Exhibit 2.5
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
PITTSTON COAL COMPANY
AND
PARAMONT COAL COMPANY VIRGINIA, LLC
October 29, 2002
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.............................................................................................1
1.1. Administrative Services Agreement.......................................................................1
1.2. Affiliate...............................................................................................2
1.3. Agreement...............................................................................................2
1.4. Asset Sale Companies....................................................................................2
1.5. Assignment and Assumption Agreements....................................................................2
1.6. Assumed Liabilities.....................................................................................2
1.7. Audited Closing Date Financial Statements...............................................................3
1.8. Bills of Sale...........................................................................................3
1.9. Books and Records.......................................................................................3
1.10. Business...............................................................................................3
1.11. Buyer.................................................................................................3
1.12. Buyer's Affiliates, Successors, Assigns, Lessees or Contractors........................................4
1.13. Buyer Closing Certificate..............................................................................4
1.14. Buyer's Ultimate Parent................................................................................4
1.15. CERCLA.................................................................................................4
1.16. CERCLIS................................................................................................4
1.17. Closing................................................................................................4
1.18. Closing Date...........................................................................................4
1.19. Coal Act...............................................................................................5
1.20. Coal Inventory.........................................................................................5
1.21. COBRA..................................................................................................5
1.22. Code...................................................................................................5
1.23. Contaminated...........................................................................................5
1.24. Contracts..............................................................................................5
1.25. Controlled Group.......................................................................................6
1.26. Cooperation Agreement..................................................................................6
1.27. CPA Arbitrator.........................................................................................6
1.28. Dispute................................................................................................6
1.29. Employee...............................................................................................6
1.30. Employee Benefit Plans.................................................................................6
1.31. Engagement Letter......................................................................................6
1.32. Environment............................................................................................7
1.33. Environmental Laws.....................................................................................7
1.34. Environmental Matter...................................................................................7
1.35. Environmental or Response Action.......................................................................8
1.36. EPA....................................................................................................8
1.37. Equipment..............................................................................................9
1.38. ERISA..................................................................................................9
1.39. ERISA Affiliates.......................................................................................9
1.40. Fiduciary..............................................................................................9
1.41. Final VC 5 Cost........................................................................................9
1.42. Fiscal Year Financial Statements.......................................................................9
1.43. GAAP...................................................................................................9
1.44. Governmental Authority................................................................................10
1.45. Hazardous Substances..................................................................................10
1.46. Health and Safety Requirements........................................................................10
1.47. HIPAA.................................................................................................10
1.48. Income Tax or Income Taxes............................................................................11
1.49. Indemnification and Guaranty Agreement................................................................11
1.50. Independent Surveyor..................................................................................11
1.51. Intellectual Property.................................................................................11
1.52. IRS...................................................................................................11
1.53. Knowledge of PCC......................................................................................12
1.54. Law...................................................................................................12
1.55. Lien..................................................................................................12
1.56. Liability.............................................................................................12
1.57. Material Adverse Effect...............................................................................12
1.58. MD&A Disclosure.......................................................................................13
1.59. Medical Plans.........................................................................................13
1.60. Mining Activities.....................................................................................13
1.61. Mining Environmental Liabilities......................................................................13
1.62. MSHA..................................................................................................13
1.63. Multiemployer Plan....................................................................................14
1.64. Operator..............................................................................................14
1.65. Ordinary Course of Business...........................................................................14
1.66. OSM...................................................................................................14
1.67. Paramont Service Agreement............................................................................14
1.68. Parts, Fuel and Supplies Inventory....................................................................14
1.69. PBGC..................................................................................................14
1.70. PCC...................................................................................................14
1.71. PCC Bonds.............................................................................................14
1.72. PCC Closing Certificate...............................................................................15
1.73. PCC Group.............................................................................................15
1.74. PCC Parent............................................................................................15
1.75. Pension Plans.........................................................................................15
1.76. Permits...............................................................................................15
1.77. Permitted Liens.......................................................................................15
1.78. Person................................................................................................15
1.79. Post-Closing Period...................................................................................16
1.80. Pre-Closing Period....................................................................................16
1.81. Promissory Note.......................................................................................16
1.82. Purchase Price........................................................................................16
1.83. Purchased Assets......................................................................................16
1.84. Qualified Plans.......................................................................................16
1.85. RCRA..................................................................................................17
1.86. Reclamation Laws......................................................................................17
1.87. Related Persons.......................................................................................17
1.88. Release...............................................................................................17
1.89. Retained Liabilities..................................................................................17
1.90. Security Agreement....................................................................................23
1.91. SEC...................................................................................................23
1.92. SMCRA.................................................................................................23
1.93. Straddle Period.......................................................................................23
1.94. Tax or Taxes..........................................................................................23
1.95. Tax Return............................................................................................24
1.96. VC 5..................................................................................................24
1.97. VC 5 Calculation......................................................................................24
1.98. VC 5 Costs............................................................................................24
1.99. VC 5 Estimate.........................................................................................24
1.100. VC 5 Revenue.........................................................................................25
1.101. VDEQ.................................................................................................25
1.102. VDMME................................................................................................25
1.103. Virginia Entities....................................................................................25
1.104. WARN Act.............................................................................................25
1.105. Welfare Plans........................................................................................25
1.106. Workers' Compensation Acts...........................................................................25
ARTICLE II PURCHASE AND SALE OF ASSETS...........................................................................26
2.1. Transfer of Assets.....................................................................................26
2.2. Calculation of VC 5 Adjustment Amount..................................................................26
2.3. Bills of Sale, Assignment and Assumption Agreements and Other Documents................................28
2.4. Assumption of Liabilities..............................................................................28
2.5. Proration of Liabilities...............................................................................28
2.6. Indemnification and Guaranty Agreement.................................................................28
2.7. Cooperation Agreement..................................................................................28
2.8. Administrative Services Agreement......................................................................29
2.9. Paramont Service Agreement.............................................................................29
2.10. Security Agreement....................................................................................29
2.11. Additional Documents..................................................................................29
2.12. Coal Inventory Adjustment.............................................................................29
2.13. Allocation of Purchase Price and Assumed Liabilities..................................................30
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PCC................................................................32
3.1. Incorporation..........................................................................................32
3.2. Execution, Delivery and Performance....................................................................33
3.3. Authorization..........................................................................................34
3.4. Absence of Changes.....................................................................................34
3.5. Purchased Assets.......................................................................................37
3.6. Intellectual Property..................................................................................38
3.7. Permits and Environmental Compliance...................................................................38
3.8. Reclamation Bonds......................................................................................41
3.9. Contracts..............................................................................................42
3.10. Litigation; Claims....................................................................................42
3.11. Employee Benefits.....................................................................................43
3.12. Employment Matters....................................................................................48
3.13. No Broker.............................................................................................48
3.14. Health and Safety Requirements........................................................................49
3.15. Restrictions on Business Activities...................................................................49
3.16. Powers of Attorney....................................................................................49
3.17. Transactions With Affiliates..........................................................................49
3.18. Absence of Certain Payments...........................................................................49
3.19. Disclosure............................................................................................50
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER...............................................................50
4.1. Organization.........................................................................................50
4.2. Execution, Delivery and Performance..................................................................50
4.3. Authorization........................................................................................51
4.4. No Broker............................................................................................52
4.5. Reclamation and Environmental Compliance.............................................................52
4.6. Financing............................................................................................52
4.7. Disclosure...........................................................................................52
ARTICLE V CERTAIN COVENANTS......................................................................................52
5.1. Operation in Ordinary Course..........................................................................52
5.2. Compliance with Law...................................................................................53
5.3. Cooperation...........................................................................................53
5.4. Notices and Consents..................................................................................54
5.5. Publicity.............................................................................................54
5.6. Permits; Replacement Bonds; Insurance and Guarantees; Other Filings...................................55
5.7. Exclusivity...........................................................................................57
5.8. Access................................................................................................58
5.9. Notice of Developments................................................................................58
5.10. Financial Statement Cooperation and Audits...........................................................58
5.11. Coal Inventory.......................................................................................61
5.12. Further Assurances...................................................................................61
ARTICLE VI CONDITIONS PRECEDENT TO CLOSING......................................................................62
6.1. Conditions Precedent to Each Party's Obligations....................................................62
6.2. Conditions Precedent to Obligations of Buyer........................................................63
6.3. Conditions Precedent to Obligations of PCC..........................................................65
ARTICLE VII CERTAIN TAX MATTERS.................................................................................67
7.1. Property Taxes......................................................................................67
7.2. Sales and Use Taxes.................................................................................68
7.3. Transfer Taxes......................................................................................68
7.4. Access for Tax Returns..............................................................................68
ARTICLE VIII COVENANTS REGARDING EMPLOYEES......................................................................69
8.1. Employees.............................................................................................69
ARTICLE IX TERMINATION..........................................................................................69
9.1. Termination...........................................................................................69
9.2. Effect of Termination.................................................................................71
ARTICLE X MISCELLANEOUS.........................................................................................71
10.1. Entire Agreement.....................................................................................71
10.2. Amendment............................................................................................71
10.3. Extension; Waiver...................................................................................72
10.4. Expenses.............................................................................................72
10.5. Bulk Sales Waiver....................................................................................72
10.6. Governing Law.......................................................................................73
10.7. Assignment...........................................................................................73
10.8. Notices..............................................................................................73
10.9. Counterparts; Headings...............................................................................74
10.10. Interpretation; Construction........................................................................75
10.11. Severability........................................................................................75
10.12. No Reliance.........................................................................................75
10.13. Retention of and Access to Records..................................................................75
10.14. Arbitration.........................................................................................76
EXHIBITS
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Exhibit A Outline of Administrative Services Agreement
Exhibit B Assignment and Assumption Agreements
Exhibit C Bills of Sale
Exhibit D Buyer Closing Certificate
Exhibit E Cooperation Agreement
Exhibit F Paramont Service Agreement
Exhibit G Engagement Letter
Exhibit H Indemnification and Guaranty Agreement
Exhibit I PCC Closing Certificate
Exhibit J Opinion of Counsel to PCC
Exhibit K Opinion of Counsel to Buyer
SCHEDULES
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Schedule 1.4 Asset Sale Companies
Schedule 1.6 Assumed Liabilities
Schedule 1.20 Coal Inventory Locations
Schedule 1.24 Contracts of Asset Sale Companies
Schedule 1.37(a) Equipment Owned by Asset Sale Companies
Schedule 1.37(b) Equipment Leased by Asset Sale Companies
Schedule 1.51(a) Intellectual Property Owned by the Asset Sale Companies
Schedule 1.51(b) Intellectual Property Leased by the Asset Sale Companies
Schedule 1.53 Knowledge of PCC
Schedule 1.61 Mining Environmental Liabilities
Schedule 1.68 Parts, Fuel and Supplies Inventory
Schedule 1.76 Permits
Schedule 1.77 Permitted Liens
Schedule 1.89(a) Retained Liabilities
Schedule 1.89(v) Excluded Contracts
Schedule 1.96 VC 5
Schedule 2.12(b) Independent Survey of the Coal Inventory-Principles and Format
Schedule 3.1 Foreign States
Schedule 3.2 Conflicts
Schedule 3.4 Absence of Changes
Schedule 3.5 Purchased Assets Exceptions
Schedule 3.6 Intellectual Property Exceptions
Schedule 3.7 Permits and Environmental Compliance
Schedule 3.8 PCC Bonds
Schedule 3.9(b) Contract Exceptions
Schedule 3.9(c) Consents
Schedule 3.10 Litigation; Claims
Schedule 3.11(a) Employee Benefit Plans
Schedule 3.11(d) Plan Administration
Schedule 3.11(f) Severance Entitlements
Schedule 3.16 Powers of Attorney
Schedule 3.17 Transactions with Affiliates
Schedule 5.4(a) PCC Consents
Schedule 5.4(b) Buyer Consents
Schedule 5.6 PCC Guaranties
Schedule 5.10(a) Excluded Business
Schedule 6.1(e)(i) PCC Material Consents
Schedule 6.1(e)(ii) Buyer Material Consents
Schedule 8.1 Asset Sale Companies with pre-Closing termination
Employees
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of the 29th day of October, 2002,
by and between PITTSTON COAL COMPANY, a Delaware corporation ("PCC"), and
Paramont Coal Company virginia, LLC, a Delaware limited liability company
("Buyer").
RECITALS
WHEREAS, PCC owns, directly or indirectly, all of the outstanding capital
stock of the corporations listed on Schedule 1.4 (the "Asset Sale Companies");
WHEREAS, PCC desires to cause to be sold and assigned, and Buyer desires to
purchase and assume, certain of the assets and certain of the Liabilities (as
hereinafter defined) of the Asset Sale Companies;
WHEREAS, PCC desires to cause the Asset Sale Companies to retain certain
assets and certain Liabilities;
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, PCC and Buyer agree
that:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
specified:
1.1. Administrative Services Agreement.
"Administrative Services Agreement" shall mean the agreement by and between
PCC and Buyer, an outline of which is attached hereto Exhibit A.
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1.2. Affiliate.
"Affiliate" shall mean, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified. "Control"
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through
the ownership of voting securities, by contract or otherwise. For purposes of
this Agreement, none of Dominion Terminal Associates or any of its partners,
other than Pittston Coal Terminal Corporation, shall be deemed an Affiliate of
PCC or any of its Affiliates.
1.3. Agreement.
"Agreement" shall mean this Asset Purchase Agreement, together with the
Exhibits and Schedules attached hereto, which are incorporated into this Asset
Purchase Agreement by this reference, as the same may be amended from time to
time in accordance with the terms hereof.
1.4. Asset Sale Companies.
"Asset Sale Companies" shall have the meaning given to it in the Recitals
to this Agreement. The term "Asset Sale Company" shall mean one of the Asset
Sale Companies.
1.5. Assignment and Assumption Agreements.
"Assignment and Assumption Agreements" shall mean the assignment and
assumption agreements substantially in the form of Exhibit B attached hereto.
1.6. Assumed Liabilities.
"Assumed Liabilities" shall mean all Liabilities of the Asset Sale
Companies listed on Schedule 1.6.
2
1.7. Audited Closing Date Financial Statements.
"Audited Closing Date Financial Statements" shall have the meaning set
forth in Section 5.10 hereof.
1.8. Bills of Sale.
"Bills of Sale" shall mean the bills of sale substantially in the form of
Exhibit C attached hereto.
1.9. Books and Records.
"Books and Records" shall mean the original or true and complete copies of
all of the books and records of the Asset Sale Companies pertaining to the
Purchased Assets, including but not limited to, customer lists, employee records
for those Employees employed by Buyer on or immediately following the Closing
Date, purchase orders and invoices, sales orders and sales order log books,
credit and collection records, plats, drawings and specifications, environmental
and mining reports and studies, correspondence and miscellaneous records with
respect to customers and supply sources, lessors and lessees, maps, core logs,
engineering data, equipment maintenance records and all other general
correspondence, records, books and files owned by any Asset Sale Company, but
excluding any and all Tax Returns, books and records relating to the Retained
Liabilities and corporate records of the Asset Sale Companies.
1.10. Business.
"Business" shall mean the coal mining and sale business conducted by the
Asset Sale Companies using the Purchased Assets.
1.11. Buyer.
"Buyer" shall have the meaning given to it in the preamble of this
Agreement.
3
1.12. Buyer's Affiliates, Successors, Assigns, Lessees or Contractors.
"Buyer's Affiliates, Successors, Assigns, Lessees or Contractors" shall
mean Buyer's Affiliates, Buyer's contractual successors and assigns, and lessees
and contractors who, as part of a contractual arrangement with Buyer or one of
its Affiliates, offer employment to the current or former Employees of an Asset
Sale Company.
1.13. Buyer Closing Certificate.
"Buyer Closing Certificate" shall mean the certificate of Buyer
substantially in the form of Exhibit D attached hereto.
1.14. Buyer's Ultimate Parent.
"Buyer's Ultimate Parent" shall mean Alpha Natural Resources, LLC, a
Delaware limited liability company.
1.15. CERCLA.
"CERCLA" shall have the meaning set forth in Section 1.33 hereof.
1.16. CERCLIS.
"CERCLIS" shall have the meaning set forth in Section 3.7 hereof.
1.17. Closing.
"Closing" shall mean the closing of the transactions contemplated by this
Agreement beginning at 10:00 a.m., local time, on the Closing Date, at the
offices of Hunton & Williams, Riverfront Plaza, East Tower, 951 East Byrd
Street, Richmond, Virginia 23219.
1.18. Closing Date.
"Closing Date" shall mean November 30, 2002 or such other date as the
parties may mutually agree in writing, subject to the provisions of Section
5.10(a) hereof.
4
1.19. Coal Act.
"Coal Act" shall mean the Coal Industry Retiree Health Benefit Act of 1992
as amended through the Closing Date (codified at Subtitle J of the Code).
1.20. Coal Inventory.
"Coal Inventory" shall mean the coal stockpile inventory and loaded
shipments in transit to a pier or at a pier owned by the Asset Sale Companies at
the locations listed on Schedule 1.20.
1.21. COBRA.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1986, as amended.
1.22. Code.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and, where
appropriate, any predecessor or successor provisions of Law, and all regulations
thereunder.
1.23. Contaminated.
"Contaminated" shall mean the presence of one or more Hazardous Substances
in such quantity or concentration as to: (i) violate any Environmental Law; (ii)
require disclosure to any Governmental Authority; (iii) require remediation or
removal; or (iv) interfere with or prevent the use of any of the Purchased
Assets as customarily intended.
1.24. Contracts.
"Contracts" shall mean the written contracts, agreements, personal and real
property leases, relationships and commitments, of the Asset Sale Companies
listed on Schedule 1.24.
5
1.25. Controlled Group.
"Controlled Group" shall have the meaning set forth in Codess.1563.
1.26. Cooperation Agreement.
"Cooperation Agreement" shall mean the agreement by and among the PCC
Parent, PCC and Buyer substantially in the form of Exhibit E attached hereto.
1.27. CPA Arbitrator.
"CPA Arbitrator" shall have the meaning set forth in Section 2.2(b) hereof.
1.28. Dispute.
"Dispute" shall have the meaning set forth in Section 10.14 hereof.
1.29. Employee.
"Employee" shall mean any Person (i) employed by and rendering personal
services for an Asset Sale Company or (ii) receiving short-term or long-term
disability benefits from an Asset Sale Company under an Employee Benefit Plan.
The term "current and former Employees" shall mean any Persons who fall within
the term Employee at any time prior to the Closing Date.
1.30. Employee Benefit Plans.
"Employee Benefit Plans" shall have the meaning set forth in Section 3.11
hereof.
1.31. Engagement Letter.
"Engagement Letter" shall mean the engagement letter by and among PCC,
Buyer and KPMG LLP substantially in the form of Exhibit G attached hereto.
6
1.32. Environment.
"Environment" shall mean surface or ground water, water supply, soil or the
ambient air.
1.33. Environmental Laws.
"Environmental Laws" shall mean collectively, all federal, foreign, state,
and local Laws in effect as of the Closing Date that relate to (a) the
prevention, abatement or elimination of pollution, or the protection of the
environment, or of natural resources, including, without limitation, Laws
applicable to coal mining operations or related activities, (b) the generation,
handling, treatment, storage, disposal or transportation of waste materials, (c)
the regulation of or exposure to Hazardous Substances, including, without
limitation, the Comprehensive Environmental Response Compensation and Liability
Act, 42 U.S.C.ss.ss.9601 et. seq. ("CERCLA"), the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act, as amended, 42
U.S.C.ss.ss.6901 et. seq. ("RCRA"), the Clean Air Act, 42 U.S.C.ss.ss.7401 et.
seq., the Clean Water Act, 33 U.S.C.ss.ss.1251 et. seq., the Toxic Substances
Control Act, 15 U.S.C.ss.ss.2601 et. seq., the Emergency Planning and Community
Right to Know Act, 42 U.S.C. ss.ss.11001 et. seq., and any foreign, state,
county, municipal, or local statutes, Laws or ordinances similar or analogous to
the federal statutes listed in this sentence.
1.34. Environmental Matter.
"Environmental Matter" shall mean any assertion of a violation, claim or
directive by any Governmental Authority or any other Person for personal injury,
damage to property or the Environment, nuisance, contamination or other adverse
effects on the Environment, or for damages or restrictions resulting from or
related to (i) the operation of PCC's or its Affiliates' business or any
predecessor or the ownership, use or operation at or on any real property or
7
other assets owned, operated or leased by PCC or its Affiliates or any
predecessor; or (ii) the existence or the continuation of a Release of, or
exposure to, or the transportation, storage or treatment of any Hazardous
Substance into the Environment from or related to any real property or assets
currently or formerly owned, operated or leased by PCC or its Affiliates or any
activities on or operations thereof.
1.35. Environmental or Response Action.
"Environmental or Response Action" shall mean all actions required (i) to
clean up, remove, treat or in any other way address any Hazardous Substance or
other substance; (ii) to prevent the Release or threat of Release, or minimize
the further Release of any Hazardous Substance or other substance so it does not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor Environment; (iii) to perform pre-remedial studies and
investigations or post-remedial monitoring and care; (iv) to bring facilities on
any real property currently or formerly owned, operated or leased by PCC or its
Affiliates and the facilities located and operations conducted thereon into
compliance with all Environmental Laws and Reclamation Laws and all permits and
other authorizations, and the filing of all notifications and reports required
under any Environmental Laws and Reclamation Laws; or (v) for the purpose of
environmental protection of any real property currently or formerly owned,
operated or leased by PCC or its Affiliates.
1.36. EPA.
"EPA" shall have the meaning set forth in Section 3.7 hereof.
8
1.37. Equipment.
"Equipment" shall mean the tangible machinery, vehicles, equipment,
furniture, fixtures, furnishings, trailers, tools, parts and other personal
property owned or leased by the Asset Sale Companies listed on Schedules 1.37(a)
and 1.37(b), respectively.
1.38. ERISA.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
1.39. ERISA Affiliates.
"ERISA Affiliates" shall mean any trade or business (whether or not
incorporated) that is part of the same Controlled Group as, or under common
control with, or part of an affiliated service group that includes, PCC and each
of the Asset Sale Companies within the meaning of Section 414(b), (c), (m) or
(o) of the Code.
1.40. Fiduciary.
"Fiduciary" shall have the meaning set forth in ERISA ss.3(21).
1.41. Final VC 5 Cost.
"Final VC 5 Cost" shall have the meaning set forth is Section 2.2(b)
hereof.
1.42. Fiscal Year Financial Statements.
"Fiscal Year Financial Statements" shall have the meaning set forth in
Section 5.10(a).
1.43. GAAP.
"GAAP" shall mean United States generally accepted accounting principles as
in effect from time to time.
9
1.44. Governmental Authority.
"Governmental Authority" shall mean any governmental, judicial,
legislative, executive, administrative or regulatory authority of the United
States, or of any foreign, state or local government or any subdivision, agency,
commission, office, authority or bureau thereof or any quasi-governmental entity
or authority of any nature.
1.45. Hazardous Substances.
"Hazardous Substances" shall mean any substance, chemical, waste, solid,
material, pollutant or contaminant that is defined or listed as hazardous or
toxic under any applicable Environmental Laws. Without limiting the generality
of the foregoing it shall also include any radioactive material, including any
naturally-occurring radioactive material, and any source, special or by-product
material as defined in 42 U.S.C. 2011, et seq., any amendments or authorizations
thereof, any asbestos-containing materials in any form or condition, any
polychlorinated biphenyls in any form or condition, radioactive waste, or
natural gas, natural gas liquids, liquified natural gas, condensate, or
derivatives or byproducts thereof or oil and petroleum products or by products
and constituents thereof.
1.46. Health and Safety Requirements.
"Health and Safety Requirements" shall mean all applicable federal, state,
local and foreign Laws concerning public health and safety and worker health and
safety each as in effect as of the Closing Date, other than Environmental Laws.
1.47. HIPAA.
"HIPAA" shall mean the Health Insurance Portability and Accountability Act
of 1996, as amended, and all rules and regulations thereunder.
10
1.48. Income Tax or Income Taxes.
"Income Tax or "Income Taxes" shall mean any Tax based on or measured by
net income.
1.49. Indemnification and Guaranty Agreement.
"Indemnification and Guaranty Agreement" shall mean the agreement by and
among PCC Parent, PCC, Buyer and Buyer's Ultimate Parent substantially in the
form of Exhibit H attached hereto.
1.50. Independent Surveyor.
"Independent Surveyor" shall have the meaning set forth in Section 2.12(b)
hereof.
1.51. Intellectual Property.
"Intellectual Property" shall mean the trademarks, service marks, patents,
copyrights (including any registrations, applications, licenses or rights
relating to any of the foregoing), technology, logos, trade secrets,
confidential information related to the Purchased Assets, inventions, know-how,
designs, technical data, drawings, customer and supplier lists, pricing and cost
information, or computer programs and processes and all goodwill associated
therewith and rights thereunder, remedies against infringements thereof, and
rights to protection of interests therein under the laws of all jurisdictions
owned or licensed or leased by the Asset Sale Companies listed on Schedules
1.51(a) and 1.51(b), respectively, including, without limitation, the
trademarks, service marks, logos or other rights related to the name "Paramont."
1.52. IRS.
"IRS" shall mean the United States Internal Revenue Service.
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1.53. Knowledge of PCC.
"Knowledge of PCC" shall mean, for the individuals listed on Schedule 1.53,
any such individual's actual knowledge and what any such individual should have
known after reasonable inquiry within the scope of that individual's job
responsibilities.
1.54. Law.
"Law" and "Laws" shall mean any applicable United States or foreign,
federal, state, local or other law or governmental requirement of any kind, and
the rules, regulations and orders promulgated thereunder.
1.55. Lien.
"Lien" shall mean any lien, encumbrance, mortgage, charge, claim,
restriction, pledge, security interest or imposition of any kind.
1.56. Liability.
"Liability" shall mean any liability or obligation (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
liquidated or unliquidated and whether due or to become due), including any
liability for Taxes. Liabilities shall mean one or more items of Liability.
1.57. Material Adverse Effect.
"Material Adverse Effect" shall mean any event, change or occurrence that
individually, or together with any other event, change or occurrence, has a
material adverse impact on the Business, taken as a whole, without regard to the
duration of such material adverse impact.
12
1.58. MD&A Disclosure.
"MD&A Disclosure" shall mean any "Management's Discussion and Analysis of
Financial Condition and Results of Operations" disclosure (required by Item 303
of Regulation S-K promulgated by the SEC (or any successor rule or regulation of
the SEC)) to be prepared for the fiscal years covered by the Fiscal Year
Financial Statements and the period covered by the Audited Closing Date
Financial Statements.
1.59. Medical Plans.
"Medical Plans" shall mean any and all benefit plans that provide medical,
vision and dental benefits to current or former Employees sponsored or
maintained by or on behalf of, or for the benefit of, PCC or any Asset Sale
Company, including the Comprehensive Medical Expense Benefits Plan of The
Pittston Company and Its Subsidiaries.
1.60. Mining Activities.
"Mining Activities" shall mean those activities of the Asset Sale Companies
that have taken place on or through the use of the Purchased Assets that involve
surface, underground and auger mining, processing or transporting of coal and
the handling of coal by-products.
1.61. Mining Environmental Liabilities.
"Mining Environmental Liabilities" shall mean Liabilities that relate to or
arise from both of the following: (i) any of the Hazardous Substances set forth
on Schedule 1.61 and (ii) an Environmental Matter or Environmental and Response
Action associated with Mining Activities to the extent that such Mining
Activities conformed to industry standard practices at the time such Mining
Activities were conducted.
1.62. MSHA.
"MSHA" shall have the meaning set forth in Section 3.7 hereof.
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1.63. Multiemployer Plan.
"Multiemployer Plan" shall have the meaning set forth in Section 3.11
hereof.
1.64. Operator.
"Operator" shall have the meaning set forth in Section 3.7 hereof.
1.65. Ordinary Course of Business.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
1.66. OSM.
"OSM" shall have the meaning set forth in Section 3.7 hereof.
1.67. Paramont Service Agreement.
"Paramont Service Agreement" shall mean the agreement by and between Buyer
and PCC, substantially in the form of Exhibit F attached hereto.
1.68. Parts, Fuel and Supplies Inventory.
"Parts, Fuel and Supplies Inventory" shall include the categories of items
listed on Schedule 1.68.
1.69. PBGC.
"PBGC" shall mean the Pension Benefits Guaranty Corporation.
1.70. PCC.
"PCC" shall have the meaning given to it in the preamble to this Agreement.
1.71. PCC Bonds.
"PCC Bonds" shall have the meaning set forth in Section 3.7(g) hereof.
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1.72. PCC Closing Certificate.
"PCC Closing Certificate" shall mean the certificate of PCC substantially
in the form of Exhibit I attached hereto.
1.73. PCC Group.
"PCC Group" shall have the meaning set forth in Section 1.89(j) hereof.
1.74. PCC Parent.
"PCC Parent" shall mean The Pittston Company, a Virginia corporation.
1.75. Pension Plans.
"Pension Plans" shall have the meaning set forth in Section 3.11 hereof.
1.76. Permits.
"Permits" shall mean the written permits, licenses, orders, certificates,
registrations, approvals and similar rights held by the Asset Sale Companies
listed on Schedule 1.76.
1.77. Permitted Liens.
"Permitted Liens" shall mean those Liens affecting the Purchased Assets
that are listed on Schedule 1.77.
1.78. Person.
"Person" shall mean any individual, corporation, general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union or other entity or Governmental
Authority.
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1.79. Post-Closing Period.
"Post-Closing Period" shall mean any taxable period beginning after the
Closing Date.
1.80. Pre-Closing Period.
"Pre-Closing Period" shall mean any taxable period ending on or before the
Closing Date.
1.81. Promissory Note.
"Promissory Note" shall mean the secured promissory note made by Buyer in
favor of PCC in the amount determined in accordance with Section 2.12, to be
dated as of the Closing Date, in a form to be agreed upon by the parties hereto.
1.82. Purchase Price.
"Purchase Price" shall mean the cash amount of $10,565,000 (which amount
shall include $620,000 for the Parts, Fuel and Supplies Inventory, $1,640,000
for the Coal Inventory, $55,000 for one continuous miner and $250,000 for one
helicopter), plus the Promissory Note, plus the VC 5 Estimate, subject to the
adjustment provided for in Section 2.2(b).
1.83. Purchased Assets.
"Purchased Assets" shall mean all right, title and interest in and to the
Coal Inventory, Parts, Fuel and Supplies Inventory, Equipment, Books and Records
and Intellectual Property of the Asset Sale Companies and the rights of the
Asset Sale Companies with respect to the Contracts and the Permits.
1.84. Qualified Plans.
"Qualified Plans" shall have the meaning set forth in Section 3.11 hereof.
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1.85. RCRA.
"RCRA" shall have the meaning set forth in Section 1.33 hereof.
1.86. Reclamation Laws.
"Reclamation Laws" shall mean all federal, state and local Laws, as now or
hereafter in effect, relating to coal mining reclamation activities or
Liabilities. For purposes of this definition, "coal mining" shall include, but
not be limited to, any activities defined under the Surface Mining Control and
Reclamation Act of 1977, as amended, as "surface coal mining operations."
1.87. Related Persons.
"Related Persons" shall mean related persons as that term is defined in
Section 9701(c)(2) of the Coal Act, except that it shall not include successors
in interest.
1.88. Release.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, dumping or disposing into the
Environment of Hazardous Substances.
1.89. Retained Liabilities.
"Retained Liabilities" shall mean all of the Liabilities of each Asset Sale
Company, other than the Assumed Liabilities, including, without limitation, the
following:
(a) the Liabilities listed on Schedule 1.89(a);
(b) all Liabilities arising under applicable Workers' Compensation
Acts for or based upon the employment of (i) the current and
former Employees of the Asset Sale Companies who are not hired by
Buyer or one of Buyer's Affiliates, Successors, Assigns, Lessees
or Contractors, and (ii) the current and former Employees of the
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Asset Sale Companies who are hired by Buyer or one of Buyer's
Affiliates, Successors, Assigns, Lessees or Contractors, but only
with respect to claims where the date of injury or the date of
last injurious exposure occurred prior to the date such Employees
began working for Buyer or one of Buyer's Affiliates, Successors,
Assigns, Lessees or Contractors;
(c) all Liabilities arising under the federal black lung Laws for or
based upon the employment of (i) the current and former Employees
of the Asset Sale Companies who are not hired by Buyer or one of
Buyer's Affiliates, Successors, Assigns, Lessees or Contractors
and (ii) the current and former Employees of the Asset Sale
Companies who are hired by Buyer or one of Buyer's Affiliates,
Successors, Assigns, Lessees or Contractors, to the extent and in
the amounts provided in the federal black lung Laws, but only
until such time as Buyer or one of Buyer's Affiliates,
Successors, Assigns, Lessees or Contractors becomes the
responsible operator under the federal black lung Laws for such
Employees;
(d) all Liabilities for medical, dental, vision and other benefits
and expenses covered under the Medical Plans including related
insurance costs or premiums for or based upon the employment of
(i) the current and former Employees of the Asset Sale Companies
who are not hired by Buyer or one of Buyer's Affiliates,
Successors, Assigns, Lessees or Contractors, (ii) the current or
former Employees of the Asset Sale Companies who are hired by
Buyer or one of Buyer's Affiliates, Successors, Assigns, Lessees
or Contractors, but only with respect to the period prior to the
date such Employees began working for Buyer or one of Buyer's
Affiliates, Successors, Assigns, Lessees or Contractors and (iii)
in either case, all such Liabilities under COBRA, HIPAA and other
Laws, including all Liabilities of a Fiduciary for breach of
fiduciary duty or any other failure to act or comply in
connection with the administration of such Medical Plans;
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(e) unless such Liabilities are otherwise retained pursuant to
Section 1.89(j) hereof, all Liabilities arising under or based
upon the Employee Benefit Plans sponsored or maintained by, on
behalf of or for the benefit of such Asset Sale Company or its
Employees or in which such Asset Sale Company participated (other
than the Medical Plans), including all Liabilities arising from
or related to the termination thereof or Liabilities of a
Fiduciary for breach of fiduciary duty or any other failure to
act or comply in connection with the administration or investment
of the assets of any such Employee Benefit Plan;
(f) all Liabilities for salaries, wages, bonuses, vacation days,
personal days and similar forms of leave or compensation for or
based upon the employment of (i) the current and former Employees
of the Asset Sale Companies who are not hired by Buyer or one of
Buyer's Affiliates, Successors, Assigns, Lessees or Contractors,
and (ii) the current and former Employees of the Asset Sale
Companies who are hired by Buyer or one of Buyer's Affiliates,
Successors, Assigns, Lessees or Contractors, that are accrued,
due or earned up to the date such Employees began working for
Buyer or one of Buyer's Affiliates, Successors, Assigns, Lessees
or Contractors and for which such Employees are eligible;
(g) all Liabilities for terminated contract miner performance escrow
amounts (including interest) accrued up to the Closing Date;
(h) all Liabilities for accounts payable for which goods have been
shipped and delivered (whether or not invoiced) or services have
been performed (whether or not invoiced) and related notes, trade
payables and earned royalties, to the extent that an Asset Sale
Company received a benefit before the Closing Date;
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(i) all Liabilities for claims of any current or former Employees
pursuant to the WARN Act arising out of acts or omissions of the
Asset Sale Companies prior to and including the Closing Date;
(j) (1) all Liabilities, if any, of any Asset Sale Company and its
Related Persons (collectively, the "PCC Group") under the Coal
Act, and (2) all Liabilities, if any, of the PCC Group under any
post-Closing amendments to the Coal Act for (i) beneficiaries
eligible under the Coal Act who are assigned to a member of the
PCC Group or for whom a member of the PCC Group is required to
provide or pay for medical benefits pursuant to Sections 9711 or
9712 of the Coal Act or (ii) death benefit premiums or unassigned
beneficiary premiums (as those terms are used in Sections 9704(c)
and 9704(d) of the Coal Act) for beneficiaries eligible under the
Coal Act, that are assessed against any member of the PCC Group;
provided, for the -------- avoidance of doubt, that the
Liabilities retained pursuant to (1) and (2) above shall not be
affected by Buyer or any of its Affiliates being identified under
the Coal Act or any post-Closing amendments thereto as a
successor, successor in interest or "Related person" under the
Coal Act or any post-Closing amendments thereto to any member of
the PCC Group solely as a result of Buyer's purchase of the
Purchased Assets;
(k) unless such Liabilities are otherwise retained pursuant to
Section 1.89(j) hereof, all Liabilities, if any, of such Asset
Sale Companies for retiree medical benefits with respect to
current or former Employees of such Asset Sale Company (and their
eligible dependents and beneficiaries) who, on or prior to the
Closing Date, satisfy the requirements for retiree medical
benefits under any Employee Benefit Plan in which such Asset Sale
Company participates;
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(l) all Liabilities relating to assets held in trust under any
Qualified Plan sponsored or maintained by, on behalf of or for
the benefit of such Asset Sale Company or its current or former
Employees or in which such Asset Sale Company participates
arising or relating to the period prior to the Closing Date;
(m) all inter-company indebtedness owed by any Asset Sale Company to
the PCC Parent or any of the PCC Parent's Affiliates;
(n) all Liabilities arising out of or in connection with compliance
prior to the Closing Date with Health and Safety Requirements
pertaining to the Purchased Assets, and all Liabilities arising
out of or in connection with compliance with all Laws relating to
equal employment opportunity, employment, or labor relations
concerning the employment of any Employee by the Asset Sale
Companies, or relating to any other action taken or not taken by
the Asset Sale Companies concerning (i) the current and former
Employees of the Asset Sale Companies who are not hired by Buyer
or one of Buyer's Affiliates, Successors, Assigns, Lessees or
Contractors, and (ii) the current and former Employees of the
Asset Sale Companies who are hired by Buyer or one of Buyer's
Affiliates, Successors, Assigns, Lessees or Contractors, but only
with respect to matters arising out of the employment of such
Employees by the Asset Sale Companies;
(o) except as set forth on Schedule 1.6, all Liabilities for the
claims, legal actions, suits, litigation, arbitrations, disputes
or investigations listed on Schedules 3.7 and 3.10;
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(p) all Liabilities of any of the Asset Sale Companies for unpaid
Taxes with respect to any Tax year or portion thereof ending on
or before the Closing Date or for any Tax year beginning before
and ending after the Closing Date to the extent allocable to the
portion of such period beginning before and ending on the Closing
Date (to the extent of any inconsistencies with Article VII
hereof, Article VII shall be controlling);
(q) all amounts payable as the result of the consummation of the
transactions contemplated by this Agreement that arise due to any
change of control provision of any Contract other than those
Contracts listed on Schedule 5.4(b);
(r) all Liabilities of any of the Asset Sale Companies for the unpaid
Taxes of any Person (including PCC and its subsidiaries) under
Reg. ss.1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or
otherwise;
(s) all Liabilities for any Environmental Matter or Environmental or
Response Action related to real property or any other asset
owned, operated or leased by PCC or any of its Affiliates that is
not a Purchased Asset (except to the extent otherwise provided in
the Paramont Service Agreement or any other agreement entered
into contemporaneously with this Agreement pursuant to which
reclamation and other services are to be performed on PCC's or
its Affiliates' idle properties);
(t) all Liabilities for any Environmental Matter or Environmental or
Response Action (other than Mining Environmental Liabilities) to
the extent the underlying claim relates to or arises from any
activity on or through the use of the Purchased Assets and is
attributable to acts or omissions occurring at or prior to the
Closing;
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(u) all Liabilities of PCC that become a Liability of Buyer under any
bulk transfer Law of any jurisdiction;
(v) all Liabilities under the contracts, agreements, personal and
real property leases, relationships and commitments of the Asset
Sale Companies listed on Schedule 1.89(v); and
(w) all Liabilities related to Equipment retained by PCC and the
Asset Sale Companies after the Closing Date but included within
the Equipment leases listed Schedule 5.4(b).
1.90. Security Agreement.
"Security Agreement" shall mean the Security Agreement between Buyer and
PCC, to be dated as of the Closing Date, in a form to be agreed upon by the
parties hereto.
1.91. SEC.
"SEC" shall mean the Securities and Exchange Commission.
1.92. SMCRA.
"SMCRA" shall have the meaning set forth in Section 3.7 hereof.
1.93. Straddle Period.
"Straddle Period" shall mean any taxable period covering days before and
after the Closing Date.
1.94. Tax or Taxes.
"Tax" or "Taxes" mean any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
custom duties, capital stock, franchise, profits, withholding, social security
23
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, reclamation fees or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not, but shall not
include, for purposes of this Agreement only, Liabilities under the Coal Act, of
whatever nature and regardless of how denominated.
1.95. Tax Return.
"Tax Return" shall mean any original or amended report, return,
declaration, claim for refund, statement, document, schedule, attachment or
other information supplied or required to be supplied to a Governmental
Authority with respect to Taxes, including any return of an affiliated, combined
or unitary group.
1.96. VC 5.
"VC 5" shall mean that certain property owned indirectly by PCC depicted on
Schedule 1.96.
1.97. VC 5 Calculation.
"VC 5 Calculation" shall have the meaning set forth in Section 1.99 hereof.
1.98. VC 5 Costs.
"VC 5 Costs" shall mean the amount that equals the sum of all costs and
expenses in connection with VC 5 incurred by PCC and its Affiliates through the
Closing Date.
1.99. VC 5 Estimate.
"VC 5 Estimate" shall mean:
(a) if the expected VC 5 Costs minus the expected VC 5 Revenue (the
"VC 5 Calculation") exceeds $13,800,000, then the VC 5 Estimate
shall be the amount by which the VC 5 Calculation exceeds
$13,800,000; or
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(b) if the VC 5 Calculation is less than $13,800,000, then the VC 5
Estimate shall equal the VC 5 Calculation minus $13,800,000.
1.100. VC 5 Revenue.
"VC 5 Revenue" shall mean the amount that equals the sum of all revenues in
connection with VC 5 received by PCC and its Affiliates through the Closing
Date.
1.101. VDEQ.
"VDEQ" shall have the meaning set forth in Section 3.7 hereof.
1.102. VDMME.
"VDMME" shall have the meaning set forth in Section 3.7 hereof.
1.103. Virginia Entities.
"Virginia Entities" shall have the meaning set forth in Section 5.10(a)
hereof.
1.104. WARN Act.
"WARN Act" shall mean the Worker Adjustment and Retraining Notification
Act, as amended.
1.105. Welfare Plans.
"Welfare Plans" shall have the meaning set forth in Section 3.11 hereof.
1.106. Workers' Compensation Acts.
"Workers' Compensation Acts" shall mean Laws that provide for awards to
employees and their dependents for employment-related accidents and diseases.
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ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1. Transfer of Assets.
On the Closing Date, PCC (on behalf of the Asset Sale Companies) shall
cause to be sold, conveyed, transferred, assigned, and delivered to Buyer, and
Buyer shall acquire, the Purchased Assets. At the Closing, subject to the terms
and conditions of this Agreement, PCC agrees to: (i) cause title to the
Purchased Assets to be transferred and delivered to Buyer; and (ii) perform its
obligations under this Agreement to be performed at or before Closing. In full
payment for the Purchased Assets, Buyer shall: (i) assume the Assumed
Liabilities; (ii) pay to PCC (which shall receive such amounts on behalf of the
Asset Sale Companies) the Purchase Price by wire transfer of cash or other
immediately available funds and execute and deliver to PCC the Promissory Note;
and (iii) perform its obligations under this Agreement to be performed at or
before Closing. Buyer shall not assume or have any responsibility with respect
to any Liability of PCC Parent, PCC, the PCC Group or the Asset Sale Companies
that is not an Assumed Liability.
2.2. Calculation of VC 5 Adjustment Amount.
(a) No later than ten days before the Closing Date, PCC will deliver
to Buyer documentation reasonably acceptable to Buyer detailing
and supporting the VC 5 Estimate.
(b) No later than 20 days after the Closing Date, PCC will deliver to
Buyer documentation reasonably acceptable to Buyer detailing the
VC 5 Costs and the VC 5 Revenue (the "Final VC 5 Cost"). The
Final VC 5 Cost shall be equal to the VC 5 Costs minus the VC 5
Revenue as shown on such documentation. PCC and Buyer will use
commercially reasonable efforts to resolve any differences within
seven business days after the delivery by PCC of the
26
documentation detailing the Final VC 5 Costs. If PCC and Buyer
cannot resolve any such differences within such seven business
days period, the parties agree to submit any such differences to
arbitration in Abingdon, Virginia, by the accounting firm of
Deloitte & Touche, LLP or another accounting firm mutually
acceptable to both parties (the "CPA Arbitrator") to resolve such
differences. The CPA Arbitrator shall make such review and
examination of the relevant facts and documents as the CPA
Arbitrator deems appropriate, and shall permit each of Buyer and
PCC to make a written presentation of their respective positions.
Within forty-five (45) days after submission of such dispute by
both parties, the CPA Arbitrator shall resolve all disputed items
in writing and shall prepare and deliver its decision (which
shall include a determination of the VC 5 Costs, the VC 5 Revenue
and the Final VC 5 Cost), and which shall be final and binding
upon the parties without further recourse or collateral attack
and, as to each disputed matter, shall accept either Buyer's or
PCC's position in its entirety and the party whose position is
not accepted by the CPA Arbitrator on a particular disputed
matter shall pay all fees and costs of such CPA Arbitrator to
arbitrate such disputed matter. In accordance with the provisions
of this Section 2.2(b): (i) Buyer shall pay PCC the amount, if
any, by which the value of the Final VC 5 Cost exceeds the value
of the VC 5 Estimate; or (ii) PCC shall pay Buyer the amount, if
any, by which the value of the VC 5 Estimate exceeds the value of
the Final VC 5 Cost. Such payment shall constitute an adjustment
to the Purchase Price and shall be paid by wire transfer of cash
or other immediately available funds within three business days
after the completion of the procedures contemplated in this
Section 2.2(b).
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2.3. Bills of Sale, Assignment and Assumption Agreements and Other
Documents.
At the Closing, PCC shall cause each of the Asset Sale Companies to: (i)
execute and deliver to Buyer the Bills of Sale, the Assignment and Assumption
Agreements and such other documents as may be necessary to convey to Buyer the
Purchased Assets; and (ii) perform its obligations under the Agreement to be
performed at or before the Closing.
2.4. Assumption of Liabilities.
At the Closing, Buyer shall execute and deliver to PCC the Assignment and
Assumption Agreements and such other documents and instruments as may be
necessary for Buyer to assume all of the Assumed Liabilities. Buyer shall not
assume or have any responsibility, however, with respect to any Liability of PCC
Parent, PCC, the PCC Group or the Asset Sale Companies that is not an Assumed
Liability.
2.5. Proration of Liabilities.
PCC and Buyer shall cooperate with each other to provide for payments due
with respect to the Assumed Liabilities and the Retained Liabilities during the
payment period in which the Closing occurs with all such Liabilities prorated as
of the Closing Date, if applicable.
2.6. Indemnification and Guaranty Agreement.
At the Closing, PCC, PCC Parent, Buyer's Ultimate Parent and Buyer shall
execute and deliver the Indemnification and Guaranty Agreement.
2.7. Cooperation Agreement.
At the Closing, PCC and Buyer shall, and PCC shall cause PCC Parent to,
execute and deliver the Cooperation Agreement pursuant to which Buyer, PCC
Parent and PCC shall provide each other certain information and other assistance
in connection with the collection, administration and/or satisfaction of certain
of the Retained Liabilities.
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2.8. Administrative Services Agreement.
At the Closing, PCC and Buyer shall execute and deliver the Administrative
Services Agreement pursuant to which PCC or one of its Affiliates will provide
certain services to Buyer and the Asset Sale Companies for a transition period.
2.9. Paramont Service Agreement.
At the Closing, PCC and Buyer shall execute and deliver the Paramont
Service Agreement pursuant to which Buyer will cause one of its Affiliates to
perform reclamation and other services on idle properties.
2.10. Security Agreement.
At the Closing, in order to secure Buyer's obligations under the Promissory
Note, PCC and Buyer shall execute and deliver the Security Agreement.
2.11. Additional Documents.
At the Closing, PCC and Buyer shall, and PCC shall cause the Asset Sale
Companies to, execute and deliver all such other documents or instruments
necessary or appropriate to effect the transactions contemplated by this
Agreement, including the documents provided in Section 5.6 hereof and in this
Article II.
2.12. Coal Inventory Adjustment.
(a) In accordance with the provisions of this Section 2.12: Buyer
shall pay PCC the amount, if any, by which the value of the Coal
Inventory (as calculated in accordance with Sections 2.12(b)) is
finally determined to be greater than $1,640,000. Such payment
shall constitute an adjustment to the Purchase Price and shall be
paid by fixing the face amount of the Promissory Note within one
business day after the completion of the procedures contemplated
in Sections 2.12(b).
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(b) No later than three days before the Closing Date, the parties
will agree upon the density of the various stockpiles that
constitute the Coal Inventory. No later than two business days
prior to the Closing, PCC and Buyer shall cause Tuck Engineering,
Inc. (the "Independent Surveyor") to prepare and deliver to each
of them a survey of all Coal Inventory of the Asset Sale
Companies as of the Closing, which survey shall be conducted in
accordance with the principles set forth on and shall be in
substantially the format attached hereto as part of Schedule
2.12(b). PCC and Buyer shall, and shall cause their respective
Affiliates to, cooperate with and make available any information
reasonably requested by the Independent Surveyor in its
preparation of its survey of the Coal Inventory. All
determinations made by the Independent Surveyor in its survey of
the Coal Inventory shall be final, binding and conclusive on the
parties. PCC and Buyer shall each bear fifty percent of the fees
and costs of the Independent Surveyor and any other third party
incurred in connection with the calculation of the Coal Inventory
pursuant to this Section 2.12(b).
2.13. Allocation of Purchase Price and Assumed Liabilities.
The Purchase Price and the Assumed Liabilities (to the extent they
constitute part of the amount realized for federal Income Tax purposes) shall be
allocated among the Purchased Assets in accordance with a schedule to be agreed
upon by Buyer and PCC after the Closing Date. Buyer shall prepare such
allocation schedule and deliver it to PCC within the later to occur of (i) ten
(10) business days after the completion of the Audited Closing Date Financial
Statements or (ii) ten (10) business days after the CPA Arbitrator's final
resolution under Sections 2.2 and 2.12, if applicable. PCC shall be deemed to
agree with such allocation schedule unless, within ten (10) days after the date
PCC receives the allocation schedule from Buyer, PCC notifies Buyer in writing
30
of (i) each allocation with which it disagrees and (ii) for each such
allocation, the amount that PCC proposes to allocate. If PCC provides such
notice to Buyer, the parties shall proceed in good faith to resolve mutually the
disputed allocation amounts within fifteen (15) days after the date on which PCC
notifies Buyer of a disagreement with Buyer's proposed allocation. If PCC and
Buyer cannot resolve any such differences, the parties agree to submit such
differences to arbitration in Abingdon, Virginia, by the CPA Arbitrator to
resolve such differences. The CPA Arbitrator shall make such review and
examination of the relevant facts and documents as the CPA Arbitrator deems
appropriate and shall permit each of Buyer and PCC to make a written
presentation of their respective positions. Within forty-five (45) days after
submission of such dispute by both parties, the CPA Arbitrator shall resolve
such dispute in writing and shall prepare and deliver its decision, which shall
(i) be based upon a determination of the fair market value of the Purchased
Assets, (ii) defer to valuations that have been prepared in accordance with
generally accepted valuation techniques absent manifest error, (iii) be final
and binding upon the parties without further recourse or collateral attack and
(iv) accept either Buyer's or PCC's position in its entirety. The party whose
position is not accepted by the CPA Arbitrator shall pay all fees and costs of
such CPA Arbitrator to arbitrate such dispute. The allocation schedule shall
include, at a minimum, information necessary to complete Part II of IRS Form
8594. The allocation to the Purchased Assets is intended to comply with the
requirements of Section 1060 of the Code. The parties shall cooperate to comply
31
with all substantive and procedural requirements of Section 1060, and except for
any adjustment to the Purchase Price hereunder, after the completion and
agreement by the parties to the allocation schedule, such allocation schedule
shall be adjusted only if and to the extent necessary to comply with such
requirements of Section 1060. Buyer and PCC agree that they will not take nor
will they permit any Affiliate to take, for Income Tax purposes, any position
inconsistent with such allocation schedule to the Purchased Assets; provided,
however, that (i) Buyer's cost for the Purchased Assets may differ from the
total amount allocated hereunder to reflect the inclusion in the total cost of
items (for example, capitalized acquisition costs) not included in the total
amount so allocated and (ii) the amount realized by the Asset Sale Companies may
differ from the total amount allocated hereunder to reflect transaction costs
that reduce the amount realized for federal Income Tax purposes.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PCC
PCC hereby represents and warrants to Buyer that the statements contained
in this Article III are correct and complete, except as set forth in the
Schedules delivered by PCC to Buyer in connection with this Agreement. The
Schedules are arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Article III.
3.1. Incorporation.
PCC and each of the Asset Sale Companies are corporations duly organized,
validly existing and in good standing under the Laws of the respective state or
commonwealth of each such company's incorporation. PCC and each of the Asset
Sale Companies that is not a corporation incorporated under the Laws of Virginia
are duly qualified or licensed to transact business as a foreign corporation in
Virginia and are in good standing under the laws of Virginia. Set forth on
Schedule 3.1 is the name of each state or other jurisdiction in which each such
company has either paid taxes or had an office in the three years prior to the
date of this Agreement.
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3.2. Execution, Delivery and Performance.
The execution, delivery and performance by PCC of this Agreement and by PCC
and the applicable Asset Sale Company of each other agreement or instrument to
which it is a party executed in connection herewith or delivered pursuant hereto
and the consummation of the transactions contemplated herein and therein will
not, with or without the giving of notice or the passage of time, or both: (i)
conflict with, or result in a violation or breach of, or a default, right to
accelerate, right to exercise any remedy or loss of rights under, or result in
the creation of any Lien (other than Permitted Liens) under or pursuant to, any
provision of PCC's or any Asset Sale Company's Articles of Incorporation or
Bylaws or of any material franchise, mortgage, deed of trust, Lien, lease,
license, instrument, agreement, consent, approval, waiver or understanding to
which PCC or any Asset Sale Company is a party or by which any Asset Sale
Company is bound, or any Law or any order, judgment, writ, injunction or decree
to which PCC or any Asset Sale Company is a party or by which PCC, any Asset
Sale Company or the Purchased Assets may be bound or affected; (ii) require the
approval, consent or authorization of, prior notice to, or filing or
registration with any Governmental Authority or, except as set forth on Schedule
1.76, contravene, conflict with or result in a violation of any of the terms or
requirements of, or give any Governmental Authority the right to revoke,
withdraw, suspend, cancel or terminate any authorization or Permit issued by a
Governmental Authority that is held by PCC or the Asset Sale Companies or that
otherwise relates to the Purchased Assets; or (iii) give any Governmental
Authority or other Person the right to challenge any of the transactions
contemplated hereunder or exercise any remedy or obtain any relief under any Law
to which PCC or any Asset Sale Company is subject.
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3.3. Authorization.
PCC has full power and authority to enter into and deliver this Agreement
and to perform its obligations hereunder and each of PCC and the Asset Sale
Companies has full power and authority to enter into and deliver each other
agreement or instrument to which it is a party executed in connection herewith
and delivered pursuant hereto and to perform its obligations thereunder. PCC's
execution, delivery and performance of this Agreement and the execution,
delivery and performance of all other agreements and instruments by PCC and each
of the Asset Sale Companies in connection herewith and delivered pursuant hereto
and the transactions contemplated hereby have been duly authorized by all
requisite corporate action on the part of PCC and each of the Asset Sale
Companies. This Agreement and all other agreements or instruments executed by
PCC or any of the Asset Sale Companies in connection herewith and delivered by
PCC or any of the Asset Sale Companies pursuant hereto have been duly executed
and delivered by PCC or such Asset Sale Companies and this Agreement and all
other agreements and instruments executed by PCC or any of the Asset Sale
Companies in connection herewith and delivered by PCC or any of the Asset Sale
Companies pursuant hereto constitute the legal, valid and binding obligation of
PCC or such Asset Sale Company, as the case may be, enforceable in accordance
with their respective terms (subject to any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting generally the
enforcement of creditors' rights).
3.4. Absence of Changes.
Except as contemplated by this Agreement, since December 31, 2001, none of
the Asset Sale Companies has, with respect to the Purchased Assets:
34
(a) borrowed or agreed to borrow any funds or incurred, or become
subject to, any Liability, or issued any note, bond or other debt
security, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation, except Liabilities incurred in the
Ordinary Course of Business, none of which would reasonably be
expected to result in an impact greater than $100,000;
(b) paid any Liability other than current Liabilities in the Ordinary
Course of Business;
(c) sold, transferred or otherwise disposed of, or agreed to sell,
transfer or otherwise dispose of any of the Equipment, or, other
than in the Ordinary Course of Business, any other Purchased
Assets, or canceled or otherwise terminated, or agreed to cancel
or otherwise terminate, other than in the Ordinary Course of
Business, any Permits;
(d) except in the Ordinary Course of Business, entered into any
agreement, contract, lease or license (or series of related
agreements, contracts, leases and licenses) or made or permitted
any material amendment to or termination, acceleration,
modification or cancellation of any Contract or breached any
provision of any Contract;
(e) merged or consolidated with any other Person;
(f) mortgaged, pledged or subjected to any Lien any of its assets or
properties, other than Permitted Liens;
(g) made any capital expenditure (or series of related capital
expenditures) either (x) involving more than $100,000 or (y)
outside the Ordinary Course of Business;
35
(h) made any capital investment in, any loan to, or any acquisition
of the securities or assets of, any other Person (or series of
related capital investments, loans and acquisitions) either (x)
involving $100,000 or (y) outside the Ordinary Course of
Business;
(i) delayed or postponed the payment of accounts payable and other
Liabilities outside the Ordinary Course of Business;
(j) cancelled, compromised, waived or released any right or claim (or
series of related rights and claims) either (x) involving more
than $100,000 or (y) outside the Ordinary Course of Business;
(k) made any loan to, or entered into any other transaction with, any
of the directors, officers and employees of such Asset Sale
Company outside the Ordinary Course of Business;
(l) entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any existing
such contract;
(m) except in the Ordinary Course of Business adopted, amended,
modified or terminated any bonus, profit-sharing, incentive,
severance or other plan, contract or commitment for the benefit
of any of the directors, officers and Employees of the Asset Sale
Companies, or taken any such action with respect to any other
Employee Benefit Plan;
(n) made any other change in employment terms for any of the
directors, officers and Employees of the Asset Sale Companies
outside the Ordinary Course of Business;
36
(o) suffered any damage, destruction or loss, whether or not covered
by insurance, that has had or would reasonably be expected to
have a Material Adverse Effect;
(p) implemented or adopted any change in its accounting methods or
principles or the application thereof; or
(q) entered into any agreement, arrangement or understanding with
respect to any of the foregoing.
3.5. Purchased Assets.
(a) The Asset Sale Companies (i) own good and transferable title to
all of the Purchased Assets free and clear of all Liens and
restrictions on transfer, other than Permitted Liens or (ii)
lease such Purchased Assets under a valid and enforceable lease
(subject to any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting
generally the enforcement of creditors' rights). No rights of the
Asset Sale Companies under such leases have been assigned or
otherwise transferred as security for any obligation of the Asset
Sale Companies. The consummation of the transactions contemplated
by this Agreement will not create or constitute, either with or
without notice or the passage of time a default or event of
default under any such lease or require the consent of any other
party to such lease in order to avoid a default or event of
default.
(b) Except for the items set forth on Schedule 1.89(v), the Purchased
Assets include all tangible and intangible assets owned by the
Asset Sale Companies and used in the Business.
37
(c) The Equipment that is currently in use has been maintained in
accordance with normal industry practice and is suitable for the
purposes for which the Asset Sale Companies are presently using
such Equipment.
(d) The value of the Parts, Fuel and Supplies Inventory as of the
Closing Date shall be at least $620,000.
3.6. Intellectual Property.
No third party has asserted any interest in the Intellectual Property, nor
has any third party alleged that any Asset Sale Company has infringed on any
Intellectual Property of any third party. To the Knowledge of PCC, none of the
Asset Sale Companies interferes with, infringes upon, misappropriates, or
otherwise comes into conflict with, any Intellectual Property rights of third
parties as a result of the continued operation of the Business as presently
conducted.
3.7. Permits and Environmental Compliance.
(a) Each Asset Sale Company is in material compliance with all
Environmental Laws related to the Purchased Assets. Neither PCC
nor any Asset Sale Company (such Persons being hereafter referred
to in this Section 3.7 as "Operators") has been notified by any
Governmental Authority of any current, alleged or unresolved
violation of any Environmental Laws applicable to Mining
Activities, including any investigatory, remedial or corrective
obligations, that would result in (i) closure, suspension or
restriction of any mine or mining-related activity related to the
Permits, (ii) revocation or suspension of any license or Permits,
or (iii) exposure of Buyer to the imposition of any fines or
other civil or criminal monetary penalty in excess of $5,000. The
Permits include all material permits, licenses, franchises and
38
other authorizations necessary to conduct the Mining Activities
as currently conducted and the Asset Sale Companies are in
material compliance with all such Permits. No such Permit is the
subject of any proceeding by or in front of any Governmental
Authority that might affect its validity and no such proceeding
is pending or, to the Knowledge of PCC, threatened.
(b) PCC has made available to Buyer true and complete copies of (i)
the Permits, (ii) all of the mining permits and other permits
held by each Operator pertaining to the Purchased Assets,
together with a description of the permitted property or
facility, the amount of the bond for each such Permit and the
surety for each such bond or manner in which each such bond has
otherwise been posted, (iii) all other licenses, franchises,
certificates, concessions and other governmental approvals and
authorizations held by each Operator pertaining to the Purchased
Assets, as amended, supplemented and modified through the date
hereof, and (iv) any and all pending applications for additional
mining permits and other licenses and authorizations that have
been submitted to any governmental agency by an Operator
pertaining to the Purchased Assets or are in the process of
development either in-house or through consultants.
(c) Schedule 3.7 includes a true and complete list of all of the
citations, notices of non-compliance and notices of violation
received by each Operator with respect to the Purchased Assets
from the Virginia Department of Mines, Minerals and Energy
("VDMME"), the Virginia Department of Environmental Quality
("VDEQ"), the federal Environmental Protection Agency ("EPA"),
the federal Office of Surface Mining ("OSM"), the federal Mine
Safety and Health Administration ("MSHA"), or any other
Governmental Authority that remain outstanding. No Operator is
subject to any cessation orders, cease and desist orders, closure
orders or show cause orders issued by VDMME, VDEQ, EPA, OSM,
MSHA, or any such other Governmental Authority with respect to
the Purchased Assets.
39
(d) With respect to the Purchased Assets, each Operator is in
material compliance with all of the requirements of the Surface
Mining Control and Reclamation Act of 1977 ("SMCRA"), the Federal
Mine Safety and Health Act of 1977, as amended, all similar
statutes of the Commonwealth of Virginia, and all rules and
regulations promulgated under those Acts and statutes by OSM,
MSHA, VDMME, VDEQ and any other Governmental Authority. With
respect to the Purchased Assets, no Operator has been subjected
to any bond forfeiture, permit suspension or revocation, or
similar effort and proceedings instituted by OSM, VDMME or any
other Governmental Authority.
(e) To the Knowledge of PCC, after the Closing, Buyer will not be
liable for any fines, penalties, fees, Taxes or other
governmental charges assessed with respect to notices of
violation, cessation orders, closure orders, show cause orders or
other governmental enforcement actions issued prior to Closing
with respect to the Purchased Assets. Neither this Agreement nor
the consummation of the transactions that are the subject of this
Agreement will result in any Buyer Liabilities for site
investigation or cleanup, or notification to or consent of any
Governmental Agency or third parties, pursuant to any of the
so-called "transaction-triggered" or "responsible property
transfer" Environmental Laws. The representation in the previous
sentence does not relate to any matters for which Buyer has the
responsibility, pursuant to this Agreement, to notify any
Governmental Authority or to otherwise process with any
Governmental Authority in connection with the transfer of any
Permit.
40
(f) No Asset Sale Company has, with respect to the Purchased Assets,
either expressly or by operation of Law, assumed or undertaken
any Liability, including without limitation, any Liability for
corrective or remedial action, of any other Person relating to
any Environmental Laws.
(g) To the Knowledge of PCC, no conditions existing as of the Closing
Date and relating to the Purchased Assets or the activities of
the Asset Sale Companies or any of their respective predecessors
or Affiliates will prevent or materially hinder Buyer's
compliance with Environmental Laws, require Buyer to undertake
any investigatory, remedial or corrective actions pursuant to
Environmental Laws or impose upon Buyer any other Liabilities
pursuant to Environmental Laws, including without limitation, any
Environmental Laws relating to onsite or offsite releases or
threatened releases of Hazardous Substances or imposing Liability
for personal injury, property damage or natural resource damage.
3.8. Reclamation Bonds.
Schedule 3.8 contains a list of all bonds, including guaranties,
indemnities, letters of credit and other forms of surety, posted by and/or for
the benefit of the Asset Sale Companies to secure the performance of their
respective reclamation or other Liabilities pursuant to, in connection with or
as a condition of, the Permits (collectively, the "PCC Bonds"). The PCC Bonds
are sufficient to permit the Asset Sale Companies and their Affiliates to
conduct the Mining Activities in compliance with Laws and are in full force and
effect.
41
3.9. Contracts.
(a) PCC has made available to Buyer copies of all of the written
Contracts, or a written summary setting forth the terms and
conditions where no copies exist, including all amendments,
modifications, waivers and elections applicable thereto.
(b) As to the Asset Sale Companies party thereto: (i) the Contracts
are valid and binding, enforceable in accordance with their
respective terms (subject to any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar Laws
affecting generally the enforcement of creditors' rights), and
are in full force and effect; (ii) the consummation of the
transactions contemplated herein will not, with or without the
giving of notice or the passage of time, or both, conflict with,
or result in a violation or breach of, or a default, right to
accelerate, right to exercise any remedy or loss of rights under
the Contracts; (iii) no Asset Sale Company, nor to the Knowledge
of PCC, any other party is in material breach or default, and no
event has occurred that, with notice or lapse of time, would
constitute a breach or default, or permit termination,
modification or acceleration, under the Contracts; and (iv) no
Asset Sale Company, nor to the Knowledge of PCC, any other party
has repudiated any provision of the Contracts.
(c) Schedule 3.9(c) sets forth the consents and approvals of third
parties and Governmental Authorities required to be obtained as a
result of the transactions contemplated by this Agreement.
3.10. Litigation; Claims.
(a) Schedules 3.7 and 3.10 list all claims, legal actions, suits,
litigation, arbitrations, disputes, investigations, proceedings
by or before any Governmental Authority involving more than
$100,000 and all orders, decrees or judgments, now pending or in
42
effect, or, to the Knowledge of PCC, threatened or contemplated,
against or affecting the Asset Sale Companies, the Purchased
Assets, or the consummation of the transactions contemplated by
this Agreement, except to the extent involving Taxes for
Pre-Closing Periods.
(b) There are no existing claims by or disputes involving more than
$100,000 with Persons owning or occupying lands or realty
adjoining or near any of the Purchased Assets regarding Mining
Activities by the Asset Sale Companies or regarding the location
of boundary lines, encroachments, mineral rights, subsidence,
water quantity or quality, blasting damage, transportation of
coal or other materials, nuisances or any other similar matter.
3.11. Employee Benefits.
(a) Schedule 3.11(a) contains a list of all "employee benefit plans"
(as defined in Section 3(3) of ERISA) and all other employee
benefit plans, programs or arrangements, including each severance
pay, bonus, deferred compensation, incentive compensation, stock
purchase, stock option or other equity-based compensation, death
benefit, group insurance, hospitalization or other medical,
dental, health, life (including all individual life insurance
policies as to which any of the Asset Sale Companies is the
owner, beneficiary or both), disability or other insurance, Code
Section 125 "cafeteria" or "flexible" benefit plan, pension,
savings, profit-sharing or retirement plan, program or
arrangement: (i) under which Employees or former Employees are
entitled to participate by reason of their employment with any of
the Asset Sale Companies or their respective ERISA Affiliates,
whether or not any of the foregoing is funded, whether insured or
self-funded, and with respect to which any of the Asset Sale
Companies are a party or a sponsor or a fiduciary thereof or by
43
which any of the Asset Sale Companies are bound; or (ii) with
respect to which any of the Asset Sale Companies otherwise may
have, as of the Closing Date, any direct or indirect Liability
(the "Employee Benefit Plans"). Schedule 3.11(a) identifies: (i)
each Employee Benefit Plan that is a "pension plan" (as defined
in Section 3(2) of ERISA) (the "Pension Plans"), and denotes
those Pension Plans intended to be qualified under Section 401(a)
of the Code (the "Qualified Plans"); (ii) each Employee Benefit
Plan that is a "multiemployer plan" (as defined in Section 3(37)
or Section 4001(a)(3) of ERISA) (a "Multiemployer Plan"); and
(iii) each Employee Benefit Plan that is a "welfare plan" (as
defined in Section 3(1) of ERISA) (the "Welfare Plans").
(b) Each Qualified Plan meets the requirements of a "qualified plan"
under Code Section 401(a) and has received, pursuant to a request
that accurately described such Qualified Plan, a favorable
determination letter from the IRS to the effect that the form of
such Qualified Plan satisfies the requirements of Section 401(a)
of the Code and that its related trust is exempt from taxation
under Section 501(a) of the Code. To the Knowledge of PCC, there
are no facts or circumstances that would jeopardize or adversely
affect in any material respect the qualification under Code
Section 401(a) of any Qualified Plan.
(c) As of the Closing Date, full payment to each Employee Benefit
Plan of all contributions (including all employer contributions
and employee salary reduction contributions) that are required to
be made by the Asset Sale Companies under the terms thereof and
under ERISA or the Code in respect of the current and prior plan
years, if any, have been made for all Employee Benefit Plans
(except for The Savings and Investment Plan of The Pittston
44
Company and Its Subsidiaries, which payment shall be made as soon
as possible after the Closing Date). All contributions that are
required to be made by the Asset Sale Companies for any period
ending on or before the Closing Date that are not yet due have
been paid to each such Employee Benefit Plan or accrued in
accordance with the past custom and practice of the Asset Sale
Companies. All premiums that are due on or before the Closing
Date have been paid with respect to each such Welfare Plan. As of
the latest actuarial determination, no "accumulated funding
deficiency" (as defined in Section 302 of ERISA or Section 412 of
the Code), whether or not waived, exists with respect to any
Pension Plan. The present value of all accumulated benefit
obligations under each Qualified Plan (based on the assumptions
used for purposes of Statement of Financial Accounting Standard
No. 87) did not as of the last annual valuation date applicable
thereto exceed the fair market value of the assets of such
Qualified Plan. No "reportable event" within the meaning of
Section 4043 of ERISA has occurred in connection with any of the
Pension Plans.
(d) Employee Benefit Plan Compliance.
(i) Each Employee Benefit Plan (other than the Multiemployer
Plans) has been administered substantially in accordance
with its terms;
(ii) each Employee Benefit Plan (other than the Multiemployer
Plans) and each related trust, insurance contract or fund
complies in form and in operation and has been administered
substantially in accordance with any applicable provisions
of ERISA, the Code and all other Laws, all reports, returns
and other documentation (including Form 5500 Annual Reports
and PBGC-1s) that are required to have been filed with the
IRS, the United States Department of Labor, the PBGC or any
45
other Governmental Authority have been filed on a timely
basis in each instance in which the failure to file such
reports, returns and other documents would result in any
material Liability to PCC or the Asset Sale Companies;
(iii)other than routine claims for benefits, no Liens, lawsuits
or complaints to or by any Person or Governmental Authority
have been filed or, to the Knowledge of PCC, are
contemplated or threatened, with respect to any Employee
Benefit Plan (other than the Multiemployer Plans) except for
those that would not reasonably be expected to result in any
material Liability to PCC or the Asset Sale Companies.
(e) Neither PCC nor any of the Asset Sale Companies has received a
written notice of, or incurred, any withdrawal liability with
respect to a Multiemployer Plan.
(f) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any Person to severance pay for
which Buyer will be liable after the Closing; (ii) accelerate the
time of payment or vesting of, increase the amount of, or satisfy
a condition to the compensation due to any Person under any
Employee Benefit Plan for which Buyer will be liable after the
Closing; or (iii) result in the payment of an amount that could,
individually or in combination with any other such payment,
constitute an "excess parachute payment" under Code Section
280G(b)(1).
(g) No "prohibited transaction" (as such term is defined in Section
406 of ERISA or Section 4975 of the Code) has occurred with
respect to any Employee Benefit Plan subject to ERISA, other than
such a transaction subject to an administrative or statutory
exemption, with respect to which a Tax, penalty or other amount
may reasonably be expected to be imposed on any of the Asset Sale
Companies or their respective ERISA Affiliates.
46
(h) Neither the PCC Parent, PCC, the Asset Sale Companies nor any of
their respective ERISA Affiliates, nor any organization with
respect to which any such entity is a successor or parent
corporation, within the meaning of Section 4069(b) of ERISA, has
engaged in any transaction described in Sections 4069 or 4212(c)
of ERISA.
(i) Each Pension Plan that is not qualified under Code Section 401(a)
or 403(a) is exempt from Parts 2, 3 and 4 of Title I of ERISA as
an unfunded plan that is maintained primarily for the purpose of
providing deferred compensation for a select group of management
or highly compensated employees, pursuant to ERISA Sections
201(2), 301(a)(3) and 401(a)(1).
(j) No assets of any of the Asset Sale Companies are allocated to or
held in a "rabbi trust" or similar funding vehicle.
(k) Neither the PCC Parent, PCC, the Asset Sale Companies nor any of
their respective ERISA Affiliates has received any notification
that any Multiemployer Plan is in reorganization (within the
meaning of Section 4121 of ERISA), is insolvent (within the
meaning of Section 4245 of ERISA) or has been terminated (within
the meaning of Title IV of ERISA), and to the Knowledge of PCC,
no Multiemployer Plan is reasonably expected to be in
reorganization, insolvent or terminated.
(l) No Welfare Plan is a "multiple employer welfare arrangement" as
defined in Section 3(40) of ERISA.
47
3.12. Employment Matters.
None of the Asset Sale Companies is a party to, bound by, or negotiating
with respect to any agreement with any labor union, association or other
employee group, nor is any unit of Employees of the Asset Sale Companies
represented by any labor union or similar association. No labor union or
employee organization has been certified or recognized as the collective
bargaining representative of any Employees of the Asset Sale Companies. To the
Knowledge of PCC, there are no active union organizational campaigns or
representation proceedings underway or threatened with respect to any Employees
of the Asset Sale Companies, nor are there any existing or threatened labor
strikes, work stoppages, slowdowns, grievances, unfair labor practice charges,
discrimination charges or labor arbitration proceedings affecting Mining
Activities at or deliveries to any mine or other facility of any of the Asset
Sale Companies. Each of the Asset Sale Companies has been and is in compliance
with all applicable Laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, except where the failure to be
in compliance would not reasonably be expected to impose any material Liability
on the Asset Sale Companies.
3.13. No Broker.
None of the Asset Sale Companies, PCC or the PCC Parent has had any
dealings, negotiations or communications with or retained any broker or other
intermediary in connection with the transactions contemplated by this Agreement
and none of the foregoing is committed to any Liability for any brokers' or
finders' fees or any similar fees in connection with the transactions
contemplated hereby, other than Rothschild Inc., who shall be compensated solely
by PCC or an Affiliate of PCC.
48
3.14. Health and Safety Requirements.
As it relates to the Purchased Assets, each of the Asset Sale Companies has
complied with all applicable Health and Safety Requirements and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
is currently outstanding against any of them alleging any failure to so comply,
except for those that would not reasonably be expected to have a Material
Adverse Effect.
3.15. Restrictions on Business Activities.
Except for this Agreement, there is no agreement, judgment, injunction,
order or decree binding upon PCC or any of the Asset Sale Companies that has or
would reasonably be expected to have the effect of prohibiting the conduct of
the Business.
3.16. Powers of Attorney.
There are no outstanding powers of attorney executed on behalf of any of
the Asset Sale Companies affecting the Purchased Assets.
3.17. Transactions With Affiliates.
The Contracts do not include any Liability between any Asset Sale Company
and any Affiliate of such Asset Sale Company. At the Closing, the Purchased
Assets will not include any receivable or other Liability from an Affiliate of
any Asset Sale Company.
3.18. Absence of Certain Payments.
During the five (5) year period prior to the date of this Agreement, to the
Knowledge of PCC, none of the Asset Sale Companies have (nor has any director,
officer, agent, or employee of any Asset Sale Company nor any other person,
acting on behalf of any Asset Sale Company) directly or indirectly: used any of
such company's funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; made any unlawful payment to
49
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from such company's funds; violated any provision
of the Foreign Corrupt Practices Act of 1977 applicable to such company;
established or maintained any unlawful or unrecorded fund of such company's
monies or other assets; made any false or fictitious entry on the books or
records of such company; or made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment, to any person or entity, private or public,
regardless of form, whether in money, property, or services, to obtain favorable
treatment in securing business or to obtain special concessions for such
company, or to pay for favorable treatment for business secured or for special
concessions already obtained for such company.
3.19. Disclosure.
The representations and warranties contained in this Article III do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements and information contained in this
Article III not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to PCC that:
4.1. Organization.
Buyer is a duly formed limited liability company, validly existing and in
good standing under the Laws of the State of Delaware.
4.2. Execution, Delivery and Performance.
The execution, delivery and performance of this Agreement and each other
agreement or instrument executed in connection herewith or delivered pursuant
hereto and the consummation of the transactions contemplated herein and therein
will not, with or without the giving of notice or the passage of time, or both,
(i) conflict with, or result in a violation or breach of, or a default, right to
50
accelerate or loss of rights under, or result in the creation of any Lien, under
or pursuant to, any provision of Buyer's organizational documents or of any
franchise, mortgage, deed of trust, lease, license, instrument, agreement,
consent, approval, waiver or understanding, any Law, or any finding, order,
judgment, writ, injunction or decree to which Buyer is a party or by which Buyer
or its respective assets may be bound or affected; or (ii) require the approval,
consent or authorization of, or prior notice to, filing with or registration
with, any Governmental Authority, or any other Person or entity; provided that
this Section 4.2 shall not apply to any requirement of Buyer to obtain any
consent of the applicable Governmental Authority to transfer or modify the
Permits.
4.3. Authorization.
Buyer has full power and authority to enter into and deliver this
Agreement, and each other agreement or instrument (to which it is a party)
executed in connection herewith or delivered pursuant hereto and to perform its
obligations hereunder and thereunder. Buyer's execution, delivery and
performance of this Agreement and all other agreements and instruments executed
in connection herewith or delivered pursuant hereto and the transactions
contemplated hereby have been duly authorized by all requisite action. This
Agreement and all other agreements or instruments executed by Buyer in
connection herewith or delivered by Buyer pursuant hereto have been duly
executed and delivered by Buyer and this Agreement and all other agreements and
instruments executed by Buyer in connection herewith or delivered by Buyer
pursuant hereto constitute Buyer's legal, valid and binding obligation,
enforceable in accordance with their respective terms (subject to any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Laws
affecting generally the enforcement of creditors' rights).
51
4.4. No Broker.
Buyer has had no dealings, negotiations or communications with any broker
or other intermediary in connection with the transactions contemplated by this
Agreement nor is it committed to any Liability for any brokers' or finders' fees
or any similar fees in connection with the transactions contemplated hereby.
4.5. Reclamation and Environmental Compliance.
Buyer and all operators it owns or controls are in compliance with all
Environmental Laws and Reclamation Laws in all material respects, and are not
"permit blocked" under the Applicant Violator System administered by the
Department of the Interior.
4.6. Financing.
Buyer will have available to it, at the Closing, financial resources
sufficient to consummate the transactions contemplated by this Agreement.
4.7. Disclosure.
The representations and warranties contained in this Article IV do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements and information contained in this
Article IV not misleading.
ARTICLE V
CERTAIN COVENANTS
5.1. Operation in Ordinary Course.
Except as provided in this Agreement, between the date of this Agreement
and the Closing, PCC shall cause each of the Asset Sale Companies, in relation
to the Purchased Assets, to: (i) carry on its business in the Ordinary Course of
Business; (ii) use commercially reasonable efforts to preserve intact its
current business organization, Mining Activities and properties until the
Closing Date, and maintain the relations and good will with its suppliers,
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customers, landlords, creditors, agents, and others having business
relationships with such Asset Sale Company; (iii) not enter into any contract or
other obligation binding upon such Asset Sale Company involving its Employees,
any union, or an expenditure, purchase, sale, cost or commitment (unless such
contract is cancelable in thirty or fewer days, involves less than $100,000, or
is for consumable purchases) without the prior written consent of Buyer; and
(iv) report regularly to Buyer concerning the status of the business, Mining
Activities and finances of such Asset Sale Company.
5.2. Compliance with Law.
Between the date of this Agreement and the Closing, each of the Asset Sale
Companies shall comply in all material respects with all Laws and with all
orders of any Governmental Authority.
5.3. Cooperation.
Subject to the terms and conditions herein provided, each of PCC and Buyer
agrees to use its commercially reasonable efforts to take, or cause to be taken,
all action, and to do, or cause to be done, all things necessary, proper and
advisable under Law, to consummate and make effective the transactions
contemplated by this Agreement. In case at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, PCC and Buyer will, and PCC will cause the Asset Sale Companies to,
execute any additional instruments reasonably necessary to consummate the
transactions contemplated hereby. Prior to and following the Closing Date, PCC
shall make available to Buyer, at reasonable times, and in a manner so as not to
interfere with the normal business operations of the Asset Sale Companies, all
documents, maps and other information necessary to transfer all Permits to Buyer
in accordance with Law.
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5.4. Notices and Consents.
PCC and Buyer each will use their commercially reasonable efforts to obtain
consents of all Governmental Authorities and other third parties necessary to
the consummation of the transactions contemplated by this Agreement. PCC shall
have responsibility for providing any notices to third parties that may be
required by the transactions contemplated by this Agreement and for obtaining,
or causing to be obtained, at its sole cost and expense, the consents listed on
Schedule 5.4(a) and Buyer shall have responsibility for obtaining, at its sole
cost and expense, all consents listed on Schedule 5.4(b), which Schedule shall
include all Equipment leases, and all consents necessary to transfer the
Permits, with the other party in each case using its commercially reasonable
efforts to assist the responsible party in obtaining such consents or Permits.
5.5. Publicity.
All general notices, releases, statements and communications to any
Employees, suppliers, distributors and customers of the Asset Sale Companies, to
the general public and to the press relating to the transactions contemplated by
this Agreement shall be made only at such times and in such manner as may be
mutually agreed upon by PCC and Buyer; provided, however, that either party
hereto (or, in the case of PCC, the PCC Parent) shall be entitled to make a
public announcement of the foregoing if: (a) in the opinion of its legal
counsel, such announcement is required to comply with Law or any listing
agreement with any national securities exchange or inter-dealer quotation
system; and (b) such disclosing party gives a reasonable period of notice and
opportunity to comment to the other party hereto of its intention to make such
public announcement; provided, that, failure to comment within 24 hours of
receipt of such notice shall be deemed a waiver of the opportunity to comment;
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and provided, further, that nothing in this Section 5.5 shall operate to
prohibit any Asset Sale Company or Buyer from communicating, after the Closing
Date, with their respective suppliers, distributors, customers and Governmental
Authorities the fact that the transaction has occurred or to employees regarding
their employment or the terms and conditions thereof, the operation of the
Purchased Assets or matters necessarily related thereto.
5.6. Permits; Replacement Bonds; Insurance and Guarantees; Other Filings.
(a) At or prior to the Closing Date, Buyer shall: (i) secure, in
accordance with Law, irrevocable commitments to issue replacement
bonds and replacement sureties and guarantees or other financial
security, if applicable, for all Permits sufficient to cause the
applicable Governmental Authority to transfer the Permits to
Buyer in accordance with Law; and (ii) deliver copies of such
documents to PCC.
(b) At or prior to the Closing Date, Buyer shall deliver copies to
PCC of all filings, each in a form that satisfies all
requirements of the applicable Governmental Authority and that
are necessary to cause the applicable Governmental Authority to
transfer the Permits to Buyer in accordance with Law.
(c) Promptly following the Closing Date through the application of
best efforts, Buyer shall make all filings with the appropriate
Governmental Authorities and shall, upon submitting such
applications to transfer such Permits, post replacement bonds
necessary under Laws to transfer the Permits to Buyer in
accordance with Law.
(d) Following the Closing Date, PCC will cause each of the Permits
that is in its name or in the name of an Asset Sale Company to be
retained in its name or in the name of such Asset Sale Company,
as appropriate, until the applicable Governmental Authority
transfers the Permits to Buyer. Buyer may rely on any related
bonds held or guaranteed by PCC or an Affiliate of PCC; provided
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that Buyer reimburses PCC for bond premiums, security, Office of
Surface Mining fees, amounts required to be paid to correct (and
to pay fines or assessments with respect to) any violation
occurring after the Closing Date and any direct out-of-pocket
costs incurred by PCC or its Affiliates in connection with the
maintenance of such Permits or the related bonds following the
Closing Date. Buyer agrees to use the same efforts to accomplish
the transfer of the Permits as soon as possible after the Closing
that it would use to obtain its own permits to commence immediate
mining operations at any site.
(e) To the extent allowed by and in accordance with applicable Law,
PCC shall cause each of the Asset Sale Companies to grant Buyer
the right to conduct Mining Activities on the properties included
in the Purchased Assets under each of the Permits; provided that
if the appropriate Governmental Authority has not transferred any
Permit by the first anniversary of the Closing Date, Buyer will
deposit in escrow cash or a letter of credit from a bank
reasonably acceptable to PCC in an amount equal to the face
amount of any related outstanding surety bonds until such Permit
has been transferred.
(f) If PCC or one of the Asset Sale Companies receives a notice of
violation under any of the Permits following the Closing Date but
before the transfer of the Permit, PCC will give Buyer prompt
notice thereof. If PCC reasonably determines that Buyer will not
cause such violation to be cured in a timely fashion, PCC shall
have the right to cure, or cause to be cured, such violation
itself and be reimbursed by Buyer for curing such violation.
(g) At or prior to the Closing Date, Buyer shall have: (i) for
purposes other than the Permits, secured replacement bonds,
replacement sureties, guarantees or other financial security, if
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applicable, sufficient to allow PCC and the Persons who will be
its Affiliates after the Closing Date to be relieved or released
as of the Closing Date from all financial commitments,
guarantees, collateral agreements or similar undertakings listed
on Schedule 5.6; (ii) obtained property and liability insurance
customary for a company that is engaged in the Business or a
business similar to the Business to insure the Purchased Assets;
and (iii) delivered copies of such documents to PCC.
(h) On or prior to the Closing, Buyer shall deliver to PCC: (i) a
Certificate of Good Standing for self-insured status or evidence
of insurance coverage with respect to Buyer's Liabilities for
workers' compensation and federal black lung benefits that arise
out of employment by Buyer or any of its Affiliates of Employees
on and after the Closing Date, to the extent and in the amounts
provided in applicable Laws; and (ii) certification from the
Department of Labor of approval of self-insured status in the
event Buyer is to be self-insured for federal black lung claim
liability.
5.7. Exclusivity.
PCC will not (nor will it cause or permit any of the Asset Sale Companies
to) (i) solicit, initiate or encourage the submission of any proposal or offer
from any Person relating directly or indirectly to the acquisition of the
Purchased Assets, or any portion thereof, or (ii) participate in any discussions
or negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner, any effort or attempt by any
Person to do or seek any of the foregoing. PCC will notify Buyer immediately if
any Person makes any proposal, offer, inquiry or contact with respect to any of
the foregoing.
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5.8. Access.
At or prior to the Closing Date, PCC will permit (and will cause each of
the Asset Sale Companies to permit) representatives of Buyer to have full access
at all reasonable times, and in a manner so as not to interfere with the normal
business operations of the Asset Sale Companies, to all premises, properties,
personnel, books, records (including Tax records), contracts and documents of or
pertaining to each of the Asset Sale Companies as related to the Purchased
Assets. Copies of and access to accounting records, ledgers and other pertinent
documents or work papers related to the Purchased Assets will be made available
to Buyer at all reasonable times, and in a manner so as not to interfere with
the normal business operations of the Asset Sale Companies, upon request.
5.9. Notice of Developments.
Each party will give prompt written notice to the other party of any
material adverse development causing a breach of any of its own representations
and warranties in Article III and Article IV above. No disclosure by any party
pursuant to this Section 5.9, however, shall be deemed to amend or supplement
the Schedules to such representations and warranties or to prevent or cure any
misrepresentation, breach of warranty or breach of covenant.
5.10. Financial Statement Cooperation and Audits.
(a) PCC and Buyer shall engage KPMG LLP pursuant to the Engagement
Letter to audit the combined balance sheets, statements of
income, cash flow and stockholders' equity (the "Fiscal Year
Financial Statements") as of and for the fiscal years ended
December 31, 2000 and 2001 for the Asset Sale Companies and
certain of their Affiliates who conduct the coal mining and sale
and export terminal and equipment rebuilding, repairing or
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servicing business of PCC in Virginia, except as listed on
Schedule 5.10(a) (the "Virginia Entities"), including notes and
disclosures required by GAAP. The parties shall cause KPMG LLP to
deliver a draft of the Fiscal Year Financial Statements to both
parties for review. Each of the parties shall have ten (10)
business days to review such draft Fiscal Year Financial
Statements and provide any comments to KPMG LLP. Notwithstanding
any provisions of this Agreement to the contrary and unless
agreed to by both parties, the Closing Date shall be no earlier
than forty-five (45) days from the date on which the final Fiscal
Year Financial Statements shall be delivered by KPMG LLP to both
parties.
(b) PCC agrees that the Fiscal Year Financial Statements (including
the notes thereto) will (i) use accounting policies that are
consistent with PCC Parent's audited financial statements, (ii)
be prepared in conformity with GAAP, applied on a consistent
basis throughout the periods covered thereby and (iii) present
fairly the financial position, condition and results of
operations of the Virginia Entities as of such dates.
(c) At any time between the date of this Agreement and the Closing
Date, Buyer shall have the right, in its reasonable discretion
and upon reasonable advance notice to PCC, to require PCC to
provide Buyer with unaudited internally prepared balance sheets,
statements of income and cash flow for the Virginia Entities
individually or on a combined basis as Buyer may request as of a
more recent month end than December 31, 2001, which will be
prepared in a manner that is consistent with past practices and
with the books and records of the Virginia Entities.
(d) After the Closing Date, PCC will furnish, or cause to be
furnished to Affiliates of Buyer, its accountants and auditors,
upon request of Buyer and as promptly as practicable, such
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information and assistance as is reasonably necessary for
Affiliates of Buyer to cause to be prepared audited combined
balance sheets, statements of income, cash flow and stockholders
equity for the Virginia Entities as of the Closing Date and for
the period beginning on January 1, 2002 and ended on the Closing
Date (the "Audited Closing Date Financial Statements") that are
consistent with the significant accounting policies disclosed in
the footnotes to the Fiscal Year Financial Statements (except as
such consistency may be affected by accounting principles that
have an effective date subsequent to the date of the Fiscal Year
Financial Statements), in conformity with GAAP and with
Regulations S-K and S-X promulgated by the SEC and applied on a
consistent basis throughout the period covered thereby.
(e) With respect to any registration statement or other filings with
the SEC that Buyer shall determine to make in the future, PCC
shall use commercially reasonable best efforts to timely furnish,
or cause to be timely furnished to Affiliates of Buyer, its
accountants and auditors, upon request of Buyer, the following:
(i) consents of PCC's independent public accountants with respect
to the audited Fiscal Year Financial Statements as required by
SEC Regulation S-X, (ii) such information, assistance and
cooperation (including information, assistance and cooperation
from PCC's independent auditors) as is reasonably necessary for
Buyer and Affiliates of Buyer to: (a) address and resolve any SEC
comments related to the Fiscal Year Financial Statements or the
Audited Closing Date Financial Statements (including any required
modification of such financial statements or footnotes thereto)
and (b) prepare any MD&A Disclosure required in connection with a
filing with the SEC and address and resolve any SEC comments
related to such MD&A Disclosure (including any required
modification to such MD&A Disclosure), (iii) such information,
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assistance and cooperation reasonably necessary for Buyer to
prepare any unaudited pro forma balance sheets or income
statements required to be included in any such registration
statement or other SEC filing and (iv) such information,
assistance and cooperation reasonably necessary for Buyer to
accumulate five years of historical unaudited financial
information of the Virginia Entities for inclusion in any such
registration statement or other filing with the SEC.
(f) PCC and its Affiliates shall reasonably cooperate with Buyer, its
accountants and auditors in the conduct of the actions described
in the preceding sentence and shall allow Buyer, its accountants
and auditors to have access at all reasonable times and upon
reasonable advance notice, and in a manner so as not to interfere
with the normal business operations of PCC, to all premises,
properties, books, records, contracts, and documents of or
pertaining to Buyer's audit of the Audited Closing Date Financial
Statements. In addition, PCC will provide access to PCC's and its
Affiliates' employees, including, without limitation, making
employees available to provide additional information and
explanation of any materials reviewed by Buyer, its accountants
and auditors; provided, however, Buyer's use of such employees
shall not unreasonably interfere with such employee's duties to
his or her employer.
5.11. Coal Inventory.
PCC shall use its commercially reasonable efforts to have 110,000 tons of
Coal Inventory as of the Closing Date.
5.12. Further Assurances.
The parties shall cooperate in a commercially reasonable manner with each
other and with their respective representatives in connection with any steps
required to be taken as part of their respective obligations under this
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Agreement, and shall (a) furnish upon request to each other such further
information; (b) execute and deliver to each other such other documents; and (c)
do such other acts and things, all as the other party may reasonably request for
the purpose of carrying out the intent of this Agreement and the transactions
contemplated.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1. Conditions Precedent to Each Party's Obligations.
The respective obligations of each party to consummate the transactions
contemplated by this Agreement are subject to the satisfaction at or prior to
the Closing Date of the following conditions precedent:
(a) no action, suit, proceeding, order, decree or injunction shall
have been commenced, threatened or entered by or before any
Governmental Authority that remains in force and that (i)
prohibits, seeks to prohibit, or imposes or seeks substantial
damages in connection with, the consummation of the transactions
contemplated by this Agreement, (ii) seeks or imposes relief that
causes or would cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, or (iii)
affects adversely the right of Buyer to own the Purchased Assets
or to operate the Business on or after the Closing Date;
(b) PCC Parent, PCC, Buyer and Buyer's Ultimate Parent shall have
executed and delivered to each other party thereto the
Administrative Services Agreement, the Cooperation Agreement, the
Indemnification and Guaranty Agreement, and Paramont Service
Agreement and any other documentation required in all
transactions contemplated or covered by all such agreements, all
in form and substance as set forth in Exhibits A, E, H and F
attached hereto and the same shall be in full force and effect;
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(c) all other transactions pursuant to which Buyer or any of its
Affiliates acquire assets related to the Business shall have been
consummated prior to or simultaneously with the transactions
contemplated by this Agreement;
(d) PCC and Buyer shall have executed and delivered to each other all
such other documents or instruments necessary or appropriate to
effect the transactions contemplated by this Agreement, including
the documents provided in Section 5.6 hereof; and
(e) PCC shall have obtained, or caused to have been obtained, the
consents listed in Schedule 6.1(e)(i) and PCC shall have provided
such payments as may be reasonably required to obtain all such
consents. Buyer shall have obtained, or caused to have been
obtained, the consents listed in Schedule 6.1(e)(ii) and Buyer
shall have provided such payments, guarantees and/or assurances
as may be reasonably required to obtain all such consents.
6.2. Conditions Precedent to Obligations of Buyer.
The obligations of Buyer to consummate the transactions contemplated by
this Agreement are subject to the satisfaction or waiver at or prior to the
Closing Date of the following conditions precedent:
(a) all of the representations and warranties of PCC set forth in
this Agreement or in any Exhibit, Schedule or document delivered
pursuant hereto, without regard to any qualification or
limitation with respect to materiality (whether by reference to
"Material Adverse Effect" or otherwise), shall be true and
correct in all respects as of the date hereof and at and as of
the Closing Date with the same effect as though such
representations and warranties were made at and as of the Closing
unless the aggregate failure of such representations or
63
warranties to be true and correct does not have a Material
Adverse Effect; provided that if a representation or warranty is
expressly made only as of a specific date, it need only be true
and correct in all respects as of such date, and Buyer shall have
received the PCC Closing Certificate required by Section 6.2(g)
below dated as of the Closing Date executed by PCC to such
effect;
(b) all of the covenants and obligations that PCC is required to
perform or to comply with pursuant to this Agreement at or prior
to the Closing Date shall have been duly performed and complied
with in all material respects;
(c) all proceedings and actions, corporate or other, to be taken by
PCC or the Asset Sale Companies in connection with the
transactions contemplated by this Agreement and all documents
incident thereto, including all actions necessary to authorize
the execution, delivery and performance of this Agreement and the
transactions contemplated hereby, shall have been taken and shall
be reasonably satisfactory in form and substance to Buyer and
Buyer's counsel;
(d) PCC shall have, and shall have caused the Asset Sale Companies to
have, executed and delivered the Bills of Sale, the Assignment
and Assumption Agreements and such other documents as may be
necessary to convey to Buyer the Purchased Assets;
(e) between the date of this Agreement and the Closing Date, there
shall not have been a change, event or occurrence that,
individually, or together with any other change, event or
occurrence, has had or could reasonably be expected to have a
Material Adverse Effect;
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(f) Buyer shall have received an opinion of counsel to PCC addressed
to Buyer substantially in the form of Exhibit J;
(g) Buyer shall have received an executed copy of the PCC Closing
Certificate; and
(h) KPMG LLP shall have issued an unqualified audit opinion with
respect to the Fiscal Year Financial Statements pursuant to the
Engagement Letter.
6.3. Conditions Precedent to Obligations of PCC.
The obligation of PCC to consummate and cause the consummation of the
transactions contemplated by this Agreement is subject to the satisfaction or
waiver at or prior to the Closing Date of the following conditions precedent:
(a) all of the representations and warranties of Buyer set forth in
this Agreement or in any Exhibit, Schedule or document delivered
pursuant hereto, without regard to any qualification or
limitation with respect to materiality, shall be true and correct
in all respects as of the date hereof and at and as of the
Closing Date with the same effect as though such representations
and warranties were made at and as of the Closing unless the
aggregate failure of such representations or warranties to be
true and correct does not have a material adverse effect on
Buyer's ability to consummate the transactions contemplated by
this Agreement or fulfill its post-Closing obligations hereunder;
provided that if a representation or warranty is expressly made
only as of a specific date, it need only be true and correct in
all respects as of such date, and PCC shall have received Buyer's
Closing Certificate required by Section 6.3(j) below dated as of
the Closing Date executed by Buyer to such effect;
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(b) all of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior
to the Closing Date shall have been duly performed and complied
with in all material respects;
(c) all proceedings and actions, corporate or other, to be taken by
Buyer in connection with the transactions contemplated by this
Agreement, and all documents incident thereto, including all
actions necessary to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated
hereby, shall have been taken and shall be reasonably
satisfactory in form and substance to PCC and its counsel;
(d) PCC shall have received, on behalf of the Asset Sale Companies,
the Purchase Price by wire transfer of cash or other immediately
available funds and the execution and delivery by Buyer of the
Promissory Note;
(e) Buyer shall have executed and delivered the Security Agreement;
(f) Buyer shall have executed and delivered the Assignment and
Assumption Agreements and such other documents as may be
necessary for Buyer to assume all of the Assumed Liabilities;
(g) Buyer shall have delivered to PCC satisfactory evidence of
compliance with Sections 5.6(a), 5.6(g) and 5.6(h);
(h) between the date of this Agreement and the Closing Date, there
shall not have been a change, event or occurrence that,
individually, or together with any other change, event or
occurrence, has had or could reasonably be expected to have a
Material Adverse Effect;
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(i) PCC shall have received an opinion of counsel to Buyer addressed
to PCC substantially in the form of Exhibit K; and
(j) PCC shall have received an executed copy of Buyer's Closing
Certificate.
ARTICLE VII
CERTAIN TAX MATTERS
7.1. Property Taxes.
Property Taxes of the Asset Sale Companies with respect to the Purchased
Assets (including, without limitation, property Taxes payable as a tenant or
lessee under any lease) will be pro-rated as of the Closing Date and,
notwithstanding any other provision of this Agreement, the economic burden of
any such property Tax will be borne by (i) the Asset Sale Companies for all
Pre-Closing Periods and the portion of any Straddle Period through the Closing
Date and (ii) by Buyer for all Post-Closing Periods and the portion of any
Straddle Period after the Closing Date. Accordingly, notwithstanding any other
provision of this Agreement, (i) if any Asset Sale Company pays such a property
Tax with respect to a Post-Closing Period or the portion of Straddle Period
after the Closing Date, Buyer will reimburse PCC on behalf of such Asset Sale
Company within 15 days after receiving from PCC written demand for the amount of
such property Tax, and (ii) if Buyer pays such a property Tax with respect to a
Pre-Closing Period or the portion of a Straddle Period through the Closing Date,
PCC on behalf of the Asset Sale Companies will reimburse Buyer within 15 days
after receiving from Buyer written demand for the amount of such property Tax.
For purposes of pro-rating property Taxes, the amount of any property Tax
attributable to the portion of a Straddle Period through the Closing Date shall
be deemed to be the amount of such property Taxes for the entire Straddle Period
multiplied by a fraction, the numerator of which is the number of days in the
Straddle Period through the Closing Date and the denominator of which is the
number of days in the entire Straddle Period. In determining the Straddle Period
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for property Taxes, the Tax period as reflected on the statement of Taxes due,
property Tax bill, property "tax ticket," or any other request for payment from
a Governmental Authority will determine the taxable period (e.g., a Virginia
property Tax bill that indicates the tax year as 2002 is for a Tax for the
taxable period January 1, 2002 through December 31, 2002).
7.2. Sales and Use Taxes.
Buyer and PCC or the Asset Sale Companies hereby intend that the
transaction be an occasional sale within the meaning of Virginia Code Section
58.1-602 and regulations thereunder, and therefore exempt from Virginia sales
and use Tax pursuant to Virginia Code Section 58.1-609. PCC will be responsible
for sales and use Taxes payable as a result of the failure of this transaction
to qualify as an occasional sale or as an exempt transaction under any other
Virginia law; provided, however, that any use Tax payable as a result of this
transaction that would be payable regardless of whether the transaction
qualifies as an occasional sale or not shall be paid by Buyer.
7.3. Transfer Taxes.
All transfer, recording and similar Taxes arising in connection with the
transactions contemplated hereunder shall be borne equally by PCC and Buyer. PCC
and Buyer shall (and they shall cause their respective Affiliates to) cooperate
to comply with all Tax Return requirements for such Taxes and provide such
documentation and take such other actions as may be necessary to minimize the
amount of any such Taxes.
7.4. Access for Tax Returns.
Following the Closing Date, Buyer shall, at reasonable times, and in a
manner so as not to interfere with normal business operations, allow PCC (and if
requested by PCC, representatives of federal, state or local agencies) access to
the Purchased Assets for purposes of reviewing information pertinent to any Tax
Return filed by PCC Parent or any of its Affiliates, including the Asset Sale
Companies.
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ARTICLE VIII
COVENANTS REGARDING EMPLOYEES
8.1. Employees.
(a) Subject to the requirements of applicable Laws, but no later than
immediately prior to the Closing, PCC will cause those Asset Sale
Companies set forth on Schedule 8.1 to terminate the employment
of their Employees with respect to the Purchased Assets.
(b) From time to time after the Closing Date, PCC and Buyer may
require information with respect to current or former Employees.
Without intending to limit the obligations of the parties in the
exchange of information with respect to any other matter or in
accordance with the Cooperation Agreement, PCC and Buyer agree to
furnish such information to the other, if available, promptly
after receipt of a written request therefor.
ARTICLE IX
TERMINATION
9.1. Termination.
This Agreement may be terminated prior to the Closing Date only as follows:
(a) by mutual written consent of PCC and Buyer;
(b) by either PCC or Buyer, if the Closing Date shall not have
occurred prior to the close of business on December 31, 2002 or
such later date as the parties may agree in writing (provided,
that the right to terminate this Agreement under this Section
9.1(b) shall not be
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available to any party whose failure to fulfill any obligation
under this Agreement has been the cause, in whole or in part, of,
or has resulted in, the failure of the conditions in Article VI
to be satisfied and the Closing Date to occur on or before such
date);
(c) by PCC or Buyer if an action, suit, or proceeding, shall have
been commenced or threatened by or before any Governmental
Authority, or any order, decree or injunction shall have been
entered therein, that (i) prohibits, seeks to prohibit, or
imposes or seeks substantial damages in connection with, the
consummation of the transactions contemplated by this Agreement,
(ii) seeks or imposes relief that causes or would cause any of
the transactions contemplated by this Agreement to be rescinded
following consummation, or (iii) affects adversely the right of
Buyer to own the Purchased Assets or to operate the Business;
(d) by Buyer if (i) the representations of PCC contained in this
Agreement are not true and correct in all material respects as if
made at and as of that time, except for failures to be true and
correct that are capable of being and are cured within fifteen
(15) days after written notice from Buyer to PCC of such failure;
or (ii) PCC has failed to comply materially with its respective
obligations under this Agreement, except for failures to comply
that are capable of being and are cured within fifteen (15) days
after written notice from Buyer to PCC of such failure; or
(e) by PCC if (i) the representations of Buyer contained in this
Agreement are not true and correct in all material respects as if
made at and as of that time, except for failures to be true and
correct that are capable of being and are cured within fifteen
(15) days after written notice from PCC to Buyer of such failure;
or (ii) Buyer has failed to comply materially with its
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obligations under this Agreement, except for failures to comply
that are capable of being and are cured within fifteen (15) days
after written notice from the PCC to Buyer of such failure.
9.2. Effect of Termination.
If this Agreement is terminated pursuant to Section 9.1 hereof, all further
obligations of the parties under or pursuant to this Agreement shall terminate
without further Liability of either party to the other except: (a) as set forth
in Section 10.4; and (b) for breaches of representations, warranties, or
covenants or for fraud. PCC and Buyer hereby agree that the provisions of this
Section 9.2 and of Section 10.4 shall survive any termination of this Agreement
pursuant to the provisions of this Article IX.
ARTICLE X
MISCELLANEOUS
10.1. Entire Agreement.
This Agreement, the documents referred to herein and to be delivered
pursuant hereto and any other agreement entered into contemporaneously with this
Agreement among PCC, PCC Parent, Buyer and Buyer's Ultimate Parent or the
Affiliates of any of them constitute the entire agreement between the parties
pertaining to the subject matter hereof, and supersede all prior agreements,
understandings, negotiations and discussions of the parties, whether oral or
written, and there are no warranties, representations or other agreements
between the parties in connection with the subject matter hereof, except as
specifically set forth herein or therein.
10.2. Amendment.
This Agreement may be amended by an instrument in writing and signed on
behalf of all of the parties hereto at any time.
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10.3. Extension; Waiver.
At any time prior to the Closing Date, the parties may (i) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document, certificate or writing delivered pursuant
hereto or (iii) waive compliance with any of the agreements or conditions
contained herein, other than the conditions contained in Section 6.1(a) hereof
as it relates to the entry of an order in any proceeding by or before a
Governmental Authority. Any agreement on the part of any party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
and signed on behalf of such party.
10.4. Expenses.
Whether or not the transactions contemplated by this Agreement are
consummated, each of the parties hereto shall pay the fees and expenses of their
respective counsel, investment bankers, financial advisors, accountants and
other experts and the other expenses incident to the negotiation and preparation
of this Agreement and consummation of the transactions contemplated hereby;
provided that Buyer and PCC shall each pay 50% of the cost of auditing the
Fiscal Year Financial Statements and the Audited Closing Date Financial
Statements and provided further that Buyer shall reimburse PCC or its Affiliates
for all out-of-pocket expenses incurred by PCC or its Affiliates in complying
with their respective obligations under Sections 5.10(e) and 5.10(f) hereof.
10.5. Bulk Sales Waiver.
Buyer hereby waives compliance with all applicable bulk sales Laws.
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10.6. Governing Law.
This Agreement shall be construed and interpreted according to the Laws of
the Commonwealth of Virginia, without regard to the conflicts of Law rules
thereof.
10.7. Assignment.
This Agreement and each party's respective rights hereunder may not be
assigned at any time except as expressly set forth herein without the prior
written consent of the other party, provided that PCC may assign its rights
hereunder to any Affiliate of PCC after the Closing Date without the consent of
Buyer and Buyer may assign its rights hereunder to any Affiliate of Buyer prior
to, at or after the Closing Date without the consent of PCC and, further
provided, that nothing in this Agreement shall prevent a successor in interest
to either party from enforcing the provisions of this Agreement.
10.8. Notices.
All communications, notices and disclosures required or permitted by this
Agreement shall be in writing and shall be deemed to have been given when
delivered personally or by messenger or by overnight delivery service, or within
five days of being mailed by registered or certified United States mail, postage
prepaid, return receipt requested, in all cases addressed to the person for whom
it is intended at his address set forth below or to such other address as a
party shall have designated by notice in writing to the other party in the
manner provided by this Section 10.8:
If to PCC: Pittston Coal Company
448 N.E. Main Street
P.O. Box 5100
Lebanon, Virginia 24266
Attention: President
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With a copy to: Pittston Coal Company
c/o The Pittston Company
1801 Bayberry Court
P.O. Box 18100
Richmond, Virginia 23226-8100
Attention: General Counsel
And a copy to: Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219
Attention: Louanna O. Heuhsen, Esq.
If to Buyer: Paramont Coal Company Virginia, LLC
c/o Alpha Natural Resources, LLC
406 West Main Street
Abingdon, Virginia 24212
Attention: Vice President
With a copy to: First Reserve Corporation
411 West Putnam, Suite 109
Greenwich, Connecticut 06830
Attention: Alex T. Krueger
First Reserve Corporation
1801 California Street, Suite 4110
Denver, Colorado 80202
Attention: Thomas R. Denison
Bartlit Beck Herman Palenchar & Scott
1899 Wynkoop Street, Suite 800
Denver, Colorado 80202
Attention: James L. Palenchar, Esq.
10.9. Counterparts; Headings.
This Agreement may be executed in several counterparts, each of which shall
be deemed an original, but such counterparts shall together constitute but one
and the same Agreement. The Table of Contents and Article and Section headings
in this Agreement are inserted for convenience of reference only and shall not
constitute a part hereof.
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10.10. Interpretation; Construction.
(a) Unless the context requires otherwise, all words used in this
Agreement in the singular number shall extend to and include the
plural, all words in the plural number shall extend to and
include the singular and all words in any gender shall extend to
and include all genders.
(b) This Agreement has been fully negotiated by the parties hereto
and shall not be construed by any Governmental Authority against
either party as the drafting party.
10.11. Severability.
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
10.12. No Reliance.
No third party is entitled to rely on any of the representations,
warranties and agreements contained in this Agreement and PCC and Buyer assume
no Liability to any third party because of any reliance on the representations,
warranties and agreements of PCC and Buyer contained in this Agreement, other
than Section 5.5 and Article VIII hereof, which are intended to be for the
benefit of the Persons expressly covered thereby and may be enforced by such
Persons.
10.13. Retention of and Access to Records.
After the Closing Date, Buyer shall retain for a period consistent with
Buyer's record retention policies and practices those books and records relating
to the Asset Sale Companies delivered to Buyer. Buyer also shall provide to PCC
and its Affiliates reasonable access thereto, during normal business hours and
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on at least three days' prior written notice, to enable them to prepare
financial statements or Tax Returns or deal with Tax audits or litigation. Buyer
shall deliver to PCC at least thirty days written notice prior to the
destruction or other disposal of any such books and records. PCC and its
Affiliates may elect to take delivery of any such books and records that Buyer
intends to destroy or otherwise dispose of and to copy any such books and
records that Buyer intends to keep, all at their own expense.
10.14. Arbitration.
Any dispute, controversy or claim arising out of or relating to this
Agreement (a "Dispute"), excluding any dispute or disagreement among the parties
concerning the determination of the Coal Inventory, which shall be resolved
pursuant to Section 2.12 and the allocation of Purchase Price and Assumed
Liabilities, which shall be resolved pursuant to Section 2.13, shall be decided
by binding arbitration in accordance with the commercial arbitration rules of
the American Arbitration Association. PCC and Buyer shall jointly select one
arbitrator. If the two parties shall fail to select an arbitrator within
fourteen 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. No Dispute shall be consolidated in
any arbitration with any dispute, claim or controversy of any other party. The
arbitration shall be conducted in Roanoke, Virginia, and any court having
jurisdiction thereof may immediately issue judgment on the arbitration award.
The parties agree that the arbitration provided for in this Section 10.14 shall
be the exclusive means to resolve all Disputes.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
PITTSTON COAL COMPANY
By: /s/ Michael D. Brown
---------------------------------------------
Name: Michael D. Brown
Title: Vice President - Development and Technical
Resources
PARAMONT COAL COMPANY VIRGINIA, LLC
By: /s/ Eddie Bateman
---------------------------------------------
Name: Eddie Bateman
Title: Vice President
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SCHEDULE 1.4
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ASSET SALE COMPANIES
Paramont Coal Corporation, a Delaware corporation
Motivation Coal Company, a Virginia corporation
Pittston Coal Management Company, a Virginia corporation
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