar
encumbrances which, in the aggregate, are
3
not substantial in amount and which do not in any case materially detract from
the value of the property subject thereto as it is currently being used or
materially interfere with the ordinary conduct of the business. Notwithstanding
the above paragraphs (iv), (v) and (vi), Permitted Encumbrances does not include
Encumbrances consisting of mortgages, deeds of trust, pledges, liens or security
interests.
"Party" and "Parties" have the meanings set forth in the preface.
"Person" means an individual or entity, including, without limitation,
any corporation, association, joint stock company, trust, joint venture, limited
liability company, unincorporated organization, or governmental entity (or any
department, agency or political subdivision thereof).
"PinnOak" has the meaning set forth in the preface.
"PinnOak Records" has the meaning set forth in Section 2.1.
"Post-Closing Tax Period" means any Tax period ending after the Closing
Date.
"Post-Closing Tax Return" means any Tax Return that is required to be
filed with respect to a Post-Closing Tax Period.
"Pre-Closing Tax Period" means any Tax periods hereof ending on or
before the Closing Date.
"Pre-Closing Tax Return" means any Tax Return that is required to be
filed with respect to a Pre-Closing Tax Period.
"Purchase Price" has the meaning set forth in Section 2.2.
"Remedial Work" means all investigative, site monitoring, restoration,
abatement, detoxification, containment, handling, treatment, removal, storage,
decontamination, clean-up, transport, disposal or other ameliorative work,
corrective action or response action required by (i) any Environmental Law, (ii)
any order or request of any federal, state or local agency, or (iii) any final
judgment, consent decree, settlement or compromise with respect to any
Environmental Law.
"Retained Property" has the meaning set forth in Section 9.3(a).
"Sellers" has the meaning set forth in the preface.
"Seller Indemnitees" means, collectively, Seller and its Affiliates and
its and their officers, directors, employees, agents, and representatives.
"Subsidiary" means, with respect to any relevant Person, any other
Person that is (directly or indirectly) controlled and more than 90%-Owned
(directly or indirectly) by
4
the relevant Person.
"Tax" or "Taxes" means any state or local ad valorem, real property or
personal property tax, including any interest, penalty or addition thereto,
whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8.4.
"Threshold Amount" has the meaning set forth in Section 8.2(b).
"Title Information" has the meaning set forth in Section 3.2(a).
"USCS" means USS Coal Sales, LLC.
"USM" means U.S. Steel Mining Company, LLC.
"USS" means United States Steel Corporation.
"USS Agreement" has the meaning set forth in the preface.
"USS Entities" means collectively, USCS, USM and USS.
1.2 Interpretations. Unless expressly provided for elsewhere in this
Agreement, this Agreement shall be interpreted in accordance with the following
provisions:
(a) Whenever the context may require, any pronoun used in this
Agreement shall include the corresponding masculine, feminine, or
neuter forms, and the singular form of nouns, pronouns and verbs shall
include the plural and vice versa.
(b) If a word or phrase is defined, its other grammatical forms
have a corresponding meaning.
(c) A reference to a person, corporation, trust, estate,
partnership, or other entity includes any of them.
(d) The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of
this Agreement.
(e) All references in this Agreement to articles, sections or
subdivisions thereof shall refer to the corresponding article, section
or subdivision thereof of this Agreement unless specific reference is
made to such articles, sections, or subdivisions of another document or
instrument.
5
(f) A reference to any agreement or document (including, without
limitation, a reference to this Agreement) is to the agreement or
document as amended, varied, supplemented, novated or replaced, except
to the extent prohibited by this Agreement or that other agreement or
document.
(g) No waiver by either Party of any default by the other Party in
the performance of any provision, condition or requirement herein shall
be deemed to be a waiver of, or in any manner release the other Party
from, performance of any other provision, condition or requirement
herein, nor shall such waiver be deemed to be a waiver of, or in any
manner a release of, the other Party from future performance of the
same provision, condition or requirement. Any delay or omission of
either Party to exercise any right hereunder shall not impair the
exercise of any such right, or any like right, accruing to it
thereafter. The failure of either Party to perform its obligations
hereunder shall not release the other Party from the performance of
such obligations.
(h) A reference to any party to this Agreement or another
agreement or document includes the party's successors and assigns.
(i) A reference to legislation or to a provision of legislation
includes a modification or reenactment of it, a legislative provision
substituted for it and a regulation or statutory instrument issued
under it.
(j) A reference to a writing includes a facsimile transmission of
it and any means of reproducing of its words in a tangible and
permanently visible form.
(k) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and article, section, subsection, schedule and exhibit
references are to this Agreement unless otherwise specified.
(l) The word "including" shall mean including without limitation.
(m) The Exhibits identified in this Agreement are incorporated
herein by reference and made a part of this Agreement.
(n) The Parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as
if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement.
6