Execution Copy
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EXHIBIT 10.30
PURCHASE AND SALE AGREEMENT
BY AND AMONG
PEABODY ENERGY CORPORATION,
EASTERN ASSOCIATED COAL CORP.,
PEABODY NATURAL RESOURCES COMPANY,
AND
PENN VIRGINIA RESOURCE PARTNERS, L.P.
DATED AS OF DECEMBER 19, 2002
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TABLE OF CONTENTS
ARTICLE I
PURCHASE AND SALE OF LIMITED LIABILITY COMPANIES
Section 1.1 Formation of Limited Liability Companies..................................................2
Section 1.2 Contribution of Federal Assets to Acquisition No. 1 LLC...................................3
Section 1.3 Contribution of ▇▇▇ Ranch Assets to Acquisition No. 2 LLC.................................3
Section 1.4 Liabilities Retained......................................................................4
Section 1.5 Leases....................................................................................6
Section 1.6 PNRC Notes................................................................................6
ARTICLE II
CLOSING; PURCHASE PRICE
Section 2.1 Closing...................................................................................6
Section 2.2 Purchase Price............................................................................6
Section 2.3 Refinance of PNRC Notes...................................................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER GROUP
Section 3.1 General...................................................................................7
Section 3.2 Organization and Good Standing............................................................7
Section 3.3 Authorization.............................................................................8
Section 3.4 Non-Contravention.........................................................................9
Section 3.5 Approvals and Consents....................................................................9
Section 3.6 Title.....................................................................................9
Section 3.7 Contracts................................................................................12
Section 3.8 Litigation...............................................................................12
Section 3.9 Compliance with Applicable Laws..........................................................13
Section 3.10 Remedial Work............................................................................13
Section 3.11 Permits..................................................................................13
Section 3.12 Environmental Matters....................................................................13
Section 3.13 Operating Information....................................................................15
Section 3.14 Reserves.................................................................................16
Section 3.15 Reliance of Buyer........................................................................16
Section 3.16 Seller Representations Relating to the Units.............................................16
Section 3.17 Broker Fees..............................................................................17
Section 3.18 Tax Matters..............................................................................17
Section 3.19 PNRC Notes...............................................................................18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.1 General..................................................................................18
Section 4.2 Organization and Good Standing...........................................................18
Section 4.3 Authorization............................................................................19
Section 4.4 Non-Contravention........................................................................19
Section 4.5 Buyer's Capital and Issuance of Units....................................................20
Section 4.6 Public Documents.........................................................................20
Section 4.7 No Undisclosed Liabilities...............................................................21
Section 4.8 Litigation...............................................................................21
Section 4.9 Tax Matters..............................................................................21
Section 4.10 Employees................................................................................22
Section 4.11 Financing................................................................................22
Section 4.12 Brokers Fees.............................................................................22
Section 4.13 Reliance of Seller Group.................................................................22
ARTICLE V
COVENANTS
Section 5.1 Access to Information....................................................................22
Section 5.2 Financial Statements.....................................................................22
Section 5.3 Public Announcements.....................................................................23
Section 5.4 Consents.................................................................................23
Section 5.5 Closing Costs; Expenses..................................................................23
Section 5.6 Taxes....................................................................................23
Section 5.7 Preparation of Proxy.....................................................................27
Section 5.8 Option Agreement; Other Oil and Gas Operations...........................................27
Section 5.9 Further Assurances.......................................................................28
ARTICLE VI
DELIVERABLES AT CLOSING
Section 6.1 Obligations of Buyer at Closing..........................................................28
Section 6.2 Obligations of Seller Group at Closing...................................................29
ARTICLE VII
INDEMNIFICATION
Section 7.1 Survival of Representations and Warranties...............................................31
Section 7.2 Seller Group's Agreement to Indemnify....................................................31
Section 7.3 Buyer's Agreement to Indemnify...........................................................32
Section 7.4 Third Party Indemnification..............................................................33
ARTICLE VIII
AMENDMENT AND WAIVER
ARTICLE IX
CHANGE OF CONTROL; RIGHT OF FIRST OFFER
Section 9.1 Change of Control........................................................................34
Section 9.2 Restriction on Sale of the Assets........................................................36
Section 9.3 Right of First Refusal...................................................................37
ARTICLE X
MISCELLANEOUS
Section 10.1 Assignment...............................................................................38
Section 10.2 Notice...................................................................................38
Section 10.3 Third Parties............................................................................39
Section 10.4 Governing Law............................................................................39
Section 10.5 Limitation on Damages....................................................................39
Section 10.6 Entire Agreement.........................................................................40
Section 10.7 Benefit..................................................................................40
Section 10.8 Headings.................................................................................40
Section 10.9 Construction.............................................................................40
Section 10.10 Severability.............................................................................40
Section 10.11 Drafting.................................................................................41
Section 10.12 Counterparts.............................................................................41
DEFINED TERMS
Acceptance Notice..................................34
Acquisition LLCs....................................2
Acquisition No. 1 LLC...............................2
Acquisition No. 2 LLC...............................2
Affiliate...........................................4
Agreement...........................................1
Assets..............................................3
Assignment of ▇▇▇ Ranch Surface Rights..............3
Audited Financial Statements.......................22
Buyer...............................................1
Buyer Damages......................................31
Buyer Indemnitees..................................31
CAA................................................14
CERCLA.............................................14
Certificate of Formation............................2
Change of Control..................................35
Change of Control Date.............................34
Change of Control Notice...........................34
Change of Control Price............................35
Claim..............................................32
Closing.............................................6
Closing Date........................................1
Closing Date Mining Plan...........................26
Coal Act............................................4
Coal Lease Assignments..............................6
Code...............................................21
Confidentiality Agreement..........................22
Continuing Directors...............................35
Conversion.........................................27
Data................................................4
Delaware Act.......................................20
Delaware LLC Act...................................10
DEP................................................14
EACC................................................1
El Segundo Reserves.................................1
Eligible Investment Banks..........................35
Encumbrances.......................................10
Environmental Laws.................................14
Environmental Permits..............................14
Escrow Agent........................................7
Escrow Amount.......................................7
Exchange Act.......................................20
Existing Buyer Assets..............................23
Fair Market Value..................................36
Federal Assets......................................3
Federal Customer Contracts.........................11
Federal Data........................................3
Federal Mortgage Lien...............................9
Federal No. 2 Mine..................................1
Federal Reserves....................................3
Federal Special Warranty Deed.......................3
Fleet Bank..........................................9
FMV PNRC Units.....................................24
FWPCA..............................................14
GAAP...............................................20
General Partner....................................19
Governmental Authority.............................14
GP LLC Agreement...................................19
GP Sole Member.....................................28
Hazardous Substance................................15
Indemnity Period...................................31
Laws and Regulations...............................13
Leases..............................................6
▇▇▇ Ranch Assets....................................3
▇▇▇ Ranch Customer Contracts.......................12
▇▇▇ Ranch Mine......................................1
▇▇▇ Ranch Mortgage Lien............................10
▇▇▇ Ranch Reserve Substitution Agreement...........29
▇▇▇ Ranch Reserves..................................3
▇▇▇ Ranch Special Warranty Deed.....................3
▇▇▇ Ranch Surface Agreement........................10
Liabilities.........................................4
Lock-up Period.....................................36
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇....................................16
Material Adverse Effect.............................7
Membership Interests................................7
Membership Interests Assignments...................29
MLP Amendment......................................28
MSHA...............................................14
Negotiation Period.................................36
New Mexico Data.....................................4
New Mexico State Coal Leases........................3
No 2 LLC Assets....................................24
Non Taxable Fraction...............................24
Offer Notice.......................................36
Operating Agreement.................................2
Option Agreement...................................27
Option Notice......................................27
OSHA...............................................14
Other Assets........................................2
Other Minerals.....................................28
Pacific............................................27
Parent..............................................1
Parties.............................................1
Partnership Agreement..............................19
Party...............................................1
PCBs...............................................15
Permits............................................13
Permitted Encumbrances.............................11
Person..............................................9
PNRC................................................1
PNRC Contributed Assets............................24
PNRC Debt Share....................................25
PNRC Notes..........................................6
PNRC Partners.......................................6
Pre-Closing Tax Period.............................17
Predecessor.........................................4
Public Documents...................................20
Purchase Date......................................34
Purchase Price......................................7
PVA................................................35
RCRA...............................................14
Registration Rights Agreement......................28
Related Person......................................4
Release............................................15
Reserves............................................3
Retained Liabilities................................5
Retained Liability Group............................4
▇▇▇▇...............................................14
SEC.................................................1
Section 2.3 Borrowing...............................7
Securities Act.....................................16
Seller..............................................1
Seller Agreements...................................8
Seller Damages.....................................32
Seller Group........................................1
Seller Indemnitees.................................32
Seller Parties......................................8
SFR................................................27
SMCRA..............................................14
Special Warranty Deeds..............................3
State Lease Assignments.............................3
State Lease Consents................................9
Subject Interests..................................36
Tax Return.........................................17
Taxable Fraction...................................25
Taxes..............................................17
Then-Existing Assets...............................34
Third Party........................................27
Third Party Offeror................................36
TSCA...............................................14
Unitholders........................................27
Units...............................................7
PURCHASE AND SALE AGREEMENT
THIS
PURCHASE AND SALE AGREEMENT (this "Agreement"), is made and
entered into, and the transactions contemplated hereby are consummated, as of
December 19, 2002 (the "Closing Date"), by and among
PEABODY ENERGY CORPORATION,
a
Delaware corporation ("Parent"), EASTERN ASSOCIATED COAL CORP., a West
Virginia corporation and indirect wholly-owned subsidiary of Parent ("EACC"),
and PEABODY NATURAL RESOURCES COMPANY, a
Delaware general partnership and
indirect wholly-owned subsidiary of Parent ("PNRC") (EACC and PNRC,
collectively, "Seller" and, together with Parent, "Seller Group"), and PENN
VIRGINIA RESOURCE PARTNERS, L.P., a
Delaware limited partnership ("Buyer").
Parent, Seller and Buyer are sometimes referred to together herein as the
"Parties," and individually as a "Party."
BACKGROUND
WHEREAS, EACC and PNRC own and lease certain coal reserves in West
Virginia and New Mexico, respectively, and operate two coal mines, the Federal
No. 2 Mine in West Virginia (the "Federal No. 2 Mine") and the ▇▇▇ Ranch Mine
(the "▇▇▇ Ranch Mine") in New Mexico;
WHEREAS, Seller Group desires to sell and Buyer desires to purchase
certain coal reserves and other assets with respect to the Federal No. 2 Mine
and the ▇▇▇ Ranch Mine;
WHEREAS, PNRC owns and/or leases certain coal reserves in New Mexico
(the "El Segundo Reserves") and leases and/or subleases such reserves to ▇▇▇▇▇
Finance Company, a
Delaware corporation and an indirect wholly-owned subsidiary
of Parent, which reserves may be mined in the future;
WHEREAS, the Parties desire to consummate the purchase and sale of coal
reserves from the Federal No. 2 Mine and the ▇▇▇ Ranch Mine by (a) Seller Group
and its Affiliates (as defined below) conveying, prior to or concurrently
herewith, such coal reserves and certain other data and rights relating to the
coal reserves to two separate limited liability companies, one of which is
wholly owned by EACC and the other of which is wholly owned by PNRC and (b)
Buyer purchasing all of the membership interests in such limited liability
companies from EACC and PNRC;
WHEREAS, Buyer desires to purchase all of the membership interests in
such limited liability companies in consideration of, and EACC and PNRC agree to
accept, a combination of cash, equity interests in Buyer and the assumption of
debt;
WHEREAS, pursuant to the Registration Rights Agreement (as defined
below), Buyer agrees to file and keep effective a registration statement
covering the resale of Common Units (as defined in Buyer's Amended and Restated
Agreement of Limited Partnership) issued under this Agreement or issuable on
conversion of or in exchange of Class B Common Units (as defined in the MLP
Amendment) with the Securities and Exchange Commission (the "SEC");
WHEREAS, pursuant to the Escrow Agreement (as defined below), the
Parties desire to escrow a portion of the equity interests (and the related
transfer instruments) allocable to (a) two leasehold interests for coal reserves
included in the reserves conveyed pursuant to this
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Agreement, which leasehold interests were granted by the State of New Mexico
pursuant to the New Mexico State Coal Leases (as defined herein), until such
time as the Parties receive consents to the assignments of such leasehold
interests from the State of New Mexico and (b) the Adverse Pittsburgh Interests
(as defined in the Lease (as defined herein) related to the Federal Reserves)
until such time or times as such Adverse Interests are transferred to Buyer or
one of its Affiliates;
WHEREAS, pursuant to the MLP Amendment (as defined below), Buyer
desires to solicit the approval of the holders of Buyer's Common Units to
convert the Class B Common Units issued by Buyer to Seller into Common Units;
WHEREAS, prior to or concurrently herewith, pursuant to the Leases (as
defined below), the limited liability companies have leased and subleased, as
applicable, the coal reserves owned by such limited liability companies to
certain of Seller's Affiliates;
WHEREAS, pursuant to the Reserve Substitution Agreement (as defined
below), all or a part of certain coal reserves subject to the Leases, subject to
certain conditions specified therein, may be substituted for other coal reserves
specified therein of substantially equivalent amount and quality; and
WHEREAS, the Parties anticipate that Parent may desire to sell and
Buyer may desire to purchase additional coal reserves and certain other assets
(the "Other Assets") in the future, pursuant to separate agreements that would
be entered into, in consideration of an increase of Parent's special membership
interest in the General Partner as provided in the GP LLC Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
covenants and promises contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Parent, Seller and Buyer hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF LIMITED LIABILITY COMPANIES
Section 1.1 Formation of Limited Liability Companies
Seller has, or has caused to be, duly and validly organized, or
concurrently herewith shall duly and validly organize, or cause to be duly and
validly organized, Suncrest Resources LLC ("Acquisition No. 1 LLC") and
Fieldcrest Resources LLC ("Acquisition No. 2 LLC") (Acquisition No. 1 LLC and
Acquisition No. 2 LLC shall sometimes be referred to together herein as the
"Acquisition LLCs") as limited liability companies under the laws of the State
of
Delaware by the filing of certificates of formation (each, a "Certificate of
Formation") with the Secretary of State of the State of
Delaware and adopting
limited liability company agreements (each, an "Operating Agreement") for
Acquisition No. 1 LLC and Acquisition No. 2 LLC, which Certificates of Formation
and Operating Agreements shall be delivered to Buyer at the Closing pursuant to
Section 6.2(k).
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Section 1.2 Contribution of Federal Assets to Acquisition No. 1 LLC
Seller Group has contributed, or concurrently herewith shall (or has
caused or concurrently herewith shall cause their Affiliates to) contribute, all
of their right, title and interest in, to and under the following assets
(collectively, the "Federal Assets") to Acquisition No. 1 LLC:
(a) the coal mineral estate, including subsidence rights, in West
Virginia (the "Federal Reserves") as more specifically described on Schedule
1.2(a), such contribution to have been effectuated by special warranty deed,
substantially in the form set forth as ERROR! REFERENCE SOURCE NOT FOUND. (the
"Federal Special Warranty Deed"), which Federal Special Warranty Deed will be
delivered to Buyer at the Closing pursuant to Section 6.2(k); and
(b) all engineering, geological, coal measurement, feasibility and coal
data and analyses, charts, surveys, maps, plans, drawings, computer files
regarding real property records, drilling logs, reserve reports, books, records,
data, title and other reports, tax tickets, tax appraisals, documents, papers
and instruments of all kinds relating to the Federal Reserves (collectively, the
"Federal Data"); provided, however, that Seller may retain copies of the Federal
Data for purposes of mining coal from the Federal Reserves under the Leases and
provided further that the Federal Data does not and shall not include
information relating to the costs of mining, processing or loading.
The Parties agree that the Federal Assets do not represent the
"operations" of the Federal No. 2 Mine and other than the Federal Data and other
rights set forth in this Section 1.2, only reserves are being contributed to
Acquisition No. 1 LLC.
Section 1.3 Contribution of ▇▇▇ Ranch Assets to Acquisition No. 2 LLC
Seller Group has contributed, or concurrently herewith shall (or has
caused or concurrently herewith shall cause their Affiliates to) contribute, all
of their right, title and interest in, to and under the following assets
(collectively, the "▇▇▇ Ranch Assets," and, together with the Federal Assets,
the "Assets") to Acquisition No. 2 LLC:
(a) the coal mineral estate, including rights to use the surface
pursuant to a partial assignment substantially in the form set forth on ERROR!
REFERENCE SOURCE NOT FOUND. ("Assignment of ▇▇▇ Ranch Surface Rights"), of the
▇▇▇ Ranch Surface Agreement (as defined below) in New Mexico (the "▇▇▇ Ranch
Reserves," and, together with the Federal Reserves, the "Reserves") as more
specifically described on Schedule 1.3(a), such contribution to have been
effectuated by special warranty deed substantially in the form set forth as
ERROR! REFERENCE SOURCE NOT FOUND. (the "▇▇▇ Ranch Special Warranty Deed" and
together with the Federal Special Warranty Deed, the "Special Warranty Deeds"),
and with respect to the reserves subject to the two leases with the State of New
Mexico (the "New Mexico State Coal Leases") assignments substantially in the
form set forth as ERROR! REFERENCE SOURCE NOT FOUND. (the "State Lease
Assignments"), which ▇▇▇ Ranch Special Warranty Deed and State Lease Assignments
will be delivered to Buyer at the Closing pursuant to Section 6.2(k); and
(b) all engineering, geological, coal measurement, feasibility and coal
data and analyses, charts, surveys, maps, plans, drawings, computer files
regarding real property records,
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drilling logs, reserve reports, books, records, data, title and other reports,
tax tickets, tax appraisals, documents, papers and instruments of all kinds
relating to the ▇▇▇ Ranch Reserves (collectively, the "New Mexico Data," and
together with the Federal Data, the "Data"); provided, however, that Seller may
retain copies of the New Mexico Data for purposes of mining coal from the ▇▇▇
Ranch Reserves under the Leases and provided further that the New Mexico Data
does not and shall not include information relating to the costs of mining,
processing, or loading.
The Parties agree that the ▇▇▇ Ranch Assets do not represent the
"operations" of the ▇▇▇ Ranch Mine and other than the New Mexico Data and other
rights set forth in this Section 1.3, only reserves are being contributed to
Acquisition No. 2 LLC.
The Parties agree that if there are any discrepancies between the maps
provided in Schedule 1.3(a) and the legal descriptions of the ▇▇▇ Ranch Reserves
also contained in Schedule 1.3(a), the legal descriptions shall control.
Section 1.4 Liabilities Retained
Seller Group and its Affiliates have not and shall not contribute or
otherwise transfer, whether voluntarily, by operation of law or otherwise, any
Retained Liabilities to the Acquisition LLCs or Buyer. Seller Group and its
Affiliates (other than the Acquisition LLCs) (the "Retained Liability Group")
shall be responsible for all Retained Liabilities of Seller Group, any Affiliate
of Seller Group and any Predecessor, successor in interest, Related Person,
lessee, sublessee or contractor.
For purposes of this Agreement, the following terms shall have the
following meanings:
(a) The term "Affiliate" shall mean any shareholder, director or
officer of a party or any other person or entity that controls, is controlled by
or is or was under common control with such party, it being understood and
agreed that Seller Group and any of their Affiliates on the one hand and Buyer
and any of its Affiliates on the other shall not be deemed to be Affiliates of
one another for the purposes of this Agreement
(b) The term "Liabilities" shall mean all debts, liabilities,
obligations or other responsibilities of any kind whatsoever (whether known or
unknown, accrued or unaccrued, asserted or unasserted, absolute or contingent,
liquidated or unliquidated or otherwise) and those arising under any contract,
commitment or undertaking or arising under strict liability or by law.
(c) The term "Predecessor" shall mean any predecessor-in-interest to
any member of Seller Group, including any person or entity that owned or
controlled the Assets prior to any member of Seller Group taking title or a
leasehold interest with respect thereto.
(d) The term "Related Person" shall have the same meaning as ascribed
to it in the Coal Act.
(e) The term "Coal Act" shall mean the Coal Industry Retiree Health
Benefit Act of 1992, as shall be amended from time to time, and/or any
substitute, replacement, or supplement thereto.
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(f) The term "Retained Liabilities" shall mean any and all Liabilities
arising out of or in connection with the Assets prior to the Closing, or arising
out of or in connection with the conduct of the Seller Group's business related
to the Assets prior to and/or after the Closing, except for any Liabilities
expressly assumed by Buyer herein, including those arising out of or in
connection with the PNRC Notes (as defined herein). Without in any way limiting
the generality of the foregoing, Retained Liabilities shall also include:
(i) Liabilities arising prior to and/or after the Closing in
connection with the use of the Assets and related to any member of the
Retained Liability Group's past, present, or future employees,
retirees, retirees' spouses or dependents arising or resulting from any
past, current, or future contract, promise, agreement of any member of
the Retained Liability Group relating to any labor union and
Liabilities in connection with the use of the Assets and arising out of
any Laws and Regulations relating to any labor union and/or affecting
or relating to employment of persons by any member of the Retained
Liability Group;
(ii) Liabilities arising prior to and/or after the Closing in
connection with the use of the Assets and resulting from all past,
present, and future labor or employment related obligations (A)
resulting from the status of any entity within the Retained Liability
Group as a signatory to any contract or any coal-wage agreement with
any labor union or organization, (B) resulting from the contribution of
the Federal Assets or the ▇▇▇ Ranch Assets to the Acquisition LLCs, or
(C) resulting from any breach of a labor agreement or labor
understanding between any labor union and any member of the Retained
Liability Group;
(iii) Liabilities arising prior to and/or after the Closing in
connection with the use of the Assets and resulting from the
Acquisition LLCs and/or Buyer and its Affiliates being treated as the
assigned operator, or the successor in interest to, the successor to or
the Related Person to the Retained Liability Group with respect to any
Coal Act beneficiaries, including any Liabilities that might in the
future be assigned to Buyer or its Affiliates for Coal Act
beneficiaries because of ownership of the Acquisition LLCs or resulting
from a relationship between the Retained Liability Group and the Buyer
created by entering into this Agreement, other than Liabilities, if
any, that may in the future be imposed on lessors of any signatory coal
company lessees in such capacity by any future amendment to the Coal
Act;
(iv) Liabilities that have been or may be assigned to the
Acquisition LLCs or its assignees, successors, successor in interest,
subsidiaries and any Related Person to the Acquisition LLCs because of
their ownership of the Assets and that arise from the Seller Group's
prior ownership of the Assets or the conduct of the Seller Group's
business prior to and/or after the date hereof;
(v) Liabilities arising under the Coal Act because a third
party operated any mine or other facility on behalf of the Seller Group
or its Affiliates; and
(vi) Liabilities for any sum of money as the guarantor of all
or part of the premiums, obligations and liabilities under the Coal Act
of Seller Group, its Affiliates, or
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its assignees, successors, Successors in Interest, subsidiaries and any
Related Person to the Seller Group or its Affiliates.
(vii) Liabilities resulting from or associated with chloride
concentrations in excess of concentrations permitted by applicable
Environmental Laws and Environmental Permits at the Federal No. 2 Mine.
Notwithstanding any provision of subsection (f) above, the term
Retained Liabilities shall not include any (i) Liabilities arising after the
Closing Date out of the Permitted Encumbrances (as defined herein), or (ii)
Liabilities of Buyer to the applicable lessee pursuant to the terms of the
Leases.
Section 1.5 Leases
Seller Group has caused, or concurrently herewith shall cause, the
lessees and the Acquisition LLCs to enter into all leases, subleases and
assignments necessary to lease or sublease, as applicable, the Reserves to
Affiliates of Seller in the forms attached hereto as Exhibit B-1, and Exhibit
B-2, (together, the "Leases"), and Exhibit B-3 and Exhibit B-4 (together, the
"Coal Lease Assignments"), which Leases and Coal Lease Assignments shall be
delivered to Buyer at the Closing pursuant to Section 6.2(k).
Section 1.6 PNRC Notes
PNRC has distributed, or will concurrently distribute, to its partners
(the "PNRC Partners") two recourse promissory notes (the "PNRC Notes") in the
aggregate principal amount of $32,500,000 in the forms attached hereto as
Exhibit C-1 and Exhibit C-2.
ARTICLE II
CLOSING; PURCHASE PRICE
Section 2.1 Closing
The closing (the "Closing") of the transactions contemplated by this
Agreement shall take place on the date hereof at 10:00 A.M., local time, at the
offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇.
Section 2.2 Purchase Price
Subject to the provisions of this Agreement, and in reliance on Seller
Group's and Buyer's representations, warranties and agreements contained herein,
at the Closing:
(a) EACC will convey, assign and transfer to Buyer all issued and
outstanding membership interests in Acquisition No. 1 LLC and in consideration
thereof Buyer will pay to EACC $40,000,000 ("Cash Portion"), and
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(b) PNRC will convey, assign and transfer to Buyer all issued and
outstanding membership interests in Acquisition No. 2 LLC and in consideration
thereof Buyer (i) will issue to PNRC 1,522,325 Common Units and 1,240,833 Class
B Common Units (collectively, the "Units") and (ii) will assume the PNRC Notes
in the aggregate principal amount of $32,500,000, it being understood and agreed
that an aggregate of two hundred ninety-three thousand seven hundred (293,700)
of the Class B Common Units (the "Escrow Amount") shall be delivered by Buyer to
U.S. Bank National Association (the "Escrow Agent") pursuant to the Escrow
Agreement in substantially the form attached hereto as Exhibit D. The Cash
Portion, Units and the assumption of the PNRC Notes shall be referred to
together herein as the "Purchase Price." All issued and outstanding membership
interests in the Acquisition LLCs shall hereinafter be referred to as the
"Membership Interests."
Section 2.3 Refinance of PNRC Notes
Immediately after the other steps that are to occur at the Closing but
as part of the Closing, Buyer shall acquire $32,500,000 as the proceeds of a
borrowing (the "Section 2.3 Borrowing") and shall apply such $32,500,000 to pay
and discharge the PNRC Notes.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER GROUP
Each member of Seller Group hereby represents and warrants, jointly and
severally, to Buyer as follows:
Section 3.1 General
Except to the extent expressly set forth in this Article III, Seller
Group does not make any representations or warranties, express or implied.
Inclusion of a matter on a schedule attached hereto with respect to a specific
representation or warranty that addresses matters having a Material Adverse
Effect shall not be deemed an indication that such matter does, or may, have a
Material Adverse Effect. Matters may be disclosed on a schedule for purposes of
information only. As used herein, "Material Adverse Effect" means a material
adverse effect on (i) the ownership, lease, operation, use or value of either
the Federal Assets, taken as a whole, or the ▇▇▇ Ranch Assets, taken as a whole,
or (ii) the ability of any of the Seller Parties to consummate the transactions
contemplated herein or in the Seller Agreements or any actions to be taken by
the Seller Parties in connection with this Agreement or the Seller Agreements;
provided, however, that "Material Adverse Effect" shall not include material
adverse effects resulting from general changes in coal prices, general changes
in industry, economic or political conditions, and civil unrest, insurrection,
outbreaks of hostilities, acts of terrorism or similar events, or changes to
Laws and Regulations.
Section 3.2 Organization and Good Standing
(a) Parent is a corporation duly organized, validly existing, and in
good standing under the laws of the State of
Delaware with the corporate power
and authority to own its property, to conduct its business as currently
conducted and to consummate the transactions contemplated by or in connection
with this Agreement. Parent is qualified or registered as a
7
foreign entity in each jurisdiction where it is required to be so qualified or
registered with respect to the ownership and operation of the Assets.
(b) All of the equity interests of EACC are indirectly owned by Parent,
and EACC is a corporation duly organized, validly existing and in good standing
under the laws of the State of West Virginia with the power and authority to own
its property, to conduct its business as conducted immediately prior to the
Closing and to own and sell the Acquisition No. 1 LLC Membership Interests to
Buyer in accordance with this Agreement and consummate the transactions
contemplated by or in connection with this Agreement. All of the equity
interests of PNRC are indirectly owned by Parent and PNRC is a general
partnership duly organized, validly existing and in good standing under the laws
of the State of
Delaware with the power and authority to own its properties, to
conduct its business as conducted immediately prior to the Closing and to own
and sell the Acquisition No. 2 LLC Membership Interests to Buyer in accordance
with the Agreement and consummate the transactions contemplated by or in
connection with this Agreement. Each of EACC and PNRC is duly qualified or
registered as a foreign entity in each jurisdiction where it is required to be
so qualified or registered with respect to the ownership of the Membership
Interests, except where failure to so quality or register would not,
individually or in the aggregate, have a Material Adverse Effect.
(c) Each of the Acquisition LLCs is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware with the limited liability company power and authority to own the
Assets. Acquisition No. 1 LLC is duly qualified or registered as a foreign
entity in the State of West Virginia and Acquisition No. 2 LLC is duly qualified
or registered as a foreign entity in the State of New Mexico.
Section 3.3 Authorization
(a) All corporate, partnership, or limited liability company action, as
the case may be, of each member of Seller Group necessary to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated by or in connection with this Agreement has been
taken, and this Agreement constitutes a valid and binding obligation of each
member of Seller Group, enforceable against each member of Seller Group in
accordance with its terms, except as enforcement may be (i) limited by any
applicable bankruptcy, insolvency, fraudulent transfer, moratorium,
reorganization, liquidation or similar Laws and Regulations affecting the
enforcement of creditors' rights generally, (ii) limited by any applicable Law
and Regulation that limits indemnification and (iii) subject to general
equitable principles (regardless of whether that enforceability is considered in
a proceeding at law or in equity).
(b) The Membership Interest Assignments (as defined in Section 6.2(a)),
the Special Warranty Deeds, the Leases, the Coal Lease Assignments, the Parent
Guarantees (as defined in Section 6.2(l)), the Reserve Substitution Agreement
(as defined in Section 6.1(g) herein), the Registration Rights Agreement, the GP
LLC Agreement, the Escrow Agreement, the State Lease Assignments, and all other
agreements, documents and instruments executed and delivered by Seller Group or
their Affiliates pursuant to this Agreement (the "Seller Agreements") constitute
valid and binding obligations of each member of Seller Group or their Affiliates
(Seller Group and such Affiliates shall be referred to collectively herein as
the "Seller Parties"), as the case
8
may be, enforceable against the applicable member of the Seller Party, in
accordance with their respective terms, except as enforcement may be (i) limited
by any applicable bankruptcy, insolvency, fraudulent transfer, moratorium,
reorganization, liquidation, or similar Laws and Regulations affecting the
enforcement of creditors' rights generally, (ii) limited by any applicable Law
and Regulation that limits indemnification and (iii) subject to general
equitable principles (regardless of whether that enforceability is considered in
a proceeding at law or in equity).
Section 3.4 Non-Contravention
The execution and delivery of this Agreement and the Seller Agreements
by any of the Seller Parties and the consummation by any of the Seller Parties
of the transactions contemplated herein and therein do not and will not (a)
violate or conflict with the terms of the organizational documents or limited
liability company or partnership agreements of any of the Seller Parties, (b)
subject to obtaining the State Lease Consents (as defined below) solely with
respect to the New Mexico State Coal Leases, violate or conflict with or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which any of the Seller
Parties is a party or by which any of them or any of their respective properties
may be bound, (c) violate any Law and Regulation or any order, judgment, decree
or injunction of any Governmental Authority directed to any of the Seller
Parties or any of their properties in a proceeding to which any of them or their
property or the Assets is or was a party, (d) violate or conflict with, or
result in the suspension, revocation, cancellation or loss of, or have an
adverse effect on, the Permits, (e) result in the creation or imposition, at or
after the Closing of any Encumbrance upon all or any part of the Assets other
than a Permitted Encumbrance or an Encumbrance created by the Leases, or (f)
give rise to any right of rescission or similar remedy under any corporation,
limited liability company or securities Law and Regulation with respect to any
of the transactions contemplated in this Agreement, unless and to the extent any
matters described in clause (b), (c), (d), (e) or (f) above would not have a
Material Adverse Effect.
Section 3.5 Approvals and Consents
Except for the consents required from the State of New Mexico with
respect to the assignment of the New Mexico State Coal Leases (the "State Lease
Consents"), no permit, consent, approval, waiver, easement, license or other
authorization of or declaration to or filing with any person, entity, or
Governmental Authority ("Person") is required in connection with (i) the
execution or performance of this Agreement or the Seller Agreements by the
Seller Parties, or (ii) the consummation by the Seller Parties of the
transactions contemplated herein or therein, except to the extent that the
failure to obtain a consent would not have a Material Adverse Effect.
Section 3.6 Title
(a) Immediately prior to the conveyance to Acquisition No. 1 LLC
pursuant to Section 1.2, EACC had (subject to the mortgage lien in the form of
that certain Line of Credit, Mortgage, Security Agreement, Assignment of Leases
and Rents, Financing Statement and Fixture Filing, dated as of July 17, 1998 in
favor of Fleet National Bank N.A., successor to Bank One, N.A., (formerly known
as the First National Bank of Chicago) ("Fleet Bank") as Administrative Agent
and Mortgagee, as supplemented and amended from time to time on the
9
Federal Reserves (the "Federal Mortgage Lien") which Seller Group has caused to
be released in accordance with Section 6.2(e) at or prior to Closing), and as of
the Closing Acquisition No. 1 LLC has, good and marketable fee title to all of
the Federal Reserves and good title to the Federal Data, in each case, free and
clear of all mortgages, claims, liens, security interests, charges, pledges,
options, purchase rights, termination rights, grants, reversionary rights or
other encumbrances (collectively, the "Encumbrances"), other than Permitted
Encumbrances (as defined below).
(b) Immediately prior to the conveyance to Acquisition No. 2 LLC
pursuant to Section 1.3, PNRC had (subject to the mortgage lien in the form of
that certain Line of Credit, Mortgage, Security Agreement, Assignment of Leases
and Rents, Financing Statement and Fixture Filing, dated as of August 11, 1998
in favor of Fleet Bank as Administrative Agent and Mortgagee, as supplemented
and amended from time to time on the ▇▇▇ Ranch Reserves (the "▇▇▇ Ranch Mortgage
Lien") which Seller Group has caused to be released in accordance with Section
6.2(f) at or prior to Closing), and as of the Closing Acquisition No. 2 LLC has,
good and marketable fee title to all of the ▇▇▇ Ranch Reserves (except for the
portion of the ▇▇▇ Ranch Reserves subject to the New Mexico State Coal Leases,
as to which a member of the Seller Parties had, and Acquisition No. 2 LLC has, a
valid and enforceable leasehold interest) and good title to the New Mexico Data,
in each case, free and clear of all Encumbrances, other than Permitted
Encumbrances.
(c) The Assets include all rights necessary to mine (i) the Federal
Reserves pursuant to underground mining methods and not any other methods,
except as otherwise provided in Schedule 1.2(a) and (ii) the ▇▇▇ Ranch Reserves
pursuant to surface mining, highwall mining or auger mining methods and not any
other methods. With respect to (ii), the Assets include, to the extent set forth
in the Assignment of ▇▇▇ Ranch Surface Rights, certain rights under the
agreement set forth on Schedule 1.3(a) (the "▇▇▇ Ranch Surface Agreement"), a
true and correct copy of which has been made available to Buyer and which, to
the knowledge of the Seller Parties, is valid, binding and enforceable in
accordance with its terms and no Seller Party nor, to the knowledge of the
Seller Parties, no other party to the ▇▇▇ Ranch Surface Agreement is in default
thereunder.
(d) The Membership Interests are (i) duly authorized and validly issued
in accordance with the Delaware Limited Liability Company Act (the "Delaware LLC
Act") and the Operating Agreement of the applicable Acquisition LLC, and (ii)
fully paid and non-assessable (except as such non-assessability may be affected
by Section 18-607 of the Delaware LLC Act). None of the Membership Interests
have been issued in breach or violation of any applicable statutory or
contractual preemptive rights or any other rights of any kind (including any
rights of first offer or refusal) of any Person or any applicable Laws or
Regulations.
(e) Acquisition No. 2 LLC has (subject to the ▇▇▇ Ranch Mortgage Lien,
which Seller Group has caused to be released in accordance with Section 6.2(f)
at or prior to the Closing and subject to obtaining the State Lease Consents)
good title to the leasehold interest in the New Mexico State Coal Leases and the
rights under the Assignment of ▇▇▇ Ranch Surface Rights free and clear of any
Encumbrances other than Permitted Encumbrances.
10
(f) (i) There are no outstanding securities convertible into,
exchangeable for, or carrying the right to acquire, any securities of either of
the Acquisition LLCs, (ii) there are no subscriptions, warrants, options, rights
or other arrangements or commitments with respect to the issuance or sale of any
ownership interests in either of the Acquisition LLCs other than this Agreement
and (iii) the Membership Interests constitute all of the issued and outstanding
ownership interests in each of the Acquisition LLCs.
(g) Immediately prior to the Closing, EACC had good title to all of the
issued and outstanding membership interest in Acquisition No. 1 LLC and PNRC had
good title to all of the issued and outstanding membership interest in
Acquisition No. 2 LLC, in each case free and clear of any Encumbrances, and at
the Closing, EACC and PNRC shall have transferred to Buyer good title to the
Membership Interests, free and clear of all Encumbrances other than any
Encumbrances in respect of Transfer Taxes that shall be paid in accordance with
Section 5.5.
(h) As used herein, "Permitted Encumbrances" means any or all of the
following:
(i) liens for taxes or assessments not yet delinquent or, if
delinquent, that are being contested in good faith in the normal course
of business;
(ii) materialmen's, mechanic's, repairmen's, employees',
contractors' or other similar liens or charges arising in the ordinary
course of business incidental to construction, maintenance, or
operation of the Assets to the extent such liens or charges do not
individually or in the aggregate materially interfere with the
operation, ownership, lease, value or use of either the ▇▇▇ Ranch
Assets or the Federal Assets for the mining of coal on an individual
basis;
(iii) to the extent such are customary in the coal industry
and of general applicability, rights reserved to or vested in any
Governmental Authority to control or regulate any Asset in any manner,
and all applicable Laws and Regulations and orders of any Governmental
Authority;
(iv) public streets and roads crossing the Assets and
easements and other rights for the purpose of installing, using and
maintaining electric, gas and other utility and transmission lines and
related facilities;
(v) all rights of consent required by the State of New Mexico
with respect to the assignment of the New Mexico State Coal Leases; and
(vi) all other liens, charges, encumbrances, instruments,
rights of third Persons, boundary line disputes, acreage discrepancies,
easements, matters which would be disclosed in an accurate survey of
the Assets, rights of way, surface leases, obligations, imperfections
in title, defects and irregularities affecting the Assets which
individually or in the aggregate are not such as to interfere
materially with the operation, ownership, lease, value or use of either
the ▇▇▇ Ranch Assets or the Federal Assets for the mining of coal on an
individual basis.
11
Section 3.7 Contracts
(a) Attached as Schedule 3.7(a) is a current and accurate list of all
customer contracts, contract expiration dates and committed contract tonnage
amounts for the years 2003 through and including 2005 involving the Federal No.
2 Mine, as of November 30, 2002 (the "Federal Customer Contracts").
(b) Attached as Schedule 3.7(b) is a current and accurate list of all
customer contracts, contract expiration dates and committed contract tonnage
amounts for the years 2003 through and including 2005 involving the ▇▇▇ Ranch
Mine, as of November 30, 2002 (the "▇▇▇ Ranch Customer Contracts").
(c) Each of the Federal Customer Contracts and the ▇▇▇ Ranch Customer
Contracts is valid, in full force and effect and enforceable in accordance with
its respective terms against the parties thereto, except as enforcement may be
(i) limited by any applicable bankruptcy, insolvency, fraudulent transfer,
moratorium, reorganization, liquidation or similar Laws and Regulations
affecting the enforcement of creditors' rights generally, (ii) limited by any
applicable Laws and Regulations that limits indemnification and (iii) subject to
general equitable principles (regardless of whether that enforceability is
considered at law or in equity), and is free and clear of all Encumbrances. None
of the Seller Parties are in default under any of the Federal Customer Contracts
or the ▇▇▇ Ranch Customer Contracts and, to each of Seller Parties' knowledge,
no third party thereto is in material default thereunder. To each of Seller
Parties' knowledge, there does not exist any state of facts which constitutes,
or with the passage of time or notice or both will constitute, a material
default under any of the Federal Customer Contracts and the ▇▇▇ Ranch Customer
Contracts on the part of any of the Seller Parties or on the part of any party
thereto.
(d) The New Mexico State Coal Leases, true copies of which have been
delivered to Buyer, are valid, in full force and effect, and enforceable in
accordance with their respective terms against the parties thereto, except as
enforcement may be (i) limited by any applicable bankruptcy, insolvency,
fraudulent transfer, moratorium, reorganization, liquidation or similar Laws and
Regulations affecting the enforcement of creditors' rights generally, (ii)
limited by any applicable Law and Regulation that limits indemnification and
(iii) subject to general equitable principles (regardless of whether that
enforceability is considered at law or in equity), and are free and clear of any
Encumbrances, other than Permitted Encumbrances. PNRC is not in default under
either of the New Mexico State Coal Leases and, to PNRC's knowledge, no third
party is in material default thereunder. There does not exist any state of facts
which constitutes, or with the passage of time or notice or both will
constitute, a default under either of the New Mexico State Coal Leases on the
part of PNRC or, to PNRC's knowledge, on the part of any party thereto.
Notwithstanding the foregoing, the assignment of the New Mexico State Coal
Leases by PNRC to Acquisition No. 2 LLC is subject to obtaining the State Lease
Consents.
Section 3.8 Litigation
Except as set forth on Schedule 3.8, there is no action, proceeding,
arbitration, investigation or claim pending or, to the Seller Parties'
knowledge, threatened, and no basis is
12
known to any of the Seller Parties for any action, proceeding, arbitration,
investigation or claim which could reasonably have a Material Adverse Effect.
Section 3.9 Compliance with Applicable Laws
Except with respect to Environmental Laws, which are addressed in
Section 3.12, the Seller Parties' ownership of the Assets immediately prior to
the Closing, the conduct by the Seller Parties of their businesses immediately
prior to the Closing, insofar as such businesses involve the Assets or the
Seller Parties' ownership of the Assets, and the Assets do not violate or fail
to comply with any federal, state or local statute, law, ordinance, decree,
order, judgment, rule or regulation (collectively "Laws and Regulations") except
as such violation or failure to comply would not have a Material Adverse Effect.
None of the Seller Parties has received any written notice or other written
communication from any Governmental Authority of any violation of any Laws and
Regulations relating to any of the Assets which if not corrected would have a
Material Adverse Effect.
Section 3.10 Remedial Work
There is no water treatment, reclamation, or other remedial work or
condition related to coal mining which is existing or is reasonably foreseeable
in the future on the Assets, except as such activity is being undertaken in
accordance with an applicable Permit.
Section 3.11 Permits
(a) The Seller Parties are in possession of all franchises, grants,
authorizations, licenses, permits (including Environmental Permits), easements,
variances, exceptions, consents, concessions, certificates, approvals and orders
of any Governmental Authority legally necessary or required for them to carry on
their businesses as they are now being conducted with respect to the Assets (the
"Permits"). All such Permits have been obtained, on behalf of the Seller
Parties, in accordance with applicable Laws and Regulations and no proceeding or
action with respect to the suspension, revocation, cancellation or loss of any
of the Permits is pending or, to the knowledge of the Seller Parties,
threatened. Schedule 3.11(a) contains a complete list of all Permits.
(b) The Seller Parties are, and the applicable Seller Party operates
the Assets, in compliance with all Permits applicable to the Assets except as
such failure to comply would not result in a Material Adverse Effect.
Section 3.12 Environmental Matters
(a) Except as set forth on Schedule 3.12:
(i) The Assets and all mining operations on the Assets are in
substantial compliance with all applicable Environmental Laws and
Environmental Permits required to be obtained.
(ii) There are no existing, pending or, to the knowledge of
Seller Parties, threatened claims, demands, orders, actions, suits,
investigations, notices of violation,
13
inquiries or proceedings by or before any Governmental Authority under
any Environmental Law relating to the Assets.
(iii) To the knowledge of Seller Parties, no Hazardous
Substances have been Released to, or are present on, or are Releasing
from the Assets in concentrations that could reasonably be expected to
give rise to remediation under Environmental Laws.
(iv) The Seller Parties do not own or operate and have not
owned or operated any underground storage tanks, aboveground storage
tanks, dikes or impoundments in, on, under or about the Assets and, to
the knowledge of the Seller Parties, there are no underground storage
tanks in, on, under or about the Assets that have been removed from the
ground or abandoned in place.
(b) (i) Seller Group has made available to Buyer, and has listed on
Schedule 3.12, all third party environmental audits, assessments,
studies or reports conducted on behalf of Seller Parties pertaining to
Hazardous Substances at, in, on or under the Assets or concerning the
Seller Parties' compliance with Environmental Laws.
(ii) Seller Group has provided to Buyer, and has listed on Schedule
3.12, all correspondence between the Seller Parties and the West
Virginia Department of Environmental Protection (the "DEP"), and all
non-privileged studies or analyses of all third party environmental
audits, assessments or reports in its possession describing, analyzing
or evaluating the Order of Compliance, dated September 12, 2002, issued
by the DEP against EACC or its potential impacts on the mining
operations undertaken at the Federal No. 2 Mine.
(c) As used in this Section and this Agreement, the following
capitalized terms shall have the meaning given to them in this subsection:
(i) "Environmental Laws" means any and all federal, state, and
local laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, by-laws, judgments, rules of common law, or requirements of
any Government Authority regulating, relating to or imposing liability
or standards of conduct concerning Hazardous Substances, pollution
prevention, environmental protection or employee health and safety,
currently in effect, including without limitation: the Surface Mining
Control and Reclamation Act ("SMCRA"), 30 U.S.C. Section 1201 et seq;
the Mine Safety and Health Act of 1977 ("MSHA"), 30 U.S.C. Section 801
et seq.; the Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq.; the Superfund
Amendment and Reauthorization Act of 1986 ("▇▇▇▇"), Public Law 99-499,
100 Stat. 1613; the Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. Section 6901 et seq.; the Toxic Substances Control Act of 1976
("TSCA"), 15 U.S.C. Section 2601 et seq.; the Federal Water Pollution
Control Act ("FWPCA"), 33 U.S.C. Section 1251 et seq.; the Clean Air
Act ("CAA"), 42 U.S.C. Section 7401 et seq.; and the Occupational
Safety and Health Act ("OSHA"), 29 U.S.C. Section 651 et seq.;
together, in each case, with any amendments thereto, and the
regulations adopted and publications promulgated thereunder and all
substitutions thereof.
14
(ii) "Environmental Permits" shall mean all Permits required
to be obtained or filed by or complied with under any Environmental
Law.
(iii) "Governmental Authority" means any federal, state, local
or municipal government, governmental or quasi-governmental authority,
agency or body exercising, or purporting to exercise, any
administrative, executive, judicial, investigative, legislative,
policy, regulatory, taxing or other power or authority of any nature.
(iv) "Hazardous Substance" means (A) any hazardous materials,
hazardous wastes, hazardous substances, toxic wastes, and toxic
substances as those or similar terms are defined under any
Environmental Laws; (B) any asbestos or any material which contains any
hydrated mineral silicate, including chrysolite, amosite, crocidolite,
tremolite, anthophylite and/or actinolite, whether friable or
non-friable; (C) polychlorinated biphenyls ("PCBs"), or PCB containing
materials, or fluids; (D) radon; (E) any other hazardous, radioactive,
toxic or noxious substance, material, pollutant, contaminant,
constituent, or solid, liquid or gaseous waste; and (F) any substance
(including any petroleum, petroleum hydrocarbons, petroleum products,
crude oil and any fractions or derivatives thereof, any oil or gas
exploration or production waste, and any natural gas, synthetic gas and
any mixtures thereof) to the extent that, and only to the extent that,
whether by its nature or its use, such substance is subject to
regulation under any Environmental Laws or with respect to which any
Environmental Law or Governmental Authority regulates the storage or
Release into the environment or requires environmental investigation,
monitoring or remediation.
(v) "Release" means, with respect to this Section 3.12, any
release, spill, emission, leaking, pumping, pouring, dumping, emptying,
injection, deposit, disposal, discharge, dispersal, leaching, or
migration into the environment of Hazardous Substances.
Section 3.13 Operating Information
(a) Attached as Schedule 3.13(a) is historical and forecasted sales and
cash cost information for the Federal No. 2 Mine and the ▇▇▇ Ranch Mine.
Historical information contained in Schedule 3.13(a) was prepared from the books
and records of Seller and its subsidiaries and, as of the date prepared, fairly
presented in all material respects said historical information for the periods
indicated. Forecasted information contained in Schedule 3.13(a) has been
prepared by the Seller Parties based on the information known to the Seller
Parties as of December 1, 2002, and represents the good faith estimates of the
Seller Parties for the periods covered by such information based on reasonable
assumptions.
(b) Attached as Schedule 3.13(b) is the historical mining volume
relating to the Federal No. 2 Mine and the ▇▇▇ Ranch Mine for the years ended
December 31, 2000 and 2001 and the eleven months ended November 30, 2002, which
was prepared from the books and records of Seller and its subsidiaries and, as
of the date prepared, fairly presented in all material respects said mining
volume for the periods indicated. Since November 30, 2002, there has been no
Material Adverse Effect on the mining volume from the Federal No. 2 Mine or the
▇▇▇ Ranch Mine.
15
(c) Attached as Schedule 3.13(c) is:
(i) the forecasted mining volume of the Federal Reserves for
the years ended December 31, 2003 through and including 2010, which has
been prepared by the Seller Parties based on the information known to
the Seller Parties as of December 1, 2002, and represents the good
faith estimates of the Seller Parties for the periods covered by such
information based on reasonable assumptions; and
(ii) the forecasted mining volume of the ▇▇▇ Ranch Reserves
for the years ended December 31, 2003 through and including 2014, which
has been prepared by the Seller Parties based on the information known
to the Seller Parties as of December 1, 2002, and represents the good
faith estimates of the Seller Parties for the periods covered by such
information based on reasonable assumptions.
Section 3.14 Reserves
(a) Attached as Schedule 3.14 are reserve reports prepared by ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ and Associates, Inc. ("▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇") covering the Reserves. The
information which was supplied by the Seller Parties to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ for the
purposes of preparing the reserve reports dated as of December 17, 2002 (with
respect to the Federal Reserves) and December 19, 2002 (with respect to the ▇▇▇
Ranch Reserves), was true and correct in all material respects on the dates such
estimates were made and such information was supplied and was prepared in
accordance with the customary industry practices; and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ was, as of
such dates, and is, as of the date hereof, not an Affiliate of Seller or any of
its Affiliates.
(b) The Reserves conveyed to the Acquisition LLCs are "virgin coal
reserves" as that term is generally understood and interpreted in the coal
mining industry, except for that portion of the Federal Reserves and ▇▇▇ Ranch
Reserves as more particularly described in Schedules 1.2(a) and 1.3(a).
(c) Except as expressly provided in this Article III or the Special
Warranty Deeds, Seller makes no warranty, express or implied, as to the
merchantability, quantity, quality or recoverability of, or title to, the coal
reserves in or from the Assets or as to the condition of the coal reserves.
Section 3.15 Reliance of Buyer
Any due diligence or other investigation by or on behalf of Buyer shall
not affect its reliance or right to rely on any representation or warranty made
by Seller Group in this Agreement.
Section 3.16 Seller Representations Relating to the Units
(a) Accredited Investor. PNRC is an "Accredited Investor" as defined in
Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as
amended (the "Securities Act").
16
(b) Investment Intent. PNRC is acquiring the Units, and the Common
Units to be issued upon conversion of the Class B Common Units as contemplated
by Section 5.7, for its own account for investment, and not with a view to any
distribution or resale, thereof in violation of the Securities Act or any other
applicable domestic or foreign securities law.
(c) Information and Access. PNRC hereby acknowledges receipt of a copy
of the Partnership Agreement and acknowledges access to the Public Documents.
PNRC and its attorneys, accountants and other representatives have had an
opportunity to ask questions of and receive answers from Buyer or a person
acting on behalf of Buyer concerning the terms and conditions of this
investment.
(d) No Registration. PNRC acknowledges and agrees that, based in part
upon its representations contained herein and in reliance upon applicable
exemptions, no Units, or Common Units to be issued upon conversion of the Class
B Common Units as contemplated by Section 5.7, acquired by it have been, or will
be, at the time of issuance, registered under the Securities Act or the
securities Laws and Regulations of any other domestic or foreign jurisdiction as
of the Closing Date.
Section 3.17 Broker Fees
Buyer and its Affiliates shall not directly or indirectly have any
responsibility, liability or expense, as a result of undertakings or agreements
of the Seller Parties, for any financial advisory or finders' fees or other
similar forms of compensation to an intermediary in connection with the
negotiation, execution or delivery of this Agreement or any agreement or
transaction contemplated hereby.
Section 3.18 Tax Matters
(a) (i) All Tax Returns required to be filed by the Seller Parties with
respect to the Assets in respect of any Pre-Closing Tax Period (as defined
below) have been, or will be, filed in a timely manner; (ii) all Taxes required
to be paid by the Seller Parties with respect to the Assets in respect of any
Pre-Closing Tax Period have been, or will be, timely paid in full by the Seller
Parties; (iii) no deficiencies for any Taxes with respect to the Assets in
respect of any Pre-Closing Tax Period have been asserted or assessed against the
Seller Parties or the Assets which remain unpaid; (iv) no claim has been made by
any taxing authority in any jurisdiction where the Seller Parties do not file
Tax Returns that may subject any of the Seller Parties to taxation in that
jurisdiction with respect to the Assets; (v) there is no pending dispute over
any Taxes imposed with respect to the Assets; and (A) all of the Assets have
been properly listed and described on the property tax rolls for all Pre-Closing
Tax Periods and no portion of the Assets constitutes omitted property for
property tax purposes.
(b) For purposes of this Agreement, "Taxes" shall mean any taxes,
assessments, duties, fees, levies, imposts, deductions, withholdings, including
income, gross receipts, ad valorem, value added, excise, real or personal
property, asset, sales, use, license, payroll, transaction, capital, net worth
and franchise taxes, estimated taxes, withholding, employment, social security,
workers compensation, utility, severance, production, unemployment compensation,
occupation, premium, windfall profits, transfer and gains taxes or other
17
governmental charges of any nature whatsoever, imposed by any government or
taxing authority of any country or political subdivision of any country and any
liabilities with respect thereto, including any penalties, additions to tax,
fines or interest thereon, and includes any liability arising under any tax
sharing agreement or any liability for Taxes of another person by contract, as a
transferee or successor, under Treas. Reg. Section 1.1502-6 or analogous state,
local, or foreign law provision, or otherwise. "Tax Return" shall mean any
report, return (including any information return) or statement required to be
supplied to a taxing authority in connection with Taxes including any amendments
thereto. "Pre-Closing Tax Period" shall mean all taxable periods ending on or
before the Closing Date and the pre-Closing portions of all taxable periods that
include but do not end on the Closing Date.
(c) As of the Closing Date, PNRC will have more than a one year holding
period (for federal income tax purposes) in the PNRC Contributed Assets (as that
term is defined in Section 5.6).
Section 3.19 PNRC Notes
At the Closing, upon Buyer's payment of $32,500,000 to the PNRC
Partners pursuant to Section 2.3, the PNRC Notes shall have been discharged in
full and Buyer shall not bear any further liability or obligation whatsoever
with respect to the PNRC Notes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller Group as follows:
Section 4.1 General
Except to the extent expressly set forth in this Article IV, Buyer does
not make any representations or warranties, express or implied. Inclusion of a
matter on a schedule attached hereto with respect to a specific representation
or warranty that addresses matters having a material adverse effect shall not be
deemed an indication that such matter does, or may, have a material adverse
effect. Matters may be disclosed on a schedule for purposes of information only.
Section 4.2 Organization and Good Standing
Buyer is a limited partnership duly formed, validly existing and in
good standing under the laws of the State of Delaware, with the partnership
power and authority to own its property, to conduct its business as currently
conducted and to consummate the transactions contemplated by or in connection
with this Agreement. Buyer is duly qualified or registered as a foreign entity
in each jurisdiction where it is required to be so qualified or registered to
conduct its business except where failure to so qualify or register would not,
individually or in the aggregate, have a material adverse effect on Buyer.
18
Section 4.3 Authorization
(a) All limited partnership action of Buyer necessary to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated by or in connection with this Agreement has been
taken, and this Agreement constitutes a valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms, except as enforcement
may be (i) limited by any applicable bankruptcy, insolvency, fraudulent
transfer, moratorium, reorganization, liquidation or similar Laws and
Regulations affecting the enforcement of creditors' rights generally, (ii)
limited by any applicable Law and Regulation that limits indemnification and
(iii) subject to general equitable principles (regardless of whether that
enforceability is considered at law or in equity).
(b) The Registration Rights Agreement, the GP LLC Agreement, the MLP
Amendment, the Escrow Agreement, the Reserve Substitution Agreement, Amendment
No. 1 to the Omnibus Agreement and all other agreements, documents and
instruments executed and delivered by Buyer or its Affiliates pursuant to this
Agreement constitute valid and binding obligations of Buyer or its Affiliates,
as the case may be, enforceable against Buyer or its Affiliates, as the case may
be, in accordance with their respective terms, except as enforcement may be (i)
limited by any applicable bankruptcy, insolvency, fraudulent transfer,
moratorium, reorganization, liquidation or similar Laws and Regulations
affecting the enforcement of creditors' rights generally, (ii) limited by any
applicable Law and Regulation that limits indemnification and (iii) subject to
general equitable principles (regardless of whether that enforceability is
considered at law or in equity).
Section 4.4 Non-Contravention
The execution and delivery of this Agreement or any agreement
contemplated hereby by Buyer or any of its Affiliates and the consummation by
Buyer or any of its Affiliates of the transactions contemplated herein and
therein do not and will not (a) as of the Closing Date, violate or conflict
with, the terms of the certificate of limited partnership or the first amended
and restated agreement of limited partnership of Buyer dated as of October 30,
2001 (the "Partnership Agreement", as amended), as it will be further amended by
the MLP Amendment, or the organizational documents of any of Buyer's Affiliates,
including without limitation the Third Amended and Restated Limited Liability
Company Agreement (the "GP LLC Agreement") of Penn Virginia Resource GP, LLC
(the "General Partner"), (b) violate or conflict with or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which Buyer or any of its Affiliates is a party or
becomes a party or by which any of them or any of their respective properties
may be bound, (c) violate any Law and Regulation or any order, judgment, decree
or injunction of any Governmental Authority directed to Buyer or any of its
Affiliates or any of their properties in a proceeding to which any of them or
their property or their assets is or was a party, (d) result in the creation or
imposition at or after the Closing of any Encumbrance other than a Permitted
Encumbrance upon all or any part of the Buyer's assets, or (e) give rise to any
right of rescission or similar remedy under any partnership or securities Law
and Regulation, with respect to any of the transactions contemplated by this
Agreement except any matters described in clause (b), (c), (d) or (e) above
which would not have a material adverse effect on Buyer's ability to consummate
the transactions contemplated by this Agreement. As used in the preceding
sentence, "Permitted
19
Encumbrance" shall have the same meaning given such term in Section 3.6(h),
except that the term "Assets" used in such definition shall refer to the assets
of Buyer and references to a material interference with the ▇▇▇ Ranch Assets or
the Federal Assets in Section 3.6(h)(ii) and Section 3.6(h)(v) shall refer to a
material adverse effect on the assets of Buyer as a whole.
Section 4.5 Buyer's Capital and Issuance of Units
As of December 11, 2002, the outstanding capital of Buyer was comprised
of 7,649,880 Subordinated Units and 7,649,880 Common Units. As of December 11,
2002, Buyer had 300,000 Common Units issuable under Buyer's long-term incentive
plan. The Units issued under Article II against delivery of the Membership
Interests, (a) will have been duly authorized and validly issued in accordance
with the Delaware Revised Uniform Limited Partnership Act, as amended (the
"Delaware Act") and the Partnership Agreement, and (b) are fully paid and
nonassessable (except as such nonassessability may be affected by Section 17-607
of the Delaware Act). None of the Units have been issued in breach or violation
of (x) applicable statutory or contractual preemptive rights, or any other
rights of any kind (including any rights of first offer or refusal), of any
Person or (y) the terms of any then outstanding options, warrants, or other
rights issued to acquire Units.
Section 4.6 Public Documents
Buyer has filed with the SEC all reports, schedules, forms, statements
and other documents required by the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), to be filed by Buyer since October 24, 2001 (collectively,
and in each case including all exhibits and schedules thereto and documents
incorporated by reference therein, the "Public Documents"). At the time filed
(in the case of filings under the Exchange Act) or at the time declared
effective (in the case of filings under the Securities Act), except to the
extent revised or superseded by a subsequent filing with the SEC, the Public
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and none of the Public
Documents (including any and all financial statements included therein) as of
such dates contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Buyer included in all
Public Documents, including any amendments thereto, (a) were prepared from the
books and records of Buyer in conformity with United States generally accepted
accounting principles as published by the Financial Accounting Standards Board
("GAAP") applied on a consistent basis throughout the periods covered thereby
(except as otherwise noted therein), (b) comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, and (c) fairly present in all
material respects the financial condition and results of operations of the Buyer
and its consolidated subsidiaries as of the respective dates thereof and for the
periods covered thereby. To Buyer's knowledge, since the date of the most recent
filing by or with respect to Buyer or its Affiliates with the SEC, there has not
occurred any event that (singly or together with other such events) would have a
material adverse effect on the financial condition or results of operations of
Buyer other than those resulting from general changes in coal prices; general
changes in industry, economic or political conditions; civil unrest,
insurrection, outbreaks of hostilities, acts of terrorism or similar events; or
changes in Laws and Regulations.
20
Section 4.7 No Undisclosed Liabilities
Except to the extent set forth on the consolidated balance sheet or the
notes thereto of Buyer in the Public Documents or otherwise disclosed in the
Public Documents, none of Buyer or its subsidiaries has any material liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) required by GAAP to be set forth on a balance sheet or in the notes
thereto, other than those incurred in the normal course of business since
September 30, 2002, in each case subject to year-end adjustments.
Section 4.8 Litigation
Except as set forth on Schedule 4.8 or in the Public Documents, there
is no action, proceeding, arbitration, investigation or claim pending or, to
Buyer's knowledge, threatened, and no basis is known to Buyer for any action,
proceeding, arbitration, investigation or claim to which Buyer or its Affiliates
is a party and which could reasonably have a material adverse effect on Buyer's
ability to consummate the transactions contemplated herein, its results of
operations or its financial condition.
Section 4.9 Tax Matters
(a) (i) All material Tax Returns required to be filed by Buyer have
been, or will be, filed in a timely manner and all such Tax Returns are complete
and correct; (ii) all material Taxes required to be paid or withheld by Buyer
have been, or will be, timely paid or withheld in full by Buyer; (iii) no
deficiencies for any Taxes have been asserted or assessed against Buyer which
remain unpaid; (iv) no claim has been made by any taxing authority in any
jurisdiction where Buyer does not file Tax Returns that may subject Buyer to
taxation or the requirement to file a Tax Return in that jurisdiction; and (v)
there is no pending dispute over any Taxes imposed with respect to Buyer or any
Tax Return filed by Buyer.
(b) Since their formation, each of Buyer and each Operating Partnership
(as defined below) (i) has been treated as a partnership or has been disregarded
as an entity for federal income tax purposes, (ii) will at, and immediately
after, the Closing be a partnership or be disregarded as an entity for federal
income tax purposes and (iii) would immediately after the Closing not be treated
as an investment company (within the meaning of section 351 of the Internal
Revenue Code of 1986, as amended (the "Code")) if it were a corporation for
federal income tax purposes. As used herein, "Operating Partnerships" means each
of the following: Penn Virginia Operating Co., LLC and all other limited
liability company operating subsidiaries of Buyer.
(c) The Section 2.3 Borrowing will be a nonrecourse liability of Buyer
within the meaning of Treasury Regulation Section 1.752-1(a)(2). Buyer does not
anticipate that PNRC's share, within the meaning of Treasury Regulation Section
1.707-5(a)(2)), of the Section 2.3 Borrowing will be reduced after the Closing
as part of a plan, within the meaning of Treasury Regulation Section
1.707-5(a)(3), that has as one of its purposes minimizing the extent to which
PNRC recognizes income on MLP's assumption of the PNRC Notes; provided, however,
Buyer's intent to amortize the Section 2.3 Borrowing or any refinancing of that
borrowing in accordance with its terms or the issuance of equity to the public
shall not be a breach of this representation.
21
Section 4.10 Employees
Buyer has no employees.
Section 4.11 Financing
Buyer has sufficient cash, available lines of credit or other sources
of immediately available funds (in United States dollars) to enable it to pay
the Cash Portion at the Closing and to effect the transaction that is described
in Section 2.3.
Section 4.12 Brokers Fees
Seller Group shall not directly or indirectly have any responsibility,
liability or expense, as a result of undertakings or agreements of Buyer or its
Affiliates, for any financial advisory or finders' fees or other similar forms
of compensation to an intermediary in connection with the negotiation, execution
or delivery of this Agreement or any agreement or transaction contemplated
hereby.
Section 4.13 Reliance of Seller Group
Any due diligence or other investigation by or on behalf of Seller
Group shall not affect its reliance or right to rely on any representation or
warranty made by Buyer in this Agreement.
ARTICLE V
COVENANTS
Section 5.1 Access to Information
All information relating to the transactions contemplated by this
Agreement provided by any Party or its Affiliates to any other Party, its
Affiliates or its or their authorized representatives (whether furnished before
or after the date of this Agreement) shall be held subject to the
confidentiality agreement between Buyer and Parent, dated as of April 29, 2002
(the "Confidentiality Agreement"). Seller Group hereby agrees to provide Buyer
and its accountants (i) on or before February 1, 2003, with the tax basis of the
PNRC Contributed Assets as of the date of the Closing Date and (ii) all
information reasonably requested by Buyer in connection with the preparation of
its tax returns or the payment of its taxes that relate to the PNRC Contributed
Assets and that is in the possession of the Seller Parties.
Section 5.2 Financial Statements
Buyer and Seller Group acknowledge that Seller Group is conveying to
Buyer certain specified assets, and Seller Group has advised Buyer that Seller
Group does not prepare financial statements relating to such assets.
Nevertheless, if Buyer is advised by the SEC that audited financial statements
of all or part of the Assets are required by Regulation S-X, Seller Group, if
requested by Buyer, shall, at Buyer's sole expense, use commercially reasonable
efforts to cause its auditors to audit and perform interim procedures in
accordance with GAAP and in accordance
22
with Regulation S-X for such Assets for the years ending December 31, 1999, 2000
and 2001 (the "Audited Financial Statements") and the period ending on the
Closing Date.
Section 5.3 Public Announcements
It is contemplated that immediately following the Closing, each of
Buyer and Seller Group will consult with each other regarding the language of
and issue a press release or press releases disclosing such action.
Section 5.4 Consents
(a) Seller Group shall make or cause to be made all filings and obtain
all licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Authorities and other third Persons necessary to
consummate the transactions contemplated by this Agreement, and Buyer shall
cooperate with Seller Group when necessary or applicable.
(b) Without limiting the generality of the foregoing, Seller Group
shall make or cause to be made all filings with the relevant agency or agencies
in the State of New Mexico necessary to, and shall use its commercially
reasonable efforts to, obtain the State Lease Consents as soon as possible after
the Closing.
Section 5.5 Closing Costs; Expenses
(a) Seller Group shall pay all Taxes associated with the transfer of
the Assets into the Acquisition LLCs. Seller and Buyer shall bear equally any
Transfer Taxes (other than Income Taxes) due and payable, if any, in connection
with the sale, conveyance, assignment, transfer, and delivery of the Membership
Interests from Seller to the Buyer pursuant to this Agreement.
(b) Each of the Parties shall pay its own expenses and the fees and
expenses of its counsel, accountants, consultants and other experts and
representatives associated with this Agreement and the transactions contemplated
herein.
Section 5.6 Taxes
(a) Any and all ad valorem taxes, personal property taxes, fees or
assessments for the calendar year 2002 due with respect to the Assets, or
payable by any of the Seller Parties pursuant to the terms of any leases,
subleases, licenses, rights-of-way, instruments, or other agreements by which
any of the Seller Parties hold the Reserves or any other of the Assets shall be
prorated between the Seller Parties on the one hand and Buyer on the other hand,
as of the Closing on a calendar year basis, using the most recent actual or
proposed tax rates and assessments by the appropriate Governmental Authority. If
any Party shall pay such taxes for which it is entitled to be reimbursed because
of such proration, the other party responsible therefor shall promptly reimburse
the party so paying upon notice of the amount paid by such Party. Regardless of
which Party is responsible, the Seller Parties shall handle the payment to the
appropriate Governmental Authority of all Taxes with respect to the Assets which
are required to be paid prior to the Closing (and shall file all returns with
respect to such Taxes).
23
(b) Buyer shall allocate to PNRC with respect to the Units reverse
section 704(c) allocations (within the meaning of Treasury Regulation Section
1.704-3(a)(6)) in accordance with the remedial allocation method of Treasury
Regulation Section 1.704-3(d) in respect of the difference between the fair
market value of the assets held by Buyer and its operating subsidiaries
immediately prior to the Closing (the "Existing Buyer Assets") and Buyer's
carrying value in the Existing Buyer Assets immediately prior to the Closing.
For such purposes, the fair market value of the assets of Buyer shall be the
amount that Buyer uses to calculate adjustments under Section 743 of the Code.
(c) Each Seller agrees that it and its Affiliates will not take any
action that would cause either of the Acquisition LLCs to be classified as a
corporation for any federal, state or local income tax purpose. Buyer agrees
that it and its Affiliates will not take any action that would cause either of
the Acquisition LLCs to be classified as a corporation for any federal, state or
local income tax purpose before or on the Closing Date.
(d) Except as may be required by a change in applicable law, the
parties hereto agree to report the transactions for which provision is made in
this Agreement for federal income tax purposes as follows:
(i) Acquisition No. 1 LLC and Acquisition No. 2 LLC are
disregarded for federal income tax purposes.
(ii) The sale by EACC and the purchase by Buyer of the
membership interests in Acquisition No 1 LLC that is to occur pursuant
to Section 2.2(a) hereof is the sale by EACC and the purchase by Buyer
of the assets of Acquisition No 1 LLC in exchange for $40,000,000 cash.
(iii) The transfer by PNRC to Buyer of the membership
interests in Acquisition No 2 LLC that is to occur pursuant to Section
2.2(b) hereof is the transfer by PNRC to Buyer of the assets (the "No 2
LLC Assets") of Acquisition No 2 LLC in exchange for 1,522,325 Common
Units, 1,240,833 Class B Common Units and the assumption by Buyer of
the PNRC Notes. Such transfer is divided into two transactions that are
as follows:
(A) A sale by PNRC and a purchase by Buyer of a
Taxable Fraction undivided interest in the No. 2 LLC Assets in
exchange for the assumption by Buyer of debt in an amount
equal to the product of (1) 1.0 minus the PNRC Debt Share and
(2) the aggregate stated principal amount of the PNRC Notes.
(B) The contribution by PNRC of a Non Taxable
Fraction undivided interest in the No. 2 Assets (the "PNRC
Contributed Assets") to Buyer in exchange for (1) the
assumption by Buyer of debt in an amount equal to the product
of (x) the PNRC Debt Share and (y) the aggregate stated
principal amount of the PNRC Notes and (2) the Units. Such
contribution is a non taxable transaction that is described in
Section 721(a) of the Code and to which Section 707(a)(2) of
the Code does not apply.
For purposes hereof,
24
"FMV PNRC Units" means the product of (a) the number
of Units that PNRC is to receive pursuant to the provisions
hereof and (b) the average of the high and low price of the
Common Units on the New York Stock Exchange on the Closing
Date as shown in The Wall Street Journal (Northeast edition).
"Non Taxable Fraction" means (a) the sum of (1) the
PNRC Debt Share multiplied by the aggregate stated principal
amount of the PNRC Notes and (2) FMV PNRC Units divided by (b)
the sum of the aggregate stated principal amount of the PNRC
Notes and FMV PNRC Units.
"PNRC Debt Share" means (a) 98% multiplied by (b) (1)
the sum of 1,522,325 and 1,240,833 divided by (2) the sum of
1,240,833 and the number of MLP Common Units that are
outstanding immediately after the Closing.
"Taxable Fraction" means 1.0 less the Non Taxable
Fraction.
(iv) The payment of the PNRC Notes that is to occur pursuant
to Section 2.3 hereof is a refinancing, within the meaning of Treasury
Regulation Section 1.707-5(c), of the PNRC Notes with the proceeds of
an obligation of Buyer that is a nonrecourse obligation, within the
meaning of Treasury Regulation Section 1.752-1(a)(2), of Buyer.
Any party hereto that determines that a change in applicable
law has occurred that prevents it from so reporting the transactions for which
provision is made in this Agreement shall, prior to reporting the transactions
in a different manner, obtain a written opinion of tax counsel at its expense to
the effect that one or more of the provisions of the foregoing may not be
included on its federal income tax return by reason of such change in applicable
law, shall provide a copy of such written opinion to the other parties hereto,
and shall discuss in good faith with the other parties the positions that such
opinion concludes cannot be taken under applicable law. Thereafter, the party
that has so obtained the written opinion and any other party hereto may file its
federal income tax return with the variations from the foregoing agreement that
are described in such written opinion as not permitted by reason of such change
in applicable law.
Moreover, each of the parties hereto agrees to report the
transactions for which provision is made in this Agreement in the manner that is
set out above for all state and local income tax purposes unless it obtains a
written opinion of tax counsel at its expense that one or more of the provisions
of the foregoing may not be included on its return under then applicable law,
shall provide a copy of such written opinion to the other parties hereto, and
shall discuss in good faith with the other parties the positions that such
opinion concludes cannot be taken under applicable law. Thereafter, the party
that has so obtained the written opinion and any other party hereto may file its
state and local income tax returns with the variations from the foregoing
agreement that are described in such written opinion as not being permitted
under then applicable law
(e) Buyer agrees that PNRC shall be allocated income in accordance with
Section 704(c) of the Code utilizing the remedial allocation method of Treasury
Regulation Section 1.704-3(d) in respect of the difference between the fair
market value and PNRC's adjusted tax basis in the PNRC Contributed Assets on the
Closing Date and that such income allocation shall be
25
calculated as though (i) the IRC Section 704(b) book value of the PNRC
Contributed Assets immediately after the Closing were the sum of (A) FMV PNRC
Units and (B) the Non Taxable Fraction of the aggregate stated principal amount
of the PNRC Notes and (ii) the PNRC Contributed Assets contained a total number
of tons that is equal to the product of the Non Taxable Fraction multiplied by
the total estimated recoverable tons of the No. 2 LLC Assets (which is
80,000,000 at the time of the Closing). Buyer agrees to adjust its estimate of
the remaining total reserves recoverable from the PNRC Contributed Assets for
purposes of this Section 5.6(e) by reason of actual production therefrom and
otherwise only in accordance with prudent coal mining practices.
(f) Buyer agrees that PNRC shall not be allocated income by reason of
Section 704(c) of the Code in respect of any PNRC Contributed Asset other than
as described in Section 5.6(e) hereof as portions of the Reserves are mined from
the PNRC Contributed Assets or from any Reserves that are transferred in
exchange for any PNRC Contributed Assets (also, in this Section 5.6(f) "PNRC
Contributed Assets"), and without limiting the generality of the foregoing,
except as provided in Section 5.6(g) below, Buyer agrees that there will be no
sale, exchange or transfer of any PNRC Contributed Asset or any portion thereof
after which income is allocated to PNRC by reason of Section 704(c) of the Code
in excess of the amount of income that would be allocated to PNRC if Buyer held
each PNRC Contributed Asset as such asset was mined to exhaustion; provided,
however, this Section 5.6(f) shall not apply to any sale, exchange, or transfer
of any PNRC Contributed Asset or portion thereof (i) to any of the Seller
Parties pursuant to Article IX of this Agreement or (ii) pursuant to the Reserve
Substitution Agreement, provided that, Buyer has not placed the property to be
substituted up for sale; provided further, however, neither the existence of the
Reserve Substitution Agreement nor the exercise of any of the rights thereunder
shall be taken into account for purposes of determining whether the property has
been put up for sale.
(g) Buyer further agrees that if it sells, exchanges, or transfers any
of the PNRC Contributed Assets (other than pursuant to the proviso in Section
5.6(f)), then Buyer shall pay to PNRC an amount that is equal to the Clause (ii)
Present Value (as defined below) reduced by the Clause (i) Present Value (as
defined below) on the 60th day after the sale, exchange or transfer that caused
such breach.
(i) The amount of taxable income that would be allocated to
PNRC by reason of Section 704(c) of the Code in respect of the PNRC
Contributed Assets if such breach had not occurred shall be determined
based on the mining plan for the ▇▇▇ Ranch Mine that is attached hereto
as Schedule 3.13(c) for each calendar year (the "Closing Date Mining
Plan") that is not ended at the time at which the sale, exchange or
transfer occurs and the income taxes that would be payable by reason of
such taxable income shall be determined as 38 percent of such taxable
income and shall be assumed to be payable by PNRC on the March 15
following the end of each such calendar year. The "Clause (i) Present
Value" is the sum of the present values of such assumed tax payments on
the 60th day after such breach using a discount rate of six percent per
annum with annual compounding. As an illustration of the calculation of
"present value" at an interest rate of six percent per annum with
annual compounding, the present value of a payment that is to be made 2
years and 150 days after such 60th day is the product of (a) the amount
of such
26
payment divided by (b) the product of (x) 1.0 + (150/365) x .06, (y)
1.06 and (z) 1.06. It is assumed for the purposes of this Agreement
that each year has 365 days.
(ii) The taxable income that is allocable to PNRC by reason of
IRC Section 704(c) after such breach in respect of the PNRC Contributed
Assets that are retained by Buyer shall then be determined based on the
Closing Date Mining Plan and the income taxes that would be payable by
reason of such taxable income shall be determined as 38 percent of such
taxable income and shall be assumed to be payable by PNRC on the March
15 following the end of each such calendar year. The "Clause (ii)
Present Value" is the sum of the present values of such assumed tax
payments on the 60th day after such breach using a discount rate of six
percent per annum with annual compounding.
The Closing Date Mining Plan shall not be changed for any reason for purposes of
this Section 5.6(g).
(h) Buyer agrees to give PNRC notice promptly of any adjustment in the
Section 2.3 Borrowing that will reduce PNRC's share for purposes of Section 752
of the Code, except in the case of an amortization of the Section 2.3 Borrowing
or any refinancing thereof in accordance with its terms or any issuance of its
equity securities and the application of the proceeds. PNRC agrees to provide
Buyer after inquiry from Buyer with PNRC's adjusted basis in Buyer from time to
time. Buyer shall be under no obligation to determine PNRC's adjusted basis in
Buyer.
Section 5.7 Preparation of Proxy
As promptly as possible (but no later than one hundred twenty (120)
days) following the date of this Agreement, Buyer shall, in accordance with the
applicable provisions of the Exchange Act and the rules and regulations
thereunder and the listing requirements of the New York Stock Exchange, prepare
and file with the SEC a proxy statement soliciting the approval of the holders
of the Common Units of Buyer (the "Unitholders") in favor of conversion of the
Class B Common Units to Common Units (the "Conversion"). If the Conversion is
not approved at the special meeting called to approve the Conversion, upon the
expiration of one hundred eighty (180) days after the date of the Special
Meeting in which the Conversion was not approved, Seller may, by written notice,
require Buyer to prepare and file with the SEC an additional proxy statement
soliciting the approval of the Unitholders in favor of the Conversion; provided,
however, that Seller shall in no event exercise this right prior to December 19,
2003. Buyer agrees to engage a proxy solicitor, at Buyer's expense, in
connection with each proxy statement to solicit the affirmative votes of the
Unitholders in favor of the Conversion, and to take all other necessary and
appropriate action to support the Conversion.
Section 5.8 Option Agreement; Other Oil and Gas Operations
(a) Santa Fe Energy Company ("SFR") and Santa Fe Pacific Mining, Inc.
("Pacific"), were the original parties to that certain Lease Option Agreement
(the "Option Agreement") dated October 8, 1987 whereunder SFR has an option,
exercisable by written notice (the "Option Notice") to Pacific until October 8,
2007, to acquire for itself or third parties (a "Third Party") oil and gas
leases on lands subject to the Option Agreement and certain rights to explore
for hydrocarbons on the lands subject to the Option Agreement. PNRC has
succeeded to the rights
27
of Pacific in the Option Agreement. PNRC agrees that (i) in the event it
receives an Option Notice, it will promptly forward a copy of the Option Notice
to Buyer and (ii) it will exercise and enforce its rights under the Option
Agreement to restrict SFR or any Third Party from obtaining any lease on lands
located over the Reserves owned by Buyer or its Affiliates unless otherwise
consented to in writing by Buyer.
(b) Seller Group agrees that it will not, and it will not permit its
existing lessees, licensees and assignees or agents to conduct exploration,
development, drilling or mining operations for oil, gas, coal bed methane or any
reserved minerals (collectively, the "Other Minerals") in a manner that will
adversely affect any active coal mining operations on ▇▇▇ Ranch Reserves (as the
same may be substituted from time to time) in any material respect. Seller Group
agrees that Buyer's rights to have the coal mined, removed and developed from
the ▇▇▇ Ranch Reserves shall be superior to the rights reserved by Seller Group
with respect to Other Minerals. Seller Group agrees that it will not enter into
any leases or other agreements in the future granting any other Third Party the
right to, explore, develop, drill or mine for Other Minerals in a manner that
will adversely affect any active coal mining operations on ▇▇▇ Ranch Reserves
(as the same may be substituted from time to time) in any material respect.
Section 5.9 Further Assurances
At or after the Closing, each Party, at the request of any other Party,
will execute and deliver to the requesting Party all such further assignments,
deeds, agreements, contracts, instruments and other documents as the requesting
Party may reasonably request in order to perform, accomplish, perfect or record,
if reasonably necessary, the transactions contemplated by this Agreement and to
otherwise carry out the intention of this Agreement, including, without
limitation, Seller Group's obtaining the releases of any Encumbrances (other
than Permitted Encumbrances) on the Assets existing as of the Closing Date
without regard to any limitations contained in Section 7.2(b) for a period of
two years from the Closing Date.
ARTICLE VI
DELIVERABLES AT CLOSING
Section 6.1 Obligations of Buyer at Closing
At the Closing, subject to the simultaneous performance by Seller Group
of its obligations pursuant to Section 6.2, Buyer shall deliver or cause to be
delivered to Seller Group the following:
(a) A certificate or certificates representing the Units, duly endorsed
by the General Partner (delivery of a certificate representing the Escrow Amount
may be made to the Escrow Agent in accordance with Section 2.2).
(b) A wire transfer in the aggregate amount of the Cash Portion in
same-day funds to an account or accounts designated by Seller.
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(c) A registration rights agreement (the "Registration Rights
Agreement"), duly executed by Buyer, in substantially the form attached hereto
as Exhibit E.
(d) The GP LLC Agreement duly executed by Penn Virginia Resource GP
Corp. ("GP Sole Member"), in substantially the form attached hereto as
Exhibit F.
(e) The amendment to the Partnership Agreement (the "MLP Amendment"),
duly adopted and executed, in substantially the form attached hereto as
Exhibit G.
(f) The Escrow Agreement duly executed by Buyer.
(g) A reserve substitution agreement (the "Reserve Substitution
Agreement") duly executed by Acquisition LLC No. 1 and Acquisition LLC No. 2 in
substantially the form attached hereto as Exhibit H.
(h) Resolutions of the board of directors of General Partner approving
the creation of one additional seat on such board of directors to be granted to
Seller in accordance with the GP LLC Agreement.
(i) An opinion from ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P. substantially in the form
attached hereto as Exhibit I-1 and an opinion from the Vice President and
General Counsel of Penn Virginia Resources GP, LLC substantially in the form
attached hereto as Exhibit I-2.
(j) Amendment No. 1 to the Omnibus Agreement duly adopted and executed,
in substantially the form attached hereto as Exhibit J.
(k) A certificate signed by the Secretary or an Assistant Secretary of
General Partner certifying as to the truthfulness, completeness and accuracy of
attached copies of resolutions of General Partner's board of directors
authorizing the execution of this Agreement and all transactions contemplated
herein.
(l) Good standing certificates for each of Buyer and General Partner
issued by the Secretary of State of the State of Delaware dated not more than
five days prior to the Closing Date.
After completion of the preceding steps, Buyer shall deliver or cause to be
delivered to Seller Group one or more wire transfers in the payoff amount of the
PNRC Notes in same-day funds to an account or accounts designated by Seller as
required by Section 2.3 hereof.
Section 6.2 Obligations of Seller Group at Closing
At the Closing, subject to the simultaneous performance by Buyer of its
obligations pursuant to Section 6.1, Seller Group shall deliver or cause to be
delivered to Buyer the following:
29
(a) Assignments of the Membership Interests, duly executed by Seller,
in substantially the form attached hereto as Exhibit J.
(the "Membership Interests Assignments").
(b) The Registration Rights Agreement, duly executed by Seller.
(c) The GP LLC Agreement, duly executed by Seller as the special
member.
(d) The Escrow Agreement, duly executed by Seller and Escrow Agent,
including the State of New Mexico Assignments, duplicate duly executed originals
of which shall be attached as an exhibit to the Escrow Agreement and held by the
Escrow Agent pursuant to the Escrow Agreement.
(e) A release of the Federal Mortgage Lien, including appropriate UCC-3
termination statements, duly executed by Fleet Bank.
(f) A release of the ▇▇▇ Ranch Mortgage Lien, including appropriate
UCC-3 termination statements, duly executed by Fleet Bank.
(g) The Reserve Substitution Agreement duly executed by PNRC, EACC, and
▇▇▇▇▇.
(h) An opinion from ▇▇▇▇▇ ▇▇▇▇▇ L.L.P. substantially in the form
attached hereto as Exhibit L-1 and an opinion from the Vice President -- Legal
Services of Parent substantially in the form attached hereto as Exhibit L-2.
(i) A certificate signed by the Secretary or an Assistant Secretary of
each of Parent and Seller certifying as to the truthfulness, completeness and
accuracy of attached copies of resolutions of each of Parent's and Seller's
board of directors authorizing the execution of this Agreement and all
transactions contemplated herein.
(j) Good standing certificates of Parent, Seller and the Acquisition
LLCs issued by the Secretary of State of the State of Delaware and, with respect
to the Acquisition LLCs, foreign qualification certificates issued by the
Secretary of State of the States of New Mexico and West Virginia, in each case
dated not more than five days prior to Closing.
(k) The Certificates of Formation, Operating Agreements, Special
Warranty Deeds, the State Lease Assignments, Assignment of ▇▇▇ Ranch Surface
Rights, Leases, Coal Lease Assignments, and other agreements relating to the
formation of the Acquisition LLCs and the transfer of the Assets thereto, each
duly executed and delivered by the appropriate Parties thereto.
(l) The Peabody Guaranty of Obligations of Lessee Under ▇▇▇ Ranch Lease
and the Peabody Guaranty of Obligations of Lessee Under Federal Lease
(collectively, the "Parent Guarantees") substantially in the forms attached
hereto as Exhibit M-1 and Exhibit M-2, respectively, duly executed by Parent.
(m) The original PNRC Notes duly endorsed "paid in full" or other
similar endorsement by the payees.
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(n) All other documents or instruments as may be reasonably necessary
in order to convey to and vest in the Acquisition LLCs or Buyer the Assets as
contemplated by this Agreement.
ARTICLE VII
INDEMNIFICATION
Section 7.1 Survival of Representations and Warranties
The representations and warranties in Article III and Article IV shall
survive and remain in effect until the second anniversary of the Closing Date
whereupon they will terminate and expire; provided that, notwithstanding the
foregoing, (a) the representations and warranties contained in Sections 3.18 and
4.9 shall survive until the expiration of the applicable statute of limitations,
(b) the representations and warranties contained in Section 3.12 shall survive
for a period of three (3) years from the Closing Date, and (c) the
representations and warranties contained in Sections 3.2, 3.3, 3.6(d), 3.19, 4.2
and 4.3 shall have perpetual existence (each such period is hereinafter referred
to as the "Indemnity Period"). Notwithstanding the above, in the event that any
Party exercises its rights to substitute reserves under the Reserve Substitution
Agreement, Seller Group shall make the same representations and warranties as
contained in Article III with respect to the substituted El Segundo Reserves
taking into account the particular facts and circumstances present in connection
with the substituted El Segundo Reserves, and which representations and
warranties shall survive for the applicable time periods set forth above from
the applicable closing date of the transactions contemplated under the Reserve
Substitution Agreement.
Section 7.2 Seller Group's Agreement to Indemnify
(a) Subject to the terms and conditions set forth herein, from and
after the Closing, each member of the Seller Group, jointly and severally, shall
indemnify and hold harmless Buyer and its General Partner and their respective
partners, directors, officers, employees, affiliates, controlling persons,
agents and representatives and their successors and assigns (collectively,
"Buyer Indemnitees") from and against all liability, demands, claims, actions or
causes of action, assessments, penalties, fines, settlements, judgments, losses,
damages, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) (collectively, "Buyer Damages") asserted against
or incurred by any Buyer Indemnitee as a result of or arising out of (i) a
breach by Seller Group of any representation or warranty contained in Article
III of this Agreement without regard to qualifications for materiality or
Material Adverse Effect, (ii) a breach by Seller Group of any agreement or
covenant of Seller in this Agreement or (iii) the Retained Liabilities. Buyer
agrees that the indemnification provided in this Section 7.2 is the exclusive
remedy for a breach by Seller Group of the items listed in (i), (ii) and (iii)
above of this paragraph; provided, however, that nothing in this Agreement shall
affect Buyer's right to recover under the Special Warranty Deeds.
(b) Seller Group's obligation to indemnify Buyer Indemnitees pursuant
to Section 7.2(a)(i) hereof are subject to the following limitations:
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(i) No indemnification shall be made by Seller Group with
respect to any claim (other than the right to indemnification for a
breach of the representations under Sections 3.2, 3.3, 3.17 and 3.19,
which shall not be limited as to the amount of the claim or the time at
which any claim may be brought under this Agreement) unless the
aggregate amount of Buyer Damages under all claims under this Article
VII exceeds an amount equal to $500,000 and then only to the extent
such Buyer Damages exceed $500,000.
(ii) Seller Group shall be obligated to indemnify Buyer
Indemnitees only for those claims giving rise to Buyer Damages for
which Buyer Indemnitees have given Seller Group written notice thereof
prior to the end of the applicable Indemnity Period in the event that
an Indemnity Period applies to such Buyer Damages. Any written notice
delivered by a Buyer Indemnitee to Seller Group with respect to Buyer
Damages shall set forth with as much specificity as is reasonably
practicable the basis of the claim for Buyer Damages and, to the extent
reasonably practicable, a reasonable estimate of the amount thereof.
Section 7.3 Buyer's Agreement to Indemnify
(a) Subject to the terms and conditions set forth herein, from and
after the Closing, Buyer shall indemnify and hold harmless Seller Group and
their directors, officers, employees, affiliates, controlling persons, agents
and representatives and their successors and assigns (collectively, the "Seller
Indemnitees") from and against all liability, demands, claims, actions or causes
of action, assessments, penalties, fines, settlements, judgments, losses,
damages, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) (collectively, "Seller Damages") asserted against
or incurred by any Seller Indemnitee as a result of or arising out of (i) a
breach by Buyer of any representation or warranty contained in Article IV of
this Agreement, in each case, without regard to qualifications for materiality
or material adverse effect or (ii) a breach by Buyer of any agreement or
covenant of Buyer in this Agreement. Seller agrees that the indemnification
provided in this Section 7.3 is the exclusive remedy for a breach by Buyer of
the items listed in (i) and (ii) above of this paragraph.
(b) Buyer's obligations to indemnify Seller Indemnitees pursuant to
Section 7.3(a)(i) hereof are subject to the following limitations:
(i) No indemnification shall be made by Buyer with respect to
any claim (other than the right to indemnification for a breach of the
representations under Sections 4.2, 4.3 and 4.12, which shall not be
limited as to the amount of the claim or the time at which any claim
may be brought under this Agreement) unless the aggregate amount of
Seller Damages under all claims under this Article VII exceeds an
amount equal to $500,000 and then only to the extent of such Seller
Damages exceed $500,000.
(ii) Buyer shall be obligated to indemnify the Seller
Indemnitees only for those claims giving rise to Seller Damages for
which the Seller Indemnitees have given Buyer written notice thereof
prior to the end of the applicable Indemnity Period in the event that
an Indemnity Period applies to such Seller Damages. Any written notice
delivered by a Seller Indemnitee to Buyer with respect to Seller
Damages shall set forth
32
with as much specificity as is reasonably practicable the basis of the
claim for Seller Damages and, to the extent reasonably practicable, a
reasonable estimate of the amount thereof.
Section 7.4 Third Party Indemnification
The obligations of any indemnifying Person to indemnify any indemnified
Person under this Article VII with respect to Buyer Damages or Seller Damages,
as the case may be, resulting from the assertion of liability by third Persons
(a "Claim"), will be subject to the following terms and conditions:
(a) Any Persons against whom any Claim is asserted will give the
indemnifying Person written notice of any such Claim (which notice shall include
reasonably specified details regarding such Claim, an estimate of the Buyer
Damages or Seller Damages, as applicable, and the specific basis under this
Agreement for such Claim) promptly after learning of such Claim, and the
indemnifying Person may at its option undertake the defense thereof by counsel
of its own choosing (which shall be reasonably acceptable to the Person being
indemnified); provided, however, the indemnified Person shall have the right to
participate in any matter through counsel of its own choosing at its own
expense; provided further, however, that the indemnifying Person shall pay the
fees and expenses of separate counsel for the indemnified Person if (i) the
indemnifying Person has agreed to pay such fees and expenses or (ii) the named
parties to any such action or proceeding (including any impleaded parties)
include both the indemnified Person and the indemnifying Person, and such
indemnified Person shall have been advised by counsel that the representation of
both parties would be inappropriate due to actual or potential differing
interests between them (in which case, if such indemnified Person notifies the
indemnifying Person in writing that it elects to employ separate counsel at the
expense of the indemnifying Person, the indemnifying Person shall not have the
right to assume the defense of such Claim on behalf of such indemnified Person;
it being understood, however, that the indemnifying Person shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together with appropriate
local counsel) at any time for such indemnified Person, which firm shall be
designated in writing by such indemnified Person). Failure to give prompt notice
of a Claim hereunder shall not affect the indemnifying Person's obligations
under this Article VII, except to the extent that the indemnifying Person is
materially prejudiced by such failure to give prompt notice. If the indemnifying
Person elects to assume the defense of the Claim, the indemnified Person shall
provide the indemnifying Person with reasonable access to its records and
personnel relating to such Claim and shall otherwise cooperate with the
indemnifying Person in the defense or settlement of the Claim. If the
indemnifying Person, within thirty (30) days after notice of any such Claim,
fails to assume the defense of such Claim, or thereafter fails to diligently
defend such Claim, the indemnified Person against whom such Claim has been made
will (upon further written notice to the indemnifying Person) have the right to
undertake the defense, compromise or settlement of such Claim on behalf of and
for the account and risk, and at the expense, of the indemnifying Person.
(b) Anything in this Section 7.4 to the contrary notwithstanding, (i)
the indemnified Person shall not settle, compromise or pay a claim for which it
is indemnified without the prior
33
written consent of the indemnifying Person, which consent shall not be
unreasonably withheld, and (ii) the indemnifying Person shall not enter into any
settlement or compromise of any action, suit or proceeding or consent to the
entry of any judgment for other than monetary damages to be borne by the
indemnifying Person, without the prior written consent of the indemnified
Person, which consent shall not be unreasonably withheld.
ARTICLE VIII
AMENDMENT AND WAIVER
The Parties may (a) amend this Agreement, (b) extend the time for the
performance of any of the obligations or other acts of the Parties, (c) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto, and (d) waive compliance with any of the
covenants, agreements or conditions contained herein, in each case only by an
instrument in writing signed on behalf of each Party.
ARTICLE IX
CHANGE OF CONTROL; RIGHT OF FIRST OFFER
Section 9.1 Change of Control
(a) For so long as any of the Leases (or any amendments thereof or
substitutes therefor) are in force, promptly, but in no event more than ten days
after the earlier of (X) the execution of a definitive agreement contemplating a
Change of Control (as defined below) or (Y) the occurrence of a Change of
Control, Buyer shall give Seller Group written notice of such event (a "Change
of Control Notice"). Seller Group shall have the right, unless waived by Seller
Group, exercisable by written notice to Buyer (an "Acceptance Notice") within 30
days after receipt of the Change of Control Notice, to purchase all, but not
less than all, of the Assets subject to a Lease with Affiliates of Seller Group
and that are then owned by Buyer or any of its Affiliates, as such Assets then
exist, free and clear of Encumbrances other than Permitted Encumbrances (the
"Then-Existing Assets"), in its own name or through one or more designated
Affiliates by payment of immediately available funds of the Change of Control
Price (as defined below) as of the date of closing of the transaction
constituting a Change of Control (the "Change of Control Date") on the later of
(x) the Change of Control Date or (y) ten days after the determination of the
Change of Control Price (the later of (x) or (y), the "Purchase Date").
(b) If Seller Group exercises its rights as provided in Section 9.1(a),
Seller Group shall be obligated to purchase the then-Existing Assets on the
Purchase Date at the Change of Control Price and on otherwise substantially the
same terms provided in this Agreement for the purchase of the Assets by Buyer at
the Closing by payment of immediately available funds and the Reserve
Substitution Agreement and the Leases shall terminate as provided therein.
(c) If Seller Group exercises its rights under Section 9.1(a), Buyer
and Seller Group shall cooperate in good faith and enter into the appropriate
agreements and make required deliveries to effect the transfer of title to the
Then-Existing Assets to Seller Group as
34
contemplated by Section 9.1(a) and to otherwise cooperate to effect such
transfer in a tax-efficient manner for Buyer and Seller Group.
(d) If prior to the expiration of the Negotiation Period, Buyer and
Seller Group are unable to agree on the Change of Control Price or either Buyer
or Seller Group desires not to negotiate with the other, each Party shall
appoint an Eligible Investment Bank of its choice within five days after the
Negotiation Period (as defined below). The two Eligible Investment Banks
appointed by the respective Parties shall appoint a third Eligible Investment
Bank not later than five days after such two Eligible Investment Banks have been
so appointed. Within 20 days from the appointment of the third Eligible
Investment Bank, each Eligible Investment Bank appointed as aforesaid shall
provide the Parties with a written valuation, with appropriate documentation,
setting forth its valuation of the Fair Market Value in U.S. dollars, of the
then expected remaining royalty income stream attributable to the Then-Existing
Assets at the per ton royalty amounts set forth in the Leases (or any amendments
thereof or substitutes therefor) to be paid to Buyer thereunder. The Change of
Control Price shall be the average of the two highest valuations; provided,
however, that for purposes of calculating the average, the highest valuation
shall in no event be deemed to be more than 10% above the second highest
valuation.
The determination of the Change of Control Price pursuant to this
Section 9.3(d) shall be final and binding on the Parties, and shall not be
appealable. Each Party shall be responsible for the costs and expenses of its
Eligible Investment Bank appointee, and the costs of the third Eligible
Investment Bank shall be shared equally by the Parties.
(e) For the purposes of this Agreement,
"Change of Control" shall occur if: (i) any "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than
Seller Group or any of their Affiliates, becomes the "beneficial owner(s)" (as
defined in Rule 13d-3 of the Exchange Act) of equity securities of (A) Penn
Virginia Corporation, a Virginia corporation ("PVA") (other than a wholly-owned
Subsidiary of PVA), which entitle the holder thereof to control more than fifty
percent (50%) of the total voting power of PVA, (B) the General Partner (other
than a Subsidiary of PVA) which entitles the holder thereof to control more than
fifty percent (50%) of the total combined voting power of the General Partner,
or (C) the Buyer (other than a Subsidiary of PVA) which entitle the holder
thereof to control more than fifty percent (50%) of the total combined voting
power of Common Units and Parity Units (as defined in the Partnership Agreement)
of Buyer; (ii) the equity security holders of PVA or Buyer approve a merger,
reorganization, consolidation, exchange of equity interests, recapitalization,
restructuring or other business combination which results in beneficial
ownership of more than fifty percent (50%) of the total voting power of PVA or
Buyer being transferred to a Person or Persons other than PVA or any of its
Subsidiaries or Seller Group or any of their Affiliates, unless the equity
securityholders of PVA or Buyer, as applicable, immediately before such
transaction beneficially own, directly or indirectly, immediately following such
transaction, at least a majority of the combined voting power of the outstanding
voting securities of the Person resulting from such transaction or the Person
acquiring such properties and assets, entitled to vote generally on the election
of such resulting or acquiring Person's directors, in substantially the same
proportion as their ownership of such equity securities immediately before such
transaction; (iii) there occurs a sale of all or substantially all of the assets
of PVA or Buyer to a Person other than Seller Group
35
or any of their Affiliates or any Affiliates of PVA or Buyer; or (iv) Continuing
Directors cease to comprise a majority of the directors on the board of
directors of the General Partner of Buyer.
"Change of Control Price" shall mean the price agreed upon between
Buyer and Seller Group prior to the expiration of Negotiation Period; provided,
however, that if Buyer and Seller Group are unable to agree within the
Negotiation Period or either Buyer or Seller Group desires not to negotiate with
the other, the Change of Control Price shall mean the Fair Market Value, as
determined in accordance with Section 9.1(d).
"Continuing Directors" shall mean, with respect to a Person, (x) all
individuals constituting the board of directors of such Person as of the date of
this Agreement, (y) all individuals hereafter designated as nominees for
election to the board of directors of such Person by a majority of the
Continuing Directors who were members of such board of directors at the time of
such nomination or election and (z) all individuals hereinafter designated as
nominees to the board of directors of such Person by Seller or any of its
Affiliates.
"Eligible Investment Bank" shall mean any of ▇▇▇▇▇▇ Brothers, Inc., UBS
Warburg, LLC, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, Merrill, Lynch, ▇▇▇▇▇▇, ▇▇▇▇▇▇
& ▇▇▇▇▇, Incorporated, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney, Inc., ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇.▇.
▇▇▇▇▇▇ Securities, Inc., ▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc., and RBC Capital Markets and
their respective successors and assigns.
"Fair Market Value" shall mean the price that a willing buyer would pay
to a willing seller after due inquiry on an arm's length basis as determined in
accordance with Section 9.1(d).
"Negotiation Period" shall mean the ten day period after delivery of
the Acceptance Notice.
"Subsidiary" shall mean, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of the capital interests of such Person entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof or, in the case of a partnership, more than 50% of the
partners' capital interests (considering all partners' capital interests as a
single class), is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of such Person or a
combination thereof.
Section 9.2 Restriction on Sale of the Assets
(a) So long as any of the Leases are in effect, for a period of four
years from the Closing Date (the "Lock-up Period"), without the written consent
of Parent, Buyer shall not (i) sell, transfer or assign the Assets to any Person
other than its Affiliates who agree to be bound by this Agreement, the Leases,
the Reserve Substitution Agreement and all other documents or agreements in
connection herewith and therewith without the written consent of Parent or (ii)
merge together or otherwise combine the Acquisition LLCs or the assets owned by
the Acquisition LLCs. This Section 9.2(a) shall not apply to any pledge to a
financial institution, foreclosure pursuant to such a pledge or subsequent sale
by such financial institution upon foreclosure.
36
(b) After the expiration of the Lock-Up Period, subject to Section 9.3,
Buyer may sell, transfer or assign (i) all of the Assets, (ii) all, but not less
than all of the ▇▇▇ Ranch Assets subject to the ▇▇▇ Ranch Lease or (iii) all,
but not less than all, of the Federal Assets subject to the Federal Lease.
Section 9.3 Right of First Refusal
(a) After the Lock-up Period, for so long as any of the Leases (or any
amendments thereof or substitutions therefor) are in force, if Buyer receives a
bona fide arms-length written offer in cash from a Person other than Seller
Group or an affiliate of Seller Group (the "Third Party Offeror") with respect
to the sale of (i) all of the Assets, (ii) all, but not less than all, of the
Federal Assets or (iii) all, but not less than all, of the ▇▇▇ Ranch Assets,
then subject to the Leases (the "Subject Interests") which Buyer desires to
accept, Buyer shall give Seller Group the opportunity to purchase the Subject
Interests by giving written notice (the "Offer Notice") to Seller Group,
specifying the purchase price in cash by the Third Party Offeror;
(b) Seller Group shall have the right, exercisable by written notice to
Buyer (the "Acceptance Notice"), within ten days after receipt of the Offer
Notice to purchase the Subject Interests at the price in cash set forth in the
Offer Notice;
(c) If Seller Group exercises its right of first refusal hereunder, the
closing for the transaction shall take place within 30 days after the date the
Seller Group delivers the Acceptance Notice as extended by the time period (i)
in which a Registration Statement shall be unavailable pursuant to Section 3(f)
or Section 6 of the Registration Rights Agreement, in the event Seller Group
shall have delivered to Buyer an officer's certificate from Seller Group that
Seller Group plans to finance such purchase price from the proceeds of a public
offering of Common Units during the period of such unavailability or (ii)
required to obtain necessary approvals or consents, which the Parties shall use
their best efforts to obtain;
(d) If Seller Group exercises its right of first offer hereunder, Buyer
and Seller Group shall each be legally obligated to consummate the purchase
contemplated thereby, shall promptly secure all approvals and comments required
in connection therewith;
(e) If Seller Group does not exercise its right under this Section 9.3
within the time period required, Buyer shall be free to sell the Assets
specified in the Offer Notice at the price specified therein or at any price in
excess thereof for a twelve month period.
(f) This Section 9.3 shall not apply to any pledge to a financial
institution, foreclosure pursuant to such a pledge or subsequent sale by such
financial institution upon foreclosure.
37
ARTICLE X
MISCELLANEOUS
Section 10.1 Assignment
The rights and obligations of a Party arising under this Agreement, or
any interest therein, shall not be assigned or otherwise transferred, in whole
or in part, without obtaining the prior written consent of the other Parties,
and any assignment or other transfer made without such consent shall be void;
provided, however, that Seller (and not Parent) may, upon prior written notice
to Buyer, assign its rights and obligations arising under this Agreement to an
Affiliate without the consent of Buyer. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns.
Section 10.2 Notice
Except as otherwise specified in this Agreement, all notices, requests,
demands and other communications under this Agreement shall be in writing and
shall be deemed to have been duly given upon receipt, if delivered personally,
mailed by registered or certified mail (postage prepaid, return receipt
requested) to the Parties at the following addresses or sent by electronic
transmission to the facsimile number specified below:
To either member of Seller Group at:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Executive Vice President and Chief Financial Officer
Peabody Energy Corporation
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Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Vice President - Legal Services
Peabody Energy Corporation
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Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
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To Buyer at:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Vice President and General Counsel
Penn Virginia Resource Partners, L.P.
One Radnor Corporate Center, ▇▇▇▇▇ ▇▇▇
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Telecopy No. ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
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Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may change its address for the purposes of this Section 10.2 by giving
the other Parties written notice of the new address in the manner set forth
above.
Section 10.3 Third Parties
Nothing in this Agreement, whether expressed or implied, is intended to
confer any rights or remedies under or by reason of this Agreement on any
Persons other than the Parties and their respective successors and permitted
assigns (except for the Buyer Indemnitees and Seller Indemnitees with respect to
the indemnification rights provided to such Persons under Article VII), nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third Person to any Party, nor shall any provision give any
third Person any right of subrogation or action over or against any Party.
Section 10.4 Governing Law
This Agreement shall be governed by, and construed and interpreted in
accordance with, the Laws and Regulations of the State of Delaware.
Section 10.5 Limitation on Damages
Notwithstanding anything to the contrary contained herein, none of the
Parties or any of their respective Affiliates shall be entitled to special,
consequential or punitive damages in connection with this Agreement and the
transactions contemplated hereby (other than special, consequential or punitive
damages suffered by third Persons for which responsibility is allocated between
the Parties) and each of Parent, Seller and Buyer, for itself and on behalf of
its Affiliates, hereby expressly waives any right to special, consequential or
punitive damages in connection with this Agreement and the transactions
contemplated hereby, except with respect to any claims for damages against any
party resulting from such party's own fraud or willful misrepresentation.
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Section 10.6 Entire Agreement
This Agreement, together with the attached Schedules and Exhibits and
the other instruments delivered at the Closing, and the Confidentiality
Agreement, constitute the entire agreement between the Parties with respect to
the subject matter hereof and thereof, and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
Parties pertaining to the subject matter hereof or thereof.
Section 10.7 Benefit
This Agreement shall be binding upon and shall only inure to the
benefit of the parties hereto, their respective successors and permitted
assigns.
Section 10.8 Headings
The table of contents and headings contained in this Agreement are
included for purposes of convenience of reference only and shall not affect the
construction or interpretation of any of its provisions.
Section 10.9 Construction
In this Agreement:
(a) References to any gender includes a reference to both genders.
(b) References to the singular includes the plural, and vice versa.
(c) Reference to any Article or Section means an Article or Section of
this Agreement.
(d) Reference to any Exhibit or Schedule means an Exhibit or Schedule
to this Agreement, all of which are incorporated into and made a part of this
Agreement.
(e) Unless expressly provided to the contrary, "hereunder", "hereof",
"herein" and words of similar import are references to this Agreement as a whole
and not any particular Section or other provision of this Agreement.
(f) "Include" and "including" shall mean include or including without
limiting the generality of the description preceding such term.
Section 10.10 Severability
In the event one or more of the provisions of this Agreement shall, for
any reason, be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision of this Agreement, and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision was not a part of this Agreement.
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Section 10.11 Drafting
No inference shall be drawn in favor of or against any Party based upon
its participation in the drafting of this Agreement or any of the other
documents referenced herein.
Section 10.12 Counterparts
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers duly authorized as of the date first
written above.
PARENT:
PEABODY ENERGY CORPORATION, a Delaware
corporation
By:
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President
SELLER:
EASTERN ASSOCIATED COAL CORP.,
a West Virginia corporation
By:
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
SELLER:
PEABODY NATURAL RESOURCES COMPANY,
a Delaware general partnership
By: GOLD FIELDS MINING CORPORATION,
its partner
By:
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
BUYER:
PENN VIRGINIA RESOURCE PARTNERS, L.P.,
a Delaware limited partnership
By: PENN VIRGINIA RESOURCE GP, LLC,
its general partner
By:
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
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