Exhibit 10.1
EXECUTION COPY
SEPARATION AGREEMENT, PLAN OF REORGANIZATION AND DISTRIBUTION
by and between
PEABODY
ENERGY CORPORATION
and
PATRIOT COAL CORPORATION
Dated as of October 22, 2007
SEPARATION AGREEMENT, PLAN OF REORGANIZATION AND DISTRIBUTION
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ARTICLE I DEFINITIONS
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1
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Section 1.01.
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Definitions
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1
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ARTICLE II REORGANIZATION; CONVEYANCE OF CERTAIN ASSETS;
ASSUMPTION OF CERTAIN LIABILITIES; CERTAIN PAYMENTS; AND TRANSITION ARRANGEMENTS
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13
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Section 2.01.
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Reorganization
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13
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Section 2.02.
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Conveyance of Assets; Discharge of Liabilities
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13
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Section 2.03.
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Ancillary Agreements
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15
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Section 2.04.
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Issuance of Patriot Common Stock
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Section 2.05.
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Resignations
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Section 2.06.
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Limitation of Liability
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Section 2.07.
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Novation of Liabilities; Consents
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Section 2.08.
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Assignment of Promissory Notes
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ARTICLE III the DISTRIBUTION
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Section 3.01.
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Cooperation Prior to the Distribution
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Section 3.02.
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Conditions Precedent to the Distribution
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Section 3.03.
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The Distribution
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ARTICLE IV COVENANTS
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Section 4.01.
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Bank Accounts
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20
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Section 4.02.
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Guaranteed Patriot and PEC Liabilities
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Section 4.03.
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Insurance
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Section 4.04.
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No Hire; No Solicit
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Section 4.05.
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Legal Names and Signage
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Section 4.06.
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Auditors and Audits; Annual and Quarterly Financial Statements and Accounting
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Section 4.07.
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No Restrictions on Post-Closing Competitive Activities; Corporate Opportunities
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Section 4.08.
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Right of Offset
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Section 4.09.
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[Intentionally Omitted]
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31
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Section 4.10.
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Prairie State Permits
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ARTICLE V LITIGATION MATTERS
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Section 5.01.
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Case Allocation
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Section 5.02.
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Litigation cooperation
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ARTICLE VI INDEMNIFICATION
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Section 6.01.
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Patriot Indemnification of the PEC Group
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Section 6.02.
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PEC Indemnification of Patriot Group
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Section 6.03.
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Contribution
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35
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Section 6.04.
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Insurance and Third Party Obligations
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Section 6.05.
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Indemnification Obligations Net of Insurance Proceeds and Other Amounts on a Net-Tax Basis
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36
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Section 6.06.
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Notice and Payment of Claims
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Section 6.07.
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Notice and Defense of Third Party Claims
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ARTICLE VII EMPLOYEE MATTERS
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Section 7.01.
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Employee Matters Agreement
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ARTICLE VIII TAX MATTERS
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2
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Section 8.01.
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Tax Separation Agreement
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ARTICLE IX ACCOUNTING MATTERS
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Section 9.01.
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Intercompany Accounts
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ARTICLE X INTELLECTUAL PROPERTY MATTERS
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Section 10.01.
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Software License Agreement
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ARTICLE XI TRANSITION Services
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Section 11.01.
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Transition Services Agreement
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ARTICLE XII REAL PROPERTY MATTERS
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Section 12.01.
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Real Property Agreements
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ARTICLE XIII INFORMATION; SEPARATION OF DATA
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Section 13.01.
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Provision of Corporate Records
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Section 13.02.
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Access to Information
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Section 13.03.
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Retention of Records
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Section 13.04.
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Confidentiality
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40
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Section 13.05.
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Privileged Matters
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41
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Section 13.06.
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Ownership of Information
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Section 13.07.
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Separation of Data
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ARTICLE XIV INTEREST ON PAYMENTS
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Section 14.01.
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Interest
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ARTICLE XV MISCELLANEOUS
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Section 15.01.
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Expenses
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Section 15.02.
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Notices
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Section 15.03.
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Amendment and Waiver
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45
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Section 15.04.
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Entire Agreement
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45
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Section 15.05.
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Consolidation, Merger, Etc.; Parties in Interest; Termination
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45
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Section 15.06.
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Further Assurances and Consents
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Section 15.07.
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Severability
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Section 15.08.
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Governing Law; Jurisdiction
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46
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Section 15.09.
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Counterparts
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46
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Section 15.10.
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Third Party Beneficiaries
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Section 15.11.
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Specific Performance
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46
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Section 15.12.
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Limitations of Liability
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47
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Section 15.13.
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Force Majeure
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47
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Section 15.14.
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Construction
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47
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Section 15.15
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Disputes
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47
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Exhibits:
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Exhibit A
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Table of Patriot Entities
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Exhibit B
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Employee Matters Agreement
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Exhibit C
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Real Property Agreements
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Exhibit D
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Software License Agreement
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Exhibit E-1
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Coal Act Liability Assumption Agreement
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Exhibit E-2
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NBCWA Liability Assumption Agreement
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Exhibit E-3
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Salaried Employee Liability Assumption Agreement
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Exhibit F
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Tax Separation Agreement
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Exhibit G
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Transition Services Agreement
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Exhibit H
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Master Equipment Sublease Agreement
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Exhibit I
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Common Interest Agreement
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Exhibit J-1
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Coal Supply Agreement I
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Exhibit J-2
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Coal Supply Agreement II
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Exhibit J-3
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Master Coal Supply Agreement
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Exhibit K
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Administrative Services Agreement
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Exhibit L
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TECO Overriding Royalty Agreement
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Exhibit M
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DTA Throughput Agreement
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Exhibit 2.01
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Restructuring Steps
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Schedules:
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Schedule 1.1(a)
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Assumed Patriot Liabilities
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Schedule 1.1(b)
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Patriot Contracts
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Schedule 1.1(c)
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Patriot Liabilities
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Schedule 1.1(d)
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Patriot Liabilities related to Indebtedness
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Schedule 2.02(g)
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Conveyance of Assets
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Schedule 2.06(b)
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Limitation of Liability
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Schedule 2.08(a)
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Promissory Notes
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Schedule 3.02(q)
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Released Obligations
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Schedule 4.01(a)
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Patriot Bank Accounts
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Schedule 4.02(a)
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Guaranteed Patriot Liabilities
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Schedule 4.02(b)
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Guaranteed PEC Liabilities
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Schedule 4.10(a)
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Prairie State Reorganization Steps
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Schedule 4.10(b)
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Prairie State Permits
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Schedule 5.01(a)
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Patriot Actions
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Schedule 5.01(b)
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PEC Actions
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Schedule 5.01(e)
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Joint Actions
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Schedule 9.01(a)
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Intercompany Accounts
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Schedule 15.01
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Expenses to be paid by Patriot
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SEPARATION AGREEMENT, PLAN OF REORGANIZATION AND DISTRIBUTION
SEPARATION AGREEMENT, PLAN OF REORGANIZATION AND DISTRIBUTION (this Agreement), dated as of
October 22, 2007, by and between Peabody Energy Corporation, a Delaware corporation (PEC) and
Patriot Coal Corporation, a Delaware corporation (Patriot and together with PEC, the Parties,
and each individually, a Party).
RECITALS
A. Patriot is a wholly-owned subsidiary of PEC formed for the purpose of taking title to the
stock of certain PEC subsidiaries, the assets and liabilities of which constitute the coal mining
business of PEC in West Virginia, all coal mines and certain coal reserves in Kentucky and certain
coal reserves in the states of Ohio and Illinois.
B. The Board of Directors of PEC has determined that it is in the best interests of PEC and
its shareholders to transfer and assign to Patriot effective at and after the Effective Time (as
defined herein) and as a contribution to the capital of Patriot, the capital stock of the PEC
subsidiaries that currently operate the Patriot Business (as defined herein) as listed in
Exhibit A
hereto and certain related assets and to receive in exchange therefor shares of
Patriot Common Stock (as defined herein).
C. The Board of Directors of PEC has further determined that it is in the best interests of
PEC and its shareholders to make a distribution (the Distribution) to the holders of PEC Common
Stock (as defined herein) of all of the outstanding shares of Patriot Common Stock at the rate of
one share of Patriot Common Stock for every ten shares of PEC Common Stock outstanding as of the
Record Date (as defined herein).
D. The Parties intend that the Contribution (as defined herein) constitute a reorganization
described in Section 368(a)(1)(D) of the Code (as defined herein) and that the Distribution not be
taxable to PEC or its shareholders pursuant to Section 355 of the Code.
E. The Parties have determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect the Contribution and the Distribution and to set forth
other agreements that will govern certain other matters following the Distribution.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements and
covenants contained in this Agreement and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01.
Definitions
. As used herein, the following terms have the following
meaning:
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Action means any claim, suit, arbitration, inquiry, proceeding, or investigation by or
before any court, governmental or other regulatory or administrative agency or commission or any
other tribunal.
Administrative Services Agreement means the Administrative Services Agreement, substantially
in the form of Exhibit K hereto, entered into at or prior to the Effective Time, between Patriot
and Peabody Holding Company, LLC, a wholly-owned subsidiary of PEC (Peabody Holding), as amended
from time to time.
Affiliate means, when used with respect to a specified Person, a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or is under common
control with such specified Person. For the purposes of this definition, control, when used with
respect to any specified Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person, whether through the
ownership of voting securities or other interests, by contract or otherwise.
Ancillary Agreements means all of the written agreements, instruments, understandings,
assignments and other arrangements (other than this Agreement) entered into in connection with the
transactions contemplated hereby, including, without limitation, the Employee Matters Agreement,
the Tax Separation Agreement, the Transition Services Agreement, the Software License Agreement,
the Real Property Agreements, the Liability Assumption Agreements, the Master Equipment Sublease
Agreement, the Administrative Services Agreement, the Common Interest Agreement, the TECO
Overriding Royalty Agreement, the DTA Throughput Agreement, the Coal Supply Agreements and other
documents relating to the transfer of assets and liabilities in contemplation of the Contribution
and Distribution.
Applicable Rate means the Prime Rate plus 2.0% per annum.
Assets means all properties, rights, contracts, leases and claims, of every kind and
description, wherever located, whether tangible or intangible, and whether real, personal or mixed.
Assumed Patriot Liabilities means those Patriot Liabilities assumed by PEC as set forth on
Schedule 1.1(a)
.
Black Lung Benefit Guarantees is defined in Section 4.02(a)(iv).
Black Lung Benefit Liabilities means (i) liabilities in respect of the Black Lung Benefits
Revenue Act of 1977 and the Black Lung Benefits Reform Act of 1977, as amended in 1981, and (ii)
liabilities in respect of occupational disease workers compensation liabilities and traumatic
workers compensation liabilities (including, without limitation, in respect of black lung disease)
arising under state law, in each case with respect to any member of the Patriot Group.
BofA is defined in Section 15.01.
Claims Administration means the administration of claims made under the Third Party
Policies, including the reporting of claims to the unaffiliated, third-party insurance carriers
that
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issued the Third Party Policies, management and defense of such claims, negotiating the
resolution of such claims, and providing for appropriate releases upon settlement of such claims.
Coal Supply Agreements means (i) the Coal Supply Agreement I, substantially in the form of
Exhibit J-1
hereto, entered into at or before the Effective Time between COALSALES II, LLC
and Patriot Coal Sales LLC, (ii) the Coal Supply Agreement II, substantially in the form of
Exhibit J-2
hereto, entered into at of before the Effective Time between COALSALES, LLC and
Patriot Coal Sales LLC, and (iii) each agreement entered into by Patriot Coal Sales LLC,
substantially in the form of the Master Coal Supply Agreement attached hereto as
Exhibit
J-3
, each of which as amended from time to time.
Code means the United States Internal Revenue Code of 1986, as amended.
Commission means Securities and Exchange Commission.
Common Interest Agreement means the Common Interest Agreement, substantially in the form of
Exhibit I
hereto, entered into at or prior to the Effective Time, between PEC and Patriot,
as amended from time to time.
Confidential Information means all business or operational information concerning a Party
and/or its subsidiaries (including (i) earnings reports and forecasts, (ii) macro-economic reports
and forecasts, (iii) business and strategic plans, (iv) general market evaluations and surveys, (v)
litigation presentations and risk assessments, (vi) budgets, (vii) financing and credit-related
information, (viii) specifications, ideas and concepts for products and services, (ix) quality
assurance policies, procedures and specifications, (x) customer information, (xi) Software, (xii)
training materials and information, and (xiii) all other know-how, methodology, procedures,
techniques and trade secrets related to design, development and operational processes) which, prior
to or following the Effective Time, has been disclosed by a Party or its subsidiaries to the other
Party or its subsidiaries, in written, oral (including by recording), electronic, or visual form
to, or otherwise has come into the possession of, the other (except to the extent that such
information can be shown to have been (i) in the public domain through no action of such Party or
its subsidiaries or (ii) lawfully acquired from other sources by such Party or its subsidiaries to
which it was furnished;
provided
,
however
, in the case of clause (ii) that, to the
furnished Partys knowledge, such sources did not provide such information in breach of any
confidentiality obligations).
Contribution is defined in Section 2.01.
Distribution is defined in the recitals to this Agreement.
Distribution Agent means American Stock Transfer & Trust Company, in its capacity as agent
for PEC in connection with the Distribution.
Distribution Date means the date upon which the Distribution shall be effective, as
determined by the Board of Directors of PEC, or such committee of such Board of Directors as shall
be designated by the Board of Directors of PEC.
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DTA Throughput Agreement means the Throughput Agreement, substantially in the form of
Exhibit M
hereto, entered into at or before the Effective Time between Peabody Terminals,
LLC, James River Coal Terminal, LLC and Patriot Coal Sales LLC, as amended from time to time.
Effective Time means 11:59 p.m. New York time on the Distribution Date.
Employee Matters Agreement means the Employee Matters Agreement, substantially in the form
of
Exhibit B
hereto, entered into at or prior to the Effective Time between PEC and
Patriot, as amended from time to time.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Force Majeure means, with respect to a Party, an event beyond the reasonable control of such
Party (or any Person acting on its behalf), which by its nature could not have been foreseen by
such Party (or such Person), or, if it could have been foreseen, was unavoidable, and includes acts
of God, storms, floods, earthquakes, hurricanes, riots, pandemics, fires, sabotage, strikes,
lockouts, civil commotion or civil unrest, interference by civil or military authorities, acts of
war (declared or undeclared) or armed hostilities or other national or international calamity or
one or more acts of terrorism.
Form 10 means the registration statement on Form 10 filed by Patriot with the Commission to
effect the registration of the Patriot Common Stock pursuant to the Exchange Act, as such
registration statement may be amended from time to time.
Fort is defined in Section 4.09(a).
Governmental Entity means any nation or government, any state, municipality or other
political subdivision thereof and any entity, body, agency, commission, department, board, bureau
or court, whether domestic, foreign or multinational, exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any official thereof.
Group means the PEC Group or the Patriot Group, as the context so requires.
Guaranteed Patriot Liabilities means the Patriot Liabilities on which any member of the PEC
Group is an obligor by reason of any guarantee or contractual commitment, including Liabilities
under any contract assumed by any member of the Patriot Group from any member of the PEC Group with
respect to which any member of the PEC Group remains liable.
Guaranteed PEC Liabilities means (i) the PEC Liabilities on which any member of the Patriot
Group is an obligor by reason of any guarantee or contractual commitment, including Liabilities
under any contract assumed by any member of the PEC Group from any member of the Patriot Group with
respect to which any member of the Patriot Group remains liable, and (ii) the Assumed Patriot
Liabilities.
Indebtedness means (i) any indebtedness for borrowed money or the deferred purchase price of
property as evidenced by a note, bonds or other instruments, (ii) obligations as lessee
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under capital leases, (iii) obligations secured by any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind existing on any asset owned or held by any Person, whether
or not such Person has assumed or becomes liable for the obligations secured thereby, (iv) any
obligation under any interest rate swap agreement, (v) accounts payable, (vi) reimbursement
obligations with respect to surety and performance bonds or letters of credit, and (vii)
obligations under direct or indirect guarantees of (including obligations, contingent or otherwise,
to assure a creditor against loss in respect of) indebtedness or obligations of the kinds referred
to in clauses (i), (ii), (iii), (iv), (v) and (vi) above.
Indemnifiable Loss means any and all damage, loss, liability, and expense (including,
without limitation, reasonable expenses of investigation and reasonable attorneys fees and
expenses) in connection with any and all Actions or threatened Actions.
Information means information, whether or not patentable or copyrightable, in written, oral,
electronic or other tangible or intangible forms, stored in any medium, including studies, reports,
records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples,
flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software,
marketing plans, customer names, communications by or to attorneys (including attorney-client
privileged communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), communications and materials otherwise related to or
made or prepared in connection with or in preparation for any legal proceeding, and other
technical, financial, employee or business information or data.
Information Statement means the information statement required by the Commission to be sent
to each holder of PEC Common Stock in connection with the Distribution, and prepared in accordance
with the Exchange Act.
Insurance Administration means, with respect to each Third Party Policy: (i) the accounting
for premiums, retrospectively-rated premiums, defense costs, indemnity payments, deductibles and
self-insured retentions, as appropriate, under the terms and conditions of such Third Party Policy;
(ii) the reporting to the relevant unaffiliated, third-party insurer that issues such Third Party
Policy of any losses or claims which may be covered by such Third Party Policy; and (iii) the
distribution of Insurance Proceeds related to such Third Party Policy, subject to the terms of
Section 4.03.
Insurance Proceeds means those monies (i) received by an insured from an unaffiliated
third-party insurer under any Third Party Policy, or (ii) paid by such third-party insurer on
behalf of an insured under any Third Party Policy, in either case net of any applicable premium
adjustment, retrospectively-rated premium, deductible, self-insured retentions, or cost of reserve
paid or held by or for the benefit of such insured.
Insured Claims means those Liabilities that, individually or in the aggregate, are covered
within the terms and conditions of any of the Third Party Policies, whether or not subject to
deductibles, co-insurance, uncollectibility or retrospectively-rated premium adjustments.
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Intellectual Property means all intellectual property and industrial property rights of any
kind or nature, including all United States and foreign (i) patents, patent applications, patent
disclosures, and all related continuations, continuations-in-part, divisionals, reissues,
re-examinations, substitutions and extensions thereof, (ii) Trademarks, (iii) copyrights, whether
statutory or common law, registered or unregistered and published or unpublished, (iv) rights of
publicity, (v) moral rights and rights of attribution and integrity, (vi) rights in Software, (vii)
trade secrets and all other confidential information, know-how, inventions, improvements,
proprietary processes, formulae, models and methodologies, (viii) rights to personal information,
(ix) telephone numbers and internet protocol addresses, (x) rights, priorities and privileges
arising under applicable law in the foregoing and in other similar intangible assets, (xi)
applications and registrations for the foregoing, and (xii) rights and remedies against past,
present, and future infringement, misappropriation, or other violation of the foregoing.
Intercompany Accounts means any receivable, payable or loan between any member of the PEC
Group, on the one hand, and any member of the Patriot Group, on the other hand that exists prior to
the Effective Time and is reflected in the Records of the relevant members of the PEC Group and the
Patriot Group, except for any such receivable, payable or loan that arise pursuant to this
Agreement or any Ancillary Agreement.
IRS means the United States Internal Revenue Service.
Joint Action means any current or future Action with respect to which it is unclear at the
onset of such Action whether Liabilities will arise primarily in connection with the Patriot
Business or the PEC Business, including any of the Actions listed on
Schedule 5.01(e)
.
KELLC is defined in Section 4.09(a).
Law means any United States or non-United States federal, national, supranational, state,
provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or
rule of law (including common law).
Liabilities means any and all claims, debts, liabilities and obligations, absolute or
contingent, matured or not matured, liquidated or unliquidated, accrued or unaccrued, known or
unknown, whenever arising, including all costs and expenses relating thereto, and including,
without limitation, those debts, liabilities and obligations arising under this Agreement or any
Ancillary Agreement, any law, rule, regulation, action, order or consent decree of any governmental
entity or any award of any arbitrator of any kind, and those arising under any contract, commitment
or undertaking.
Liability Assumption Agreements means each of (i) the Coal Act Liability Assumption
Agreement, substantially in the form of
Exhibit E-1
hereto, (ii) the NBCWA Liability
Assumption Agreement, substantially in the form of
Exhibit E-2
hereto, and (iii) the
Salaried Employee Liability Assumption Agreement, substantially in the form of
Exhibit E-3
hereto, in each case entered into at or before the Effective Time between Patriot and Peabody
Holding, as amended from time to time.
Master Equipment Sublease Agreement means the Master Equipment Sublease Agreement,
substantially in the form of
Exhibit H
hereto, entered into at or before the Effective
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Time between PEC Equipment Company, LLC and Patriot Leasing Company LLC, as amended from time
to time.
NYSE means the New York Stock Exchange.
Other Partys Marks is defined in Section 4.05(a).
Party is defined in the preamble to this Agreement.
Patriot is defined in the preamble to this Agreement.
Patriot Accounts is defined in Section 4.01(a).
Patriot Action means any current or future Action relating primarily to the Patriot Business
in which one or more members of the PEC Group is a defendant or the party against whom a claim or
investigation is directed, including any of the Actions listed on
Schedule 5.01(a)
, but
excluding any Joint Action.
Patriot Articles means the articles of incorporation of Patriot in the form filed as an
exhibit to the Form 10 at the time it becomes effective.
Patriot Assets means:
(a) the capital stock or partnership interest, as applicable, of any of the entities listed
in Exhibit A;
(b) the Real Property Assets;
(c) the Patriot Contracts; and
(d) except as otherwise provided in an Ancillary Agreement, all Assets that are (i) owned of
record or held in the name of a member of the Patriot Group on the Distribution Date, (ii) treated
for internal financial reporting purposes of PEC prior to the Distribution Date or on the Patriot
Business Balance Sheet as owned by a member of the Patriot Group, (iii) on the Distribution Date
used exclusively by one or more members of the Patriot Group, or (iv) transferred to a member of
the Patriot Group pursuant to any Ancillary Agreement.
Patriot Business means the business comprised of the Patriot Assets and the Patriot
Liabilities.
Patriot Business Balance Sheet means the consolidated balance sheet of the Patriot Group as
of the Effective Time, which balance sheet shall be prepared by PEC on a basis consistent with
PECs historical practices for the preparation of subsidiary balance sheets.
Patriot Bylaws means the bylaws of Patriot in the form filed as an exhibit to the Form 10 at
the time it becomes effective.
8
Patriot Common Stock means the outstanding shares of common stock, $.01 par value, of
Patriot.
Patriot Contracts means the following agreements or arrangements to which PEC or any of its
Affiliates is a party or by which it or any of its Affiliates or any of their respective Assets is
bound, except for any such agreement or arrangement or part thereof (i) that is expressly
contemplated not to be transferred or assigned by any member of the PEC Group to Patriot, or (ii)
that is expressly contemplated to be transferred or assigned to (or remain with) any member of the
PEC Group, in each case, pursuant to any provision of this Agreement or any Ancillary Agreement:
(i) any agreement or arrangement entered into in the name of, or expressly on behalf
of, any division, business unit or member of the Patriot Group;
(ii) any agreement or arrangement that relates primarily to the Patriot Business;
(iii) any agreement or arrangement representing capital or lease obligations of
facilities or equipment primarily used by any member of the Patriot Group;
(iv) any agreement or arrangement or part thereof that is otherwise expressly
contemplated pursuant to this Agreement or any of the Ancillary Agreements to be retained
by, transferred or assigned to, any member of the Patriot Group;
(v) any guarantee, indemnity, representation or warranty of any member of the Patriot
Group; and
(vi) the agreements or arrangements listed or described on
Schedule 1.1(b)
.
Patriot Group means Patriot and any of the entities listed in Exhibit A, any of their
respective subsidiaries and any subsidiary or division of any member of the PEC Group that is
included in the assets of the Patriot Business as reflected in the pro forma combined balance sheet
of Patriot as of June 30, 2007 contained in the Information Statement.
Patriot Liabilities means:
(i) the Liabilities listed or described on
Schedule 1.1(c)
and any and all
Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as
Liabilities to be retained, assumed or retired by any member of the Patriot Group;
(ii) any and all Liabilities of PEC, Patriot, or any of their respective Affiliates,
primarily relating to, arising out of or resulting from:
(A) the operation or conduct of the Patriot Business, as conducted at any time
prior to, or the ownership or use of the Patriot Assets, on or after the Effective
Time (including any Liability relating to, arising out of or resulting from any act
or failure to act by any director, officer, employee, agent or representative of
PEC, Patriot, or any of their respective Affiliates (whether or not such act or
failure to act is or was within such Persons authority)); or
9
(B) the operation or conduct of any business conducted by any member of the
Patriot Group at any time after the Effective Time (including any Liability relating
to, arising out of or resulting from any act or failure to act by any director,
officer, employee, agent or representative of Patriot, or any of its Affiliates
after the Effective Time (whether or not such act or failure to act is or was within
such Persons authority));
(iii) except as otherwise expressly provided in this Agreement or any Ancillary
Agreement, Liabilities set forth on the Patriot Business Balance Sheet;
(iv) any and all Liabilities to the extent relating to, arising out of or resulting
from any terminated, sold, discontinued or divested entity, business, real property, or
Asset formerly and primarily owned or managed by, or associated with any member of the
Patriot Group or the Patriot Business, or arising out of the sale thereof;
(v) any Liabilities relating to or arising out of the acquisition (whether through an
acquisition of stock or assets or a merger, share exchange or other form of business
combination) of any business prior to the Effective Time by any member of the Patriot Group,
except to the extent such Liabilities arise out of or are based upon the issuance of
securities of PEC in any such business combination transaction;
(vi) Liabilities arising under or in connection with the Form 10, except to the extent
such Liabilities arise out of or are based upon information about PEC included in the
sections of the Information Statement attached as Exhibit 99.1 to the Form 10 entitled
SummaryOur Company, SummarySummary of the Spin-Off, and The Spin-OffReasons for the
Spin-Off;
(vii) any and all Liabilities, including those Liabilities listed on
Schedule
1.1(d)
, relating to, arising out of or resulting from any Indebtedness (including debt
securities and asset-backed debt) of any member of the Patriot Group (whether incurred prior
to, on or after the Effective Time);
(viii) any and all Liabilities of the guarantor under the Guaranteed Patriot
Liabilities;
(x) any and all Liabilities relating to, resulting from, or arising out of any Action
that is primarily related to the Patriot Business, including any Patriot Action;
(xi) any and all obligations of an insured Person under each Third Party Patriot Policy
and each Third Party Policy to the extent related to or arising out of the Patriot Business;
and
(xii) any and all obligations relating to (A) labor or Mine Safety and Health
Administration matters arising out of the operations of PCC at Randolph South prior to the
Distribution Date or (B) labor matters arising out of the operations of PCC at Randolph
North prior to the Distribution Date.
Notwithstanding the foregoing, the Patriot Liabilities shall in any event not include:
10
(A) any Liabilities that are expressly contemplated by this Agreement or any Ancillary
Agreement as Liabilities to be retained or assumed by any member of the PEC, including any
Liabilities set forth on
Schedule 1.1(a)
or any Liabilities that are the subject of
the Liability Assumption Agreements;
(B) any Liabilities related or attributable to, or arising in connection with, the
employment, service, termination of employment or termination of service of Patriot
employees, which shall be exclusively governed by the Employee Matters Agreement;
(C) any Liabilities related or attributable to, or arising in connection with, Taxes or
Tax returns, which shall be exclusively governed by the Tax Separation Agreement; and
(D) the Assumed Patriot Liabilities and any Liabilities of the guarantor under the
Guaranteed PEC Liabilities.
FOR THE AVOIDANCE OF DOUBT, NO LIABILITY SHALL BE A PATRIOT LIABILITY SOLELY AS A RESULT OF
PATRIOT OR ANY OTHER MEMBER OF THE PATRIOT GROUP BEING NAMED AS PARTY TO, OR IN, ANY ACTION.
Patriot Revolving Credit Agreement means the Revolving Credit Agreement among various
lenders and Patriot, which provides for up to $500 million of availability.
PCC shall mean Peabody Coal Company, LLC.
PEC is defined in the preamble to this Agreement.
PEC Accounts is defined in Section 4.01(a).
PEC Action means any current or future Action that does not relate primarily to the Patriot
Business and in which one or more members of the Patriot Group is a defendant or the party against
whom any claim or investigation is directed, including any of the Actions listed on
Schedule
5.01(b)
, but excluding any Joint Action.
PEC Asset means:
(a) the capital stock of each member of the PEC Group; and
(b) except as otherwise provided in an Ancillary Agreement, all Assets of any member of the
PEC Group or the Patriot Group that are not Patriot Assets.
PEC Business means the business now or formerly conducted by PEC and its present and former
subsidiaries, joint ventures and partnerships, other than the Patriot Business.
PEC Common Stock means the outstanding shares of common stock, $0.01 par value, of PEC.
11
PEC Group means PEC and its subsidiaries, joint ventures and partnerships, excluding any
member of the Patriot Group.
PEC Liabilities means (i) Liabilities of any member of the PEC Group under this Agreement or
any Ancillary Agreement, (ii) the Assumed Patriot Liabilities, (iii) any other Liabilities of any
member of the Patriot Group or the PEC Group, whether arising before, at, or after the Effective
Time, that do not constitute Patriot Liabilities and (iv) any and all obligations relating to (A)
permit or environmental matters, or other reclamation liabilities, relating to Randolph South or
Randolph North, whether arising prior to or subsequent to the Distribution, (B) permit matters
arising out of the operations by any member of the Peabody Group under any of the permits set forth
on
Schedule 4.10(b)
subsequent to the Distribution Date but prior to the transfer of all
the permits set forth on
Schedule 4.10(b)
to a member of the Peabody Group or (C) the
requirement of Patriot or any of its Affiliates, including PCC, to make any payment under the
Prairie State Bonds after the Distribution Date as a result of either (1) the failure of PEC or any
of its Affiliates to meet its obligations underlying the Prairie State Bonds or (2) the failure of
PCC or any of its Affiliates to be fully released from the Prairie State Bonds.
Person means any natural person, firm, individual, corporation, business trust, joint
venture, association, company, limited liability company, partnership or other organization or
entity, whether incorporated or unincorporated, or any Governmental Entity.
Plan shall have the meaning set forth in the Employee Matters Agreement.
Policies means insurance policies and insurance agreements or arrangements of any kind
(other than life and benefits policies, agreements or arrangements), including primary, excess and
umbrella policies, comprehensive general liability policies, director and officer liability,
fiduciary liability, automobile, aircraft, property and casualty, business interruption, workers
compensation and employee dishonesty insurance policies, bonds and self-insurance company
arrangements, together with the rights, benefits and privileges thereunder.
Prairie State Bonds is defined in Section 4.10(a).
Prime Rate means the rate of interest announced by Bank of America, Inc. from time to time
as its prime rate, prime lending rate, base rate or similar reference rate. In the event the
Prime Rate is discontinued as a standard, the holder hereof shall designate a comparable reference
rate as a substitute therefor. For purposes hereof, the Prime Rate in effect at the close of
business on each business day of Bank of America, Inc. shall be the Prime Rate for that day and any
immediately succeeding non-business day or days.
Real Property Agreements means all deeds, subleases, releases, assignments, consents and
agreements relating to the conveyance to Patriot of the Real Property Assets and the division of
real property and interests therein between members of the PEC Group and members of the Patriot
Group entered into as of or prior to the Distribution Date substantially in the form of
Exhibit
C
hereto, in each case as amended from time to time.
Real Property Assets means the real property owned or controlled by the PEC Group which
shall be conveyed to the Patriot Business and conveyed by Patriot to the PEC Group pursuant to the
Real Property Agreements.
12
Record Date means the date designated by or under the authority of PECs Board of Directors
as the record date for determining the shareholders of PEC entitled to receive the Distribution.
Records means any agreements, documents, books, records or files.
Securities Act means the Securities Act of 1933, as amended.
Sell Agreement is defined in Section 4.09(a).
Senior Credit Facility means the Senior Secured Credit Facility to be entered into by
Patriot in connection with the Distribution, as amended, restated, modified, renewed, refunded
replaced or refinanced in whole or in part from time to time.
Snowberry is defined in Section 2.08(a).
Software means all computer programs (whether in source code, object code, or other form),
algorithms, databases, compilations and data, and technology supporting the foregoing, and all
documentation, including flowcharts and other logic and design diagrams, technical, functional and
other specifications, and user and training materials related to any of the foregoing.
Software License Agreement means the Software License Agreement, substantially in the form
of
Exhibit D
hereto, entered into at or before the Effective Time between PEC and Patriot,
as amended from time to time.
Tax shall have the meaning given to such term in the Tax Separation Agreement.
Tax Separation Agreement means the Tax Separation Agreement, substantially in the form of
Exhibit F
hereto, entered into at or before the Effective Time between PEC and Patriot, as
amended from time to time.
TECO Overriding Royalty Agreement means the Cooperation Agreement and Ratification of
Assignment of Overriding Royalty Interest Payment Obligations to Tampa Electric Company Henderson
Reserves, substantially in the form of
Exhibit L
hereto, entered into at or prior to the
Effective Time, between PCC, Highland Mining Company, LLC and Midwest Coal Reserves of Kentucky,
LLC.
Third Party Claim means a claim or demand made against a PEC Indemnitee or a Patriot
Indemnitee by any Person who is not a Party or an Affiliate of a Party as to which such PEC
Indemnitee or Patriot Indemnitee, as applicable, is or may be entitled to indemnification pursuant
to this Agreement.
Third Party Patriot Policies means all Policies, whether or not in force on the Effective
Time, issued by unaffiliated third-party insurers to PEC, Patriot, or any of their respective
Affiliates that cover risks that relate exclusively to the Patriot Business.
13
Third Party Policies means all Policies, whether or not in force on the Effective Time,
issued by unaffiliated third-party insurers to PEC, Patriot or any of their respective Affiliates
that cover risks that relate to both the PEC Business and the Patriot Business.
Trademarks means all United States and foreign trademarks, service marks, corporate names,
trade names, domain names, logos, slogans, designs, trade dress and other similar identifiers of
source or origin, whether registered or unregistered, together with the goodwill connected with the
use of and symbolized by any of the foregoing.
Transition Services Agreement means the Transition Services Agreement, substantially in the
form of
Exhibit G
hereto, entered into at or prior to the Effective Time between PEC and
Patriot, as amended from time to time.
ARTICLE II
REORGANIZATION; CONVEYANCE OF CERTAIN ASSETS;
ASSUMPTION OF CERTAIN LIABILITIES;
CERTAIN PAYMENTS; AND TRANSITION ARRANGEMENTS
Section 2.01.
Reorganization
. Prior to the Distribution Date PEC shall, and shall
cause its respective subsidiaries to, use commercially reasonable efforts to complete the
reorganization steps described in
Exhibit 2.01
hereto. On or prior to the Distribution Date
and effective as of the Effective Time, PEC shall contribute to Patriot all of the Patriot Assets
in exchange for a number of shares of Patriot Common Stock that when combined with the shares of
Patriot Common Stock already owned by PEC shall equal all the shares to be distributed as provided
in Section 3.03 below (the Contribution).
Section 2.02.
Conveyance of Assets; Discharge of Liabilities
. Except as otherwise
expressly provided herein or in any of the Ancillary Agreements:
(a) Effective as of the Effective Time (i) all Patriot Assets are intended to be and shall
become Assets of the Patriot Group, (ii) all Patriot Liabilities are intended to be and shall
become the Liabilities of the Patriot Group, and (iii) all other Assets and Liabilities of PEC and
its subsidiaries are intended to be and shall remain exclusively the Assets and Liabilities of the
PEC Group.
(b) Effective as of the Effective Time, PEC agrees to transfer or cause to be transferred to
Patriot or to such other members of the Patriot Group as Patriot may designate all right, title
and interest of the PEC Group in and to all of the Patriot Assets.
(c) Patriot agrees that, effective as of the Effective Time, it will transfer or cause to be
transferred to PEC or to such other member of the PEC Group as PEC may designate all right, title
and interest of the Patriot Group in and to all Assets that are not Patriot Assets.
(d) Patriot agrees that it will, or will cause another member of the Patriot Group designated
by Patriot to, (i) assume any of the Patriot Liabilities for which a member of the Patriot Group
is not the obligor, effective as of the Effective Time, and (ii) timely pay and discharge all of
the Patriot Liabilities, at and after the Effective Time.
14
(e) PEC agrees that it will, or will cause another member of the PEC Group designated by PEC
to, (i) assume any of the PEC Liabilities for which a member of the PEC Group is not the obligor,
effective as of the Effective Time, and (ii) timely pay and discharge all of the PEC Liabilities,
at and after the Effective Time.
(f) PEC agrees that, on the Distribution Date, it will, or will cause another member of the
PEC Group designated by PEC to, make to Patriot a payment of $19,407,495.24 in respect of the
Black Lung Case and an additional cash contribution of $30,000,000.
(g) In the event that any conveyance of an Asset, including conveyance of any Asset listed in
Schedule 2.02(g)
, required hereby is not effected at or before the Effective Time, the
obligation to transfer such Asset shall continue past the Effective Time and shall be accomplished
as soon thereafter as practicable.
(h) If any Asset may not be transferred by reason of the requirement to obtain the consent of
any third party and such consent has not been obtained by the Effective Time, then (unless
otherwise expressly agreed by PEC and Patriot) such Asset shall not be transferred until such
consent has been obtained. PEC and Patriot, as the case may be, shall (i) cause the owner of such
Asset to use commercially reasonable efforts to provide to the appropriate member of the other
Group all the rights and benefits under such Asset, (ii) cause such owner to enforce such Asset
for the benefit of such member, and (iii) cause such member to assume all obligations of such
Asset, in each case to the extent that such action does not cause a breach or default under such
Asset. Both parties shall otherwise cooperate and use commercially reasonable efforts to provide
the economic and operational equivalent of an assignment or transfer of the Asset as of the
Effective Time.
(i) From and after the Effective Time, each Party shall promptly transfer or cause the
members of its Group promptly to transfer to the other Party or the appropriate member of the
other Partys Group, from time to time, any property received that is an Asset of the other Party
or a member of its Group. Without limiting the foregoing, funds received by a member of one Group
upon the payment of accounts receivable that belong to a member of the other Group shall be
transferred to the other Group by wire transfer as promptly as practicable after the receiving
party becomes aware of having received such funds.
(j) Except as expressly set forth in this Agreement, any Ancillary Agreement, or any
instrument or document contemplated by this Agreement or any Ancillary Agreement, neither any
member of the PEC Group nor any member of the Patriot Group has made or shall be deemed to have
made any representation or warranty as to (i) the Assets, business or Liabilities retained,
transferred or assumed as contemplated hereby or thereby, (ii) any consents or approvals required
in connection with the transfer or assumption by such party of any Asset or Liability contemplated
by this Agreement, (iii) the value or freedom from any lien, claim, equity or other encumbrance
of, or any other matter concerning, any Assets of such Party, (iv) the absence of any defenses or
right of setoff or freedom from counterclaim with respect to any claim or other Asset of such
Party, or (v) the legal sufficiency of any assignment, document or instrument delivered to convey
title to any Asset transferred. EXCEPT AS MAY BE EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY
ANCILLARY AGREEMENT, ALL ASSETS WERE, OR ARE BEING, TRANSFERRED,
15
OR ARE BEING RETAINED, ON AN AS IS, WHERE IS BASIS AND THE RESPECTIVE TRANSFEREES WILL
BEAR THE ECONOMIC AND LEGAL RISKS THAT ANY CONVEYANCE OR OTHER TRANSFER SHALL PROVE TO BE
INSUFFICIENT TO VEST IN THE TRANSFEREE A TITLE THAT IS FREE AND CLEAR OF ANY LIEN, CLAIM, EQUITY
OR OTHER ENCUMBRANCE.
Section 2.03.
Ancillary Agreements
. Concurrently with the execution of this Agreement,
PEC and Patriot (or their appropriate subsidiaries) will execute and deliver:
(a) A duly executed Employee Matters Agreement substantially in the form of
Exhibit B
hereto;
(b) A duly executed copy of each of the Real Property Agreements substantially in the form of
Exhibit C
hereto;
(c) A duly executed Software License Agreement substantially in the form of
Exhibit D
hereto;
(d) A duly executed copy of each of the Liability Assumption Agreements substantially in the
form of
Exhibits E-1
,
E-2
or
E-3
, as applicable;
(e) A duly executed Tax Separation Agreement substantially in the form of
Exhibit F
hereto;
(f) A duly executed Transition Services Agreement substantially in the form of
Exhibit
G
hereto;
(g) A duly executed Master Equipment Sublease Agreement substantially in the form of
Exhibit H
hereto;
(h) A duly executed Common Interest Agreement substantially in the form of
Exhibit I
hereto;
(i) A duly executed copy of each of the Coal Supply Agreements, substantially in the form of
Exhibits J-1
,
J-2
or
J-3
, as applicable;
(j) A duly executed Administrative Services Agreement, substantially in the form of
Exhibit K
hereto;
(k) A duly executed TECO Overriding Royalty Agreement, substantially in the form of
Exhibit L
hereto;
(l) A duly executed DTA Throughput Agreement, substantially in the form of
Exhibit M
hereto; and
(m) Such other agreements, leases, subleases, documents, or instruments as the Parties may
agree are necessary or desirable in order to achieve the purposes hereof.
16
Section 2.04.
Issuance of Patriot Common Stock
. On or before the Distribution Date,
and in exchange for the transfer by PEC to Patriot of the stock and assets as provided above, and
the surrender for reissue of all certificates representing outstanding Patriot Common Stock,
Patriot will issue and deliver to PEC a certificate representing shares of Patriot Common Stock
constituting all the shares to be distributed as provided in Section 3.03 below.
Section 2.05.
Resignations
.
(a) On the Distribution Date, Patriot will deliver or cause to be delivered to PEC
resignations of each individual who will be an employee of Patriot or another member of the
Patriot Group from and after the Distribution Date and who is an officer or director of PEC or any
of its subsidiaries or affiliates not constituting a member of the Patriot Group immediately prior
to the Distribution Date.
(b) On the Distribution Date, PEC will deliver or cause to be delivered to Patriot
resignations of each individuals who will be an employee of PEC or another member of the PEC Group
from and after the Distribution Date and who is an officer or director of Patriot or any of its
subsidiaries or affiliates not constituting a member of the PEC Group immediately prior to the
Distribution Date.
Section 2.06.
Limitation of Liability
.
(a) Except as otherwise expressly provided in this Agreement, no Party or any member of such
Partys Group shall have any Liability to any other Party or any member of each other Partys
Group in the event that any Information exchanged or provided pursuant to this Agreement (but
excluding any such information included in the Form 10) which is an estimate or forecast, or which
is based on an estimate or forecast, is found to be inaccurate.
(b) Except as provided in Section 4.02, Section 9.01 or as set forth in subsection (c) below,
neither Party nor any member of such Partys Group shall have any Liability to any other Party or
any member of such other Partys Group based upon, arising out of or resulting from any agreement,
arrangement, course of dealing or understanding existing on or prior to the Effective Time (other
than this Agreement or any Ancillary Agreement or any agreement entered into in connection
herewith or therewith in order to consummate the transactions contemplated hereby or thereby), and
each Party hereby terminates, and shall cause all members in its Group to terminate, any and all
agreements, arrangements, course of dealings or understandings between it or any members in its
Group and the other Party, or any members of its Group, effective as of the Effective Time (other
than this Agreement or any Ancillary Agreement or any agreement entered into in connection
herewith or in order to consummate the transactions contemplated hereby or thereby), unless such
agreement, arrangement, course of dealing or understanding is set forth in any Ancillary Agreement
or on
Schedule 2.06(b)
, and any such Liability, whether or not in writing, which is not
reflected in any Ancillary Agreement or on such Schedule, is hereby irrevocably cancelled,
released and waived effective as of the Effective Time. No such terminated agreement, arrangement,
course of dealing or understanding (including any provision thereof which purports to survive
termination) shall be of any further force or effect after the Effective Time.
17
(c) The provisions of Section 2.06(b) shall not apply to any of the following agreements,
arrangements, course of dealings or understandings (or to any of the provisions thereof):
(i) any agreement or arrangement to which any Person other than the Parties and their
respective Affiliates is a Party (it being understood that to the extent that the rights and
obligations of the Parties and the members of their respective Groups under any such
agreements or arrangements constitute PEC Assets or Patriot Assets, PEC Liabilities, or
Patriot Liabilities, such agreements or arrangements shall be assigned or retained pursuant
to this Article II); and
(ii) any agreements, arrangements, commitments or understandings to which any
non-wholly-owned subsidiary or non-wholly-owned Affiliate of PEC or Patriot is a Party.
Section 2.07.
Novation of Liabilities; Consents
.
(a) Each Party, at the request of the other Party, shall use commercially reasonable efforts
to obtain, or to cause to be obtained, any consent, release, substitution or amendment required to
novate or assign all obligations under agreements, arrangements, licenses and other obligations or
Liabilities for which a member of such Partys Group and a member of the other Partys Group are
jointly or severally liable and that do not constitute Liabilities of such other Party as provided
in this Agreement (such other Party, the Other Party), or to obtain in writing the unconditional
release of all parties to such arrangements (other than any member of the Group who assumed or
retained such Liability as set forth in this Agreement), so that, in any such case, the members of
the applicable Group will be solely responsible for such Liabilities;
provided
,
however
, that no Party shall be obligated to pay any consideration therefor to any third
party from whom any such consent, substitution or amendment is requested (unless such Party is
fully reimbursed by the requesting Party).
(b) If the Parties are unable to obtain, or to cause to be obtained, any such required
consent, release, substitution or amendment, the Other Party or a member of such Other Partys
Group shall continue to be bound by such agreement, arrangement, license or other obligation that
does not constitute a Liability of such Other Party and, unless not permitted by Law or the terms
thereof, as agent or subcontractor for such Party, the Party or member of such Partys Group who
assumed or retained such Liability as set forth in this Agreement (the Liable Party) shall, or
shall cause a member of its Group to, pay, perform and discharge fully all the obligations or
other Liabilities of such Other Party or member of such Other Partys Group thereunder from and
after the Effective Time;
provided
,
however
, that the Other Party shall not be
obligated to extend, renew or otherwise cause such agreement, arrangement, license or other
obligation to remain in effect beyond the term in effect as of the Effective Time. The Liable
Party shall indemnify each Other Party and the members of such Other Partys Group and hold each
of them harmless against any and all Liabilities arising in connection therewith;
provided
, that the Liable Party shall have no obligation to indemnify the Other Party or
any member of such Other Partys Group with respect to any matter to the extent that such Other
Party has engaged in any knowing violation of Law, fraud or misrepresentation in connection
therewith. The Other Party shall, without further
18
consideration, promptly pay and remit, or cause to be promptly paid or remitted, to the
Liable Party or to another member of the Liable Partys Group, all money, rights and other
consideration received by it or any member of its Group in respect of such performance by the
Liable Party (unless any such consideration is an Asset of such Other Party pursuant to this
Agreement). If and when any such Consent, release, substitution or amendment shall be obtained or
such agreement, lease, license or other rights or obligations shall otherwise become assignable or
able to be novated, the Other Party shall promptly assign, or cause to be assigned, all rights,
obligations and other Liabilities thereunder of any member of such Other Partys Group to the
Liable Party or to another member of the Liable Partys Group without payment of any further
consideration and the Liable Party, or another member of such Liable Partys Group, without the
payment of any further consideration, shall assume such rights and Liabilities.
Section 2.08.
Assignment of Promissory Notes
.
(a) On the Distribution Date, PEC will assign to Snowberry Land Company (Snowberry), a
Delaware corporation and a member of the Patriot Group all of its rights as the payee under those
promissory notes listed on
Schedule 2.08(a)
.
(b) On the Distribution Date, PEC will cause Peabody Investments Corp., a Delaware
corporation and a member of the PEC Group, to assign to Patriot or a designated member of the
Patriot Group all of its rights as lender and payee under the Loan Agreement, dated June 15, 2006,
with Kanawha Eagle Coal, LLC, as the borrower.
ARTICLE III
THE DISTRIBUTION
Section 3.01.
Cooperation Prior to the Distribution
.
(a) PEC and Patriot shall prepare, and PEC shall mail to the holders of PEC Common Stock, the
Information Statement, which shall set forth appropriate disclosure concerning Patriot, the
Distribution and any other appropriate matters. PEC and Patriot shall also prepare, and Patriot
shall file with the Commission, the Form 10, which shall include the Information Statement. PEC
and Patriot shall use commercially reasonable efforts to cause the Form 10 to become effective
under the Exchange Act.
(b) PEC shall, as the sole shareholder of Patriot, approve and adopt the Patriot employee
benefit plans contemplated by the Employee Matters Agreement and PEC and Patriot shall cooperate
in preparing, filing with the Commission under the Securities Act and causing to become effective
not later than the Distribution Date any registration statements or amendments thereto that are
appropriate to reflect the establishment of or amendments to any employee benefit plan of Patriot
contemplated by the Employee Matters Agreement, including without limitation, a Form S-8 with
respect thereto.
(c) PEC and Patriot shall take all such action as may be necessary or appropriate under the
securities or blue sky laws of states or other political subdivisions of the United States in
connection with the transactions contemplated by this Agreement or any Ancillary Agreement.
19
(d) Patriot shall prepare, file, and use all reasonable efforts to cause to be approved prior
to the Record Date, the application to permit listing of the Patriot Common Stock on the New York
Stock Exchange.
(e) PEC and Patriot shall take all such actions as may be deemed reasonably necessary to
secure a favorable ruling from the IRS that the Distribution is not taxable to PEC or its
shareholders pursuant to Section 355 of the Code.
Section 3.02.
Conditions Precedent to the Distribution
. In no event shall the
Distribution occur unless the following conditions shall have been satisfied or, in the case of any
condition other than the condition set forth in Section 3.02(q) below, waived by PEC:
(a) PECs Board of Directors or a duly appointed committee thereof, shall, in its sole
discretion, have established the Record Date and the Distribution Date and any appropriate
procedures in connection with the Distribution;
(b) all necessary regulatory approvals shall have been received;
(c) the Information Statement shall have been mailed to the holders of PEC Common Stock;
(d) the Form 10 shall have become effective under the Exchange Act, and all registration
statements referred to under Section 3.01(b) shall have become effective under the Securities Act;
(e) the Patriot Board of Directors, as named in the Form 10, shall have been elected by PEC,
as sole shareholder of Patriot, and the Patriot Articles and Patriot Bylaws shall have been
adopted and be in effect;
(f) the Patriot Common Stock shall have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance;
(g) PEC and Patriot shall have taken all such action as may be necessary or appropriate under
the securities or blue sky laws of states or other political subdivisions of the United States in
connection with the transactions contemplated by this Agreement or any Ancillary Agreement;
(h) PEC shall have received a favorable private letter ruling from the IRS that the
Contribution constitutes a reorganization pursuant to Section 368(a)(1)(D) of the Code and that
the Distribution will not be taxable to PEC or its shareholders pursuant to Section 355 of the
Code, and such ruling shall continue in effect;
(i) Patriot shall have entered into the Patriot Revolving Credit Agreement;
(j) PEC shall have received a tax opinion from Ernst & Young LLP, in form and substance
satisfactory to PEC;
20
(k) PEC shall have received a solvency opinion from Duff & Phelps, in form and substance
satisfactory to PEC, regarding Patriot after the Distribution;
(l) Patriot shall have established insurance arrangements with insurers of recognized
financial responsibility for Policies in such amounts and covering such risks as is adequate for
the conduct of the Patriot Business and the value of Patriots properties and as is customary for
companies engaged in similar businesses in similar industries;
(m) the transactions described in Section 2.01 shall have occurred;
(n) no order, injunction, or decree issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing consummation of the Distribution shall be in effect;
(o) PEC and Patriot shall each have performed its obligations under this Agreement and each
Ancillary Agreement, which are required to be performed prior to or at the time of the
Distribution;
(p) the Parties shall have consummated those other transactions in connection with the
Distribution that are contemplated by the Information Statement to be consummated prior to or at
the time of the Distribution and are not specifically referred to in this Agreement or the
Ancillary Agreements identified in Sections 2.03(a) (f); and
(q) all members of the Patriot Group shall have been released from their obligations as
guarantors with respect to the guarantees listed or described on
Schedule 3.02(q)
.
Section 3.03.
The Distribution
. On or before the Distribution Date, subject to
satisfaction or waiver of the conditions set forth in this Agreement, PEC shall deliver to the
Distribution Agent a certificate or certificates representing all of the then outstanding shares of
Patriot Common Stock held by the PEC Group, endorsed in blank, and shall instruct the Distribution
Agent, except as otherwise provided in Sections 3.04 and 3.05, to distribute to each holder of
record of PEC Common Stock on the Record Date one share of Patriot Common Stock for each ten shares
of PEC Common Stock so held either by crediting the holders brokerage account or by delivering a
certificate or certificates representing such shares. Patriot agrees to provide all certificates
for shares of Patriot Common Stock that the Distribution Agent shall require in order to effect the
Distribution.
ARTICLE IV
COVENANTS
Section 4.01.
Bank Accounts
.
(a) The Parties agree to take, or cause the respective members of their respective Groups to
take, at the Effective Time (or such earlier time as the Parties may agree), all actions necessary
to amend all agreements or arrangements governing each bank and brokerage account owned by Patriot
or any other member of the Patriot Group (the Patriot Accounts), including all Patriot Accounts
listed or described on
Schedule 4.01(a)
, so that such
21
Patriot Accounts, if currently linked (whether by automatic withdrawal, automatic deposit, or
any other authorization to transfer funds from or to, hereinafter linked) to any bank or
brokerage account owned by PEC or any other member of the PEC Group (the PEC Accounts) are
de-linked from the PEC Accounts. From and after the Effective Time, no current or former employee
of any member of the PEC Group shall have any authority to access or control any Patriot Account
other than those who will be Patriot employees.
(b) The Parties agree to take, or cause the respective members of their respective Groups to
take, at the Effective Time (or such earlier time as the Parties may agree), all actions necessary
to amend all agreements or arrangements governing the PEC Accounts so that such PEC Accounts, if
currently linked to a Patriot Account, are de-linked from the Patriot Accounts. From and after the
Effective Time, no current or former employee of any member of the Patriot Group shall have any
authority to access or control any PEC Account.
(c) With respect to any outstanding checks issued by PEC, Patriot, or any of their respective
subsidiaries prior to the Effective Time, such outstanding checks shall be honored following the
Effective Time by the entity or Group owning the account on which the check is drawn.
(d) As between the two Parties (and the members of their respective Groups) all payments and
reimbursements received after the Effective Time by any Party (or member of its Group) that relate
to a business, Asset or Liability of another Party (or member of its Group), shall be held by such
Party in trust for the use and benefit of the Party entitled thereto (at the expense of the Party
entitled thereto) and, promptly upon receipt by such Party of any such payment or reimbursement,
such Party shall pay over, or shall cause the applicable member of its Group to pay over to the
other Party the amount of such payment or reimbursement without right of set-off.
Section 4.02.
Guaranteed Patriot and PEC Liabilities
.
(a) (i) Patriot shall use commercially reasonable efforts (excluding payment of money
or incurrence of Liabilities) to obtain as promptly as practicable after the Distribution
Date the release of all members of the PEC Group from any obligations with respect to
Guaranteed Patriot Liabilities, including removing all members of the PEC Group from their
obligations as guarantors with respect to the guarantees listed or described on
Schedule
4.02(a)
. In no event shall any member of the Patriot Group take any action with respect
to any Guaranteed Patriot Liabilities which could be reasonably expected to adversely affect
the PEC Group members in any way, including, without limitation, extending the term of any
Guaranteed Patriot Liabilities or increasing the liability guaranteed thereunder, unless the
guarantee or obligation of all PEC Group members is released as to any extended or modified
liability obligations under such Guaranteed Patriot Liabilities or PEC otherwise consents in
writing.
(ii) If at any time any member of the PEC Group is required by any governmental agency
to arrange or provide letters of credit, surety bonds or other credit arrangements, in
support of Guaranteed Patriot Liabilities constituting Black Lung
22
Benefit Liabilities, then Patriot shall provide such letters of credit, surety bonds or
other credit arrangements, at its expense.
(iii) Until such time as Patriot shall have no amounts recorded in its most recent
audited balance sheet in respect of Black Lung Benefit Liabilities, Patriot shall use best
efforts to maintain sufficient capacity under the Senior Credit Facility to permit it to
obtain (subject to the satisfaction of the conditions precedent contained therein) letters
of credit in an aggregate amount equal to not less than the amount of Black Lung Benefit
Liabilities recorded in its most recent audited balance sheet, less the amount of letters of
credit provided by Patriot to any governmental agency in respect of Guaranteed Patriot
Liabilities constituting Black Lung Benefit Liabilities.
(iv) If (x) at any time prior to June 30, 2011, any member of the Patriot Group shall
have failed to pay any Black Lung Benefit Liabilities when due and any member of the PEC
Group remains obligated with respect to Guaranteed Patriot Liabilities constituting Black
Lung Benefit Liabilities (such PEC Group obligations, the Black Lung Benefit Guarantees)
or (y) on June 30, 2011, any member of the PEC Group remains obligated under any Black Lung
Benefit Guarantees, then commencing on the date of such failure (in the case of clause (x))
or on July 1, 2011 (in the case of clause (y)) and continuing in either case until the date
on which no member of the PEC Group has any obligation under any Black Lung Benefit
Guarantee, upon the written request of PEC, Patriot shall use best efforts to obtain letters
of credit in favor of PEC in an amount specified by PEC, which amount shall be (at PECs
sole option) up to the amount recorded by Patriot in its most recent audited consolidated
balance sheet in respect of Guaranteed Patriot Liabilities constituting Black Lung Benefits,
less the amount of letters of credit provided by Patriot to any governmental agency in
respect of Guaranteed Patriot Liabilities constituting Black Lung Benefit Liabilities.
(v) Patriot shall provide prompt written notice to Peabody in the event that (A) any
issuer of a letter of credit required pursuant to this Section 4.02(a) notifies Patriot that
it does not intend to renew any letter of credit provided pursuant hereto or (B) Patriots
capacity to obtain letters of credit under its Senior Credit Facility or otherwise is not
sufficient, or is not expected to be sufficient, to permit Patriot to meet or to continue to
meet its obligations under this Section 4.02(a).
(b) PEC shall use commercially reasonable efforts (excluding payment of money or incurrence
of Liabilities) to obtain as promptly as practicable after the Distribution Date the release of
all members of the Patriot Group from any obligations with respect to Guaranteed PEC Liabilities
to which they have not been released as of the Distribution Date, including removing all members
of the Patriot Group from their obligations as guarantors with respect to the guarantees listed or
described on
Schedule 4.02(b)
. In no event shall any member of the PEC Group take any
action with respect to any Guaranteed PEC Liabilities which could be reasonably expected to
adversely affect the Patriot Group members in any way including, without limitation, extending the
term of any Guaranteed PEC Liabilities or increasing the liability guaranteed thereunder, unless
the guarantee or obligation of all Patriot Group members is released as to any extended or
modified liability obligations under such Guaranteed PEC Liabilities or Patriot otherwise consents
in writing.
23
(c) In the event that any PEC Group member is required to pay or otherwise satisfy any
Guaranteed Patriot Liabilities, without limiting any of PECs rights and remedies against Patriot
under this Agreement or otherwise, in order to secure Patriots indemnity obligations to PEC
hereunder in respect of such Guaranteed Patriot Liabilities, PEC shall be entitled to all the
rights of the payee in any property of any member of the Patriot Group pledged as security for
such Guaranteed Patriot Liabilities.
(d) In the event that Patriot Group member is required to pay or otherwise satisfy any
Guaranteed PEC Liabilities, without limiting any of Patriots rights and remedies against PEC
under this Agreement or otherwise, in order to secure PECs indemnity obligations to Patriot
hereunder in respect of such Guaranteed PEC Liabilities, Patriot shall be entitled to all the
rights of the payee in any property of any member of the PEC Group pledged as security for such
Guaranteed PEC Liabilities.
Section 4.03.
Insurance
.
(a) Directors and Officers and Fiduciary Liability Policies. Following the Distribution, PEC
will maintain directors and officers liability and fiduciary liability insurance coverage for a
period of six (6) years from the Distribution Date for the directors and officers of Patriot who
were directors or officers of PEC or members of the PEC Group as of the Distribution Date for acts
as directors and officers of members of the PEC Group during periods prior to the Distribution
Date.
(b) Third Party Policies.
(i) With respect to Third Party Policies, if an occurrence for which coverage is
available under such Third Party Policies happens prior to the Effective Time, and a claim
arising therefrom has been or is eventually asserted against Patriot or any other member of
the Patriot Group and such claim is reported by Patriot to the carrier, with a copy to PEC,
in accordance with the reporting provision of the applicable policy, then PEC will, or will
cause the members of the PEC Group that are insured thereunder to, (A) continue to provide
Patriot and any other member of the Patriot Group with access to and coverage under the
applicable Third Party Policies and (B) reasonably cooperate with Patriot and take
commercially reasonable actions as may be necessary or advisable to assist Patriot in
submitting such claims under the applicable Third Party Policies,
provided
that
Patriot shall be responsible for its portion of any deductibles or self-insured retentions
or co-payments legally due and owing relating to such claims. For the avoidance of doubt, if
an occurrence for which coverage is available under such Third Party Policies happens after
the Effective Time, or a claim arising from an occurrence prior to the Effective Time is not
reported by Patriot to PEC on or before the date when such occurrence must be reported to
the carrier under the applicable Third Party Policy, then no payment for any damages, costs
of defense, or other sums with respect to such claim shall be available to Patriot under
such Third Party Policies.
(ii) With respect to all Third Party Policies, Patriot agrees and covenants (on behalf
of itself and each other member of the Patriot Group, and each other Affiliate of Patriot)
not to make any claim or assert any rights against PEC and any other
24
member of the PEC Group (including the captive insurance companies that are insured
under the Third Party Policies), or the unaffiliated third-party insurers of such Third
Party Policies, except as expressly provided under this Section 4.03(b).
(c) Administration of Third Party Policies; Other Matters.
(i) From and after the Effective Time, Patriot or a member of the Patriot Group shall
be responsible for the administration of all Third Party Patriot Policies and Patriot shall
be responsible for any premium adjustments, audits, deductible bills, collateral, Taxes and
claims handling charges or other expenses associated with Third Party Patriot Policies.
(ii) With respect to all Third Party Policies, from and after the Effective Time, the
agent for the applicable policy shall be responsible for the Insurance Administration and
Claims Administration of such Third Party Policies;
provided
that the retention of
such administrative responsibilities by an agent of Peabody is in no way intended to limit,
inhibit or preclude any right to insurance coverage for any Insured Claim of a named insured
under such Third Party Policies as contemplated by the terms of this Agreement;
provided
,
further
, that the retention of such administrative
responsibilities by an agent of Peabody shall not relieve the Person submitting any Insured
Claim of the primary responsibility for reporting such Insured Claim accurately, completely
and in a timely manner, or of such Persons authority to settle any such Insured Claim
within any period permitted or required by the relevant Third Party Policy. PEC or any
member of the PEC Group or any agent of PEC shall not settle any Insured Claim of Patriot or
any member of the Patriot Group under the Third Party Policies without first obtaining the
approval of Patriot or another member of the Patriot Group. Such approval shall not be
unreasonably withheld, delayed or conditioned. Patriot shall have the right to utilize its
broker to advocate for their interest.
(iii) Where Patriot Liabilities are specifically covered under a Third Party Policy for
periods prior to the Effective Time, or where such Third Party Policy covers claims made
after the Effective Time with respect to an occurrence prior to the Effective Time, then
from and after the Effective Time, Patriot may claim coverage for Insured Claims under such
Third Party Policy as and to the extent that such insurance is available up to the full
extent of the applicable limits of liability of such Third Party Policy (and may receive any
Insurance Proceeds with respect thereto as contemplated by Section 4.03(b) or
Section 4.03(c)(v)), subject to the terms of this Section 4.03(c).
(iv) Except as set forth in this Section 4.03(c), PEC and Patriot shall not be liable
to one another (or any of the members of their respective Groups) for claims, or portions of
claims, not reimbursed by insurers under any Third Party Policy for any reason not within
the control of PEC or Patriot, including coinsurance provisions, deductibles, quota share
deductibles, self-insured retentions, bankruptcy or insolvency of any insurance carrier(s),
Third Party Policy limitations or restrictions, any coverage disputes, any failure to timely
file a claim by PEC or Patriot (or any of the members of their respective Groups), or any
defect in such claim or its processing. The liability of PEC and Patriot to one another for
such claims is expressly limited to the amount of
25
Insurance Proceeds received with respect to such claims and allocated to the respective
Parties in accordance with Section 4.03(c)(v). It is expressly understood that the foregoing
provisions in this Section 4.03(c)(iv) shall not limit any Partys liability to any other
Party for indemnification pursuant to Article VI.
(v) Except as otherwise provided in Section 4.03(b), Insurance Proceeds received with
respect to claims, costs and expenses under the Third Party Policies shall be paid, as
appropriate, to PEC with respect to the PEC Liabilities, and Patriot, with respect to
Patriot Liabilities. In the event that the aggregate limits on any Third Party Policies are
exceeded by the aggregate of outstanding Insured Claims by the Parties or members of their
respective Groups, the Parties agree to allocate the Insurance Proceeds received thereunder
based upon their respective percentage of the total of their bona fide claims which were
covered under such Third Party Policy, and any Party who has received Insurance Proceeds in
excess of such Partys respective percentage of Insurance Proceeds shall pay to the other
Party the appropriate amount so that each Party will have received its respective percentage
of Insurance Proceeds pursuant hereto. Each of the Parties agrees to use commercially
reasonable efforts to maximize available coverage under those Third Party Policies
applicable to it, and to take all commercially reasonable steps to recover from all other
responsible parties in respect of an Insured Claim to the extent coverage limits under a
Third Party Policy have been exceeded or would be exceeded as a result of such Insured
Claim.
(vi) In the event that the Parties or members of their respective Groups have bona fide
claims under any Third Party Policy arising from the same occurrence and for which a
deductible or self-insured retention is payable, the Parties agree that the aggregate amount
of the deductible or self-insured retention paid shall be borne by the Parties in the same
proportion which the Insurance Proceeds received by each such Party bears to the total
Insurance Proceeds received under the applicable Third Party Policy pursuant to
Section 4.03(c)(v), and any Party who has paid more than such allocable share of the
deductible or self-insured retention shall be entitled to receive from the other Party an
appropriate amount so that each Party has borne its allocable share of the deductible or
self-insured retention pursuant hereto.
(d) Agreement for Waiver of Conflict and Shared Defense. In the event that Insured Claims of
both Parties exist relating to the same occurrence, the Parties shall jointly defend and waive any
conflict of interest necessary to the conduct of the joint defense. Nothing in this Section 4.03
shall be construed to limit or otherwise alter in any way the obligations of the Parties,
including those created by this Agreement, by operation of Law or otherwise.
(e) Cooperation. The Parties agree to use (and cause the members in their respective Groups
to use) all commercially reasonable efforts to cooperate with respect to the various insurance
matters contemplated by this Section 4.03.
(f) Miscellaneous.
(i) Nothing in this Agreement shall be deemed to restrict Patriot or PEC, or any
members of their respective Groups, from acquiring at its own expense any
26
insurance Policy in respect of any Liabilities or covering any period. Except as
otherwise provided in this Agreement, from and after the Effective Time, Patriot and PEC
shall be responsible for obtaining and maintaining their respective insurance programs for
their risk of loss and such insurance arrangements shall be separate programs apart from
each other and each will be responsible for its own deductibles and self-insured retentions
for such insurance programs.
(ii) Each of the Parties intends by this Agreement that a third-party Person, including
a third-party insurer or reinsurer, or other third-party Person that, in the absence of the
Agreement would otherwise be obligated to pay any claim or satisfy any indemnity or other
obligation, shall not be relieved of the responsibility with respect thereto and shall not
be entitled to a windfall (i.e., avoidance of the obligation that such Person would have
in the absence of this Agreement). To the extent that any such Person would receive such a
windfall, the Parties shall negotiate in good faith concerning an amendment of this
Agreement.
Section 4.04.
No Hire; No Solicit
. None of PEC or Patriot or any member of their
respective Groups will from the Effective Time through and including the one-year anniversary of
the Effective Time, without the prior written consent of the other Party, either directly or
indirectly, on their own behalf or in the service or on behalf of others, (i) solicit, aid, induce
or encourage any individual who is an employee of a member of the other Partys Group to leave his
or her employment, or (ii) hire any individual who is an employee of a member of the other Partys
Group;
provided
,
however
, that nothing in this Section 4.04 shall be deemed to
prohibit, any general solicitation for employment through advertisements and search firms not
specifically directed at employees of such other applicable Party;
provided
further
, that the applicable Party has not encouraged or advised such firm to approach any
such employee.
Section 4.05.
Legal Names and Signage
. (a) Except as otherwise specifically provided
in any Ancillary Agreement, each Party shall exercise commercially reasonable efforts to cease (and
cause all of the other members of its Group to cease), as soon as reasonably practicable after the
Distribution Date, but in any event within six (6) months thereafter: (i) making any use of any
names or Trademarks that include (A) any of the Trademarks of the other Party or such other Partys
subsidiaries or Affiliates (including, in the case of Patriot, Peabody Energy or Peabody Energy
Corporation or any other name or Trademark containing the word Peabody) and (B) any names or
Trademarks related thereto including any names or Trademarks confusingly similar thereto or
dilutive thereof (with respect to each Party, such Trademarks of the other Party or any of such
other Partys subsidiaries or Affiliates, the
Other Party Marks
), and (ii) holding
themselves out as having any affiliation with the other Party or such other Partys subsidiaries or
Affiliates;
provided
,
however
, that the foregoing shall not prohibit any Party or
any member of a Partys Group from (1) stating in any advertising or any other communication that
it is formerly a PEC affiliate or (2) making use of any Other Party Mark in a manner that would
constitute fair use under applicable Law if any unaffiliated third party made such use or would
otherwise be legally permissible for any unaffiliated third party without the consent of the Party
owning such Other Party Mark. In furtherance of the foregoing, as soon as practicable, but in no
event later than three (3) months following the Effective Time, each Party shall (and cause all of
the other members of its Group to) remove, strike over or otherwise obliterate all Other Party
Marks from all of such Partys and its subsidiaries and
27
Affiliates assets and other materials, including any vehicles, business cards, schedules,
stationery, packaging materials, displays, signs, promotional materials, manuals, forms, websites,
email, computer software and other materials and systems;
provided
,
however
, that
Patriot shall promptly after the Effective Time post a disclaimer on the www.patriotcoal.com
website informing its customers that as of the Effective Time and thereafter Patriot, and not PEC,
is responsible for the operation of the Patriot Business, including such website and any applicable
services. Any use by any Party or any of such Partys Subsidiaries or Affiliates of any of the
Other Party Marks as permitted in this Section 4.05 is subject to their compliance with all quality
control and related requirements and guidelines in effect for the Other Party Marks as of the
Effective Time.
(b) Notwithstanding the foregoing requirements of
Section 4.05(a)
, if any Party or
any member of such Partys Group exercised good faith efforts to comply with
Section 4.05(a)
but is unable, due to regulatory or other circumstance beyond its control,
to effect a legal name change in compliance with applicable Law such that an Other Party Mark
remains in such Partys or its Group members legal name, then such Party or its relevant Group
member will not be deemed to be in breach hereof as long as it continues to exercise good faith
efforts to effectuate such name change and does effectuate such name change within nine (9) months
after the Effective Time, and, in such circumstances, such Party or Group member may continue to
include in its assets and other materials references to the Other Party Mark that is in such
Partys or Group members legal name which includes references to Patriot Coal or Peabody
Energy as applicable, but only to the extent necessary to identify such Party or Group member and
only until such Partys or Group members legal name can be changed to remove and eliminate such
references.
(c) Notwithstanding the foregoing requirements of Section 4.05(a), Patriot shall not be
required to change any name including the word Peabody in any third-party contract or license,
or in property records with respect to real or personal property, if an effort to change the name
is commercially unreasonable;
provided
,
however
, that (i) Patriot on a prospective
basis from and after the Effective Time shall change the name in any new or amended third-party
contract or license or property record and (ii) Patriot shall not advertise or make public any
continued use of the Peabody name permitted by this Section 4.05(c).
Section 4.06.
Auditors and Audits; Annual and Quarterly Financial Statements and
Accounting
.
(a) Each Party agrees that during the period ending one hundred and eighty (180) days
following the Effective Time and in any event solely with respect to the preparation and audit of
each of the Partys financial statements for any of the years ended December 31, 2007, 2006 and
2005, the printing, filing and public dissemination of such financial statements, the audit of
each Partys internal control over financial reporting related to such financial statements and
such Partys managements assessment thereof, if applicable, and each Partys managements
assessment of such Partys disclosure controls and procedures related to such financial
statements:
(i) Annual Financial Statements. Each Party shall provide to the other Party on a
timely basis all information reasonably required to meet its schedule for the
28
preparation, printing, filing, and public dissemination of its annual financial
statements and, to the extent applicable to such Party, for managements assessment of the
effectiveness of its disclosure controls and procedures and its internal control over
financial reporting in accordance with all applicable provisions of Regulation S-K,
including, without limitation, Items 307 and 308 of Regulation S-K and, to the extent
applicable to such party, its auditors audit of its internal control over financial
reporting and managements assessment thereof in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002 and the Commissions and Public Company Accounting Oversight
Boards rules and auditing standards thereunder (such assessments and audit being referred
to as the Internal Control Audit and Management Assessments). Without limiting the
generality of the foregoing, each Party will provide all required financial and other
Information with respect to itself and its Subsidiaries to its auditors in a sufficient and
reasonable time and in sufficient detail to permit its auditors to take all steps and
perform all reviews necessary to provide sufficient assistance to the other Partys auditors
with respect to information to be included or contained in the other Partys annual
financial statements and to permit the other Partys auditors and management to complete the
Internal Control Audit and Management Assessments.
(ii) Access to Personnel and Records. With respect to the 2007 fiscal year of each of
PEC and Patriot, if PEC and Patriot use a different independent auditor then each audited
Party shall authorize, and use commercially reasonable efforts to cause, its respective
auditors to make available to the other Partys auditors (the other Partys auditors,
collectively, the Other Partys Auditors) both the personnel who performed or are
performing the annual audits of such audited party (each such Party with respect to its own
audit, the Audited Party) and work papers related to the annual audits of such Audited
Party, in all cases within a reasonable time prior to such Audited Partys auditors opinion
date, so that the Other Partys Auditors are able to perform the procedures they consider
necessary to take responsibility for the work of the Audited Partys auditors as it relates
to their auditors report on such other Partys financial statements, all within sufficient
time to enable such other Party to meet its timetable for the printing, filing and public
dissemination of its annual financial statements. In such an event, each Party shall make
available to the Other Partys Auditors and management its personnel and Records in a
reasonable time prior to the Other Partys Auditors opinion date and the other partys
managements assessment date so that the Other Partys Auditors and the other Partys
management are able to perform the procedures they consider necessary to conduct the
Internal Control Audit and Management Assessments.
(b) In the event a Party restates any of its financial statements that includes such Partys
audited or unaudited financial statements with respect to any balance sheet date or period of
operation between January 1, 2004 and December 31, 2007, such Party will deliver to the other
Party a substantially final draft, as soon as the same is prepared, of any report to be filed by
such first Party with the Commission that includes such restated audited or unaudited financial
statements (the Amended Financial Report);
provided
,
however
, that such first
Party may continue to revise its Amended Financial Report prior to its filing thereof with the
Commission, which changes will be delivered to the other Party as soon as reasonably practicable;
provided
,
further
,
however
, that such first Partys financial personnel
will actively consult with the other Partys financial personnel regarding any changes which such
first Party
29
may consider making to its Amended Financial Report and related disclosures prior to the
anticipated filing of such report with the Commission, with particular focus on any changes which
would have an effect upon the other Partys financial statements or related disclosures. Each
Party will reasonably cooperate with, and permit and make any necessary employees available to,
the other Party, in connection with the other Partys preparation of any Amended Financial
Reports.
(c) If any Party or member of its respective Group is required, pursuant to Rule 3-09 of
Regulation S-X or otherwise, to include in its Exchange Act filings audited financial statements
or other information of the other Party or member of the other Partys Group, the other Party
shall use commercially reasonable efforts (i) to provide such audited financial statements or
other information, and (ii) to cause its outside auditors to consent to the inclusion of such
audited financial statements or other information in the Partys Exchange Act filings.
(d) Nothing in this Section 4.06 shall require any Party to violate any agreement with any
third party regarding the confidentiality of confidential and proprietary information relating to
that third party or its business;
provided
,
however
, that in the event that a
Party is required under this Section 4.06 to disclose any such information, such Party shall use
commercially reasonable efforts to seek to obtain such third partys consent to the disclosure of
such information.
Section 4.07.
No Restrictions on Post-Closing Competitive Activities; Corporate
Opportunities
.
(a) Except as expressly provided herein or in any of the Ancillary Agreements, it is the
explicit intent of each of the Parties that this Agreement shall not include any non-competition
or other similar restrictive arrangements with respect to the range of business activities that
may be conducted by the Parties. Accordingly, each of the Parties acknowledges and agrees that
nothing set forth in this Agreement shall be construed to create any explicit or implied
restriction or other limitation on (i) the ability of the other Party hereto to engage in any
business or other activity that competes with the business of such Party, or (ii) the ability of
the other Party to engage in any specific line of business or engage in any business activity in
any specific geographic area.
(b) Except as expressly provided herein or in any of the Ancillary Agreements, PEC and the
PEC Group shall have the right to, and shall have no duty not to, (i) engage in the same or
similar business activities or lines of business as Patriot or any other member of the Patriot
Group, (ii) do business with any client or customer of Patriot or any other member of the Patriot
Group, and (iii) employ or otherwise engage any officer or employee of Patriot or any other member
of the Patriot Group, and neither PEC nor the PEC Group nor any officer or director thereof shall
be liable to Patriot or any other member of the Patriot Group or any of Patriots stockholders for
breach of any fiduciary duty by reason of any such activities of PEC or any other member of the
PEC Group or of such persons participation therein.
30
(c) Except as expressly provided in the Ancillary Agreements, Patriot and the Patriot Group
shall have the right to, and shall have no duty not to, (i) engage in the same or similar business
activities or lines of business as PEC or any other member of the PEC Group, (ii) do business with
any client or customer of PEC or any other member of the PEC Group, and (iii) employ or otherwise
engage any officer or employee of PEC or any other member of the PEC Group, and neither Patriot
nor the Patriot Group nor any officer or director thereof shall be liable to PEC or any other
member of the PEC Group or any of PECs stockholders for breach of any fiduciary duty by reason of
any such activities of Patriot or the Patriot Group or of such persons participation therein.
(d) In the event that PEC or any other member of the PEC Group acquires knowledge of a
potential transaction or matter that may be a corporate opportunity for both PEC or any other
member of the PEC Group and Patriot or any other member of the Patriot Group, neither PEC nor any
other member of the PEC Group nor any agent or advisor thereof shall have any duty to communicate
or present such corporate opportunity to Patriot or any other member of the Patriot Group and
shall not be liable to Patriot or any other member of the Patriot Group or to Patriots
stockholders for breach of any fiduciary duty as a stockholder of Patriot by reason of the fact
that PEC or any other member of the PEC Group pursues or acquires such corporate opportunity for
itself, directs such corporate opportunity to another person or entity, or does not present such
corporate opportunity to Patriot or any other member of the Patriot Group.
(e) In the event that Patriot or any other member of the Patriot Group acquires knowledge of
a potential transaction or matter that may be a corporate opportunity for both PEC or any other
member of the PEC Group and Patriot or any other member of the Patriot Group, neither Patriot nor
any other member of the Patriot Group nor any agent or advisor thereof shall have any duty to
communicate or present such corporate opportunity to PEC or any other member of the PEC Group and
shall not be liable to PEC or any other member of the PEC Group or to PECs stockholders for
breach of any fiduciary duty as a stockholder of Patriot by reason of the fact that Patriot or any
other member of the Patriot Group pursues or acquires such corporate opportunity for itself,
directs such corporate opportunity to another person or entity, or does not present such corporate
opportunity to PEC or any other member of the PEC Group.
(f) For the purposes of this Section 4.07, corporate opportunities of Patriot or any other
member of the Patriot Group shall include, but not be limited to, business opportunities (i) that
Patriot or any other member of the Patriot Group is financially able to undertake, (ii) that are,
by their nature, in a line of business of Patriot or any other member of the Patriot Group,
including the Patriot Business, (iii) that are of practical advantage to Patriot or any other
member of the Patriot Group, (iv) in which Patriot or any other member of the Patriot Group has an
interest or a reasonable expectancy, and (v) in which, by embracing the opportunities, Patriot or
any other member of the Patriot Group will cause the self-interest of PEC or any other member of
the PEC Group or any of their officers or directors to be brought into conflict with that of
Patriot or any other member of the Patriot Group, and corporate opportunities of PEC or any
other member of the PEC Group shall include, but not be limited to, business opportunities (i)
that PEC or any other member of the PEC Group is financially able to undertake, (ii) that are, by
their nature, in a line of business of PEC or any other
31
member of the PEC Group, (iii) that are of practical advantage to PEC or any other member of
the PEC Group, (iv) in which PEC or any other member of the PEC Group have an interest or a
reasonable expectancy, and (v) in which, by embracing the opportunities, PEC or any other member
of the PEC Group will cause the self-interest of Patriot or any other member of the Patriot Group
or any of their officers or directors to be brought into conflict with that of PEC or any other
member of the PEC Group.
Section 4.08.
Right of Offset
.
(a) To the extent PEC or any other member of the PEC Group has the right to receive any
amounts hereunder, including under the provisions of Article VI, or under any Ancillary Agreement
or under any other arrangement between any member of the PEC Group and Patriot or any other member
of the Patriot Group, then PEC may satisfy such amounts out of and shall have a right of off-set
against any amounts then currently due from Patriot or any other member of the Patriot Group to
PEC or any other member of the PEC Group hereunder or thereunder. For the avoidance of doubt, the
parties acknowledge that expenses payable by Patriot pursuant to Section 15.01 of this agreement
may be offset against amounts payable to Patriot pursuant to Section 2.02(f). PEC shall be
entitled to offset from the amount to be contributed by it to Patriot pursuant to Section 2.02(f)
of this Agreement an amount representing PECs estimate of expenses to be paid by Patriot pursuant
to Section 15.01 hereof. The parties shall conduct a final accounting for such expenses within 60
days of the Distribution Date and related payments required to be made by either Patriot or PEC to
the extent the expenses determined by such final accounting are higher or lower, respectively,
than PECs estimate, shall be made not later than 90 days after the Distribution Date.
(b) To the extent Patriot or any other member of the Patriot Group has the right to receive
any amounts hereunder, including under the provisions of Article VI, or under any Ancillary
Agreement or under any other arrangement between any member of the Patriot Group and PEC or any
other member of the PEC Group, then Patriot may satisfy such amounts out of and shall have a right
of off-set against any amounts then currently due from PEC or any other member of the PEC Group to
Patriot or any other member of the Patriot Group hereunder or thereunder
Section 4.09.
[Intentionally Omitted]
.
Section 4.10.
Prairie State Permits
.
(a) After the Distribution Date, PEC shall use its commercially reasonable efforts to cause a
member of the Peabody Group to apply for, and diligently pursue, the transfer of the permits held
by PCC and set forth on
Schedule 4.10(b)
and to cause in connection with such transfers
the replacement of each surety bond, letter of credit or other similar arrangement (collectively,
Prairie State Bonds
) with respect to the permits set forth on
Schedule 4.10(b)
by posting, or causing another party to post, a new bond in form and substance satisfactory to the
applicable beneficiary of such Prairie State Bond.
(b) Patriot will use commercially reasonable efforts to (i) execute and deliver such further
instruments and documents and take such other actions as PEC may
32
reasonably request in order to effectuate the transfer of the permits identified in
Schedule 4.10(b)
and (ii) take, or cause to be taken, all actions, and do, or cause to be
done, all things, reasonably necessary, proper or advisable under applicable laws, regulations and
agreements or otherwise to consummate and make effective such transfers, including, without
limitation, using commercially reasonable efforts to obtain any consents and approvals, make any
filings and applications and remove any liens, claims, equity or other encumbrance on an Asset
necessary or desirable in order to effect such transfers;
provided
that neither Patriot
nor any of its Affiliates shall be obligated to pay any consideration therefor (except for filing
fees and other similar charges) to any third party from whom such consents, approvals and
amendments are requested or to take any action or omit to take any action if the taking of or the
omission to take such action would be unreasonably burdensome to Patriot or the Patriot Group or
the business thereof. PEC shall (i) use commercially reasonable efforts to cooperate with Patriot
in order to effect the transfer of the permits identified in
Schedule 4.10(b)
and (ii)
promptly reimburse Patriot or its Affiliate, as the case may be, for any filing fee or other
similar charge paid to a third party from whom such consents, approvals and amendments are
requested.
ARTICLE V
LITIGATION MATTERS
Section 5.01.
Case Allocation
.
(a) As of the Distribution Date, Patriot shall, and, as applicable, shall cause the other
members of the Patriot Group to, (i) diligently conduct, at its sole cost and expense, the defense
of the Patriot Actions, including the Patriot Actions listed on
Schedule 5.01(a)
and any
applicable future Patriot Actions; (ii) notify PEC of material litigation developments related to
the Patriot Actions; and (iii) agree not to file any cross claim or institute separate legal
proceedings against PEC in relation to the Patriot Actions.
(b) As of the Distribution Date, PEC shall, and, as applicable, shall cause the other members
of the PEC Group to, (i) diligently conduct, at its sole cost and expense, the defense of the PEC
Actions, including the PEC Actions listed on
Schedule 5.01(b)
and any applicable future
PEC Actions; (ii) notify Patriot of material litigation developments related to the PEC Actions;
and (iii) agree not to file any cross claim or institute separate legal proceedings against
Patriot in relation to the PEC Actions.
(c) Notwithstanding anything in this Section 5.01 to the contrary, PEC shall have the right
to participate in the defense of any Patriot Action and to be represented by attorneys of its own
choosing and at its sole cost and expense, and Patriot shall have the right to participate in the
defense of any PEC Action and to be represented by attorneys of its own choosing and at its sole
cost and expense.
(d) Patriot shall indemnify and hold harmless PEC and other members of the PEC Group against
Liabilities arising in connection with Patriot Actions, and PEC shall indemnify and hold harmless
Patriot and other members of the Patriot Group against Liabilities arising in connection with PEC
Actions, in each case, in accordance with the indemnification provisions of Article VI.
33
(e) As of the Distribution Date, PEC shall, and, as applicable, shall cause the other members
of the PEC Group to, (i) diligently conduct the defense of the Joint Actions; (ii) notify Patriot
of material litigation developments related to the Joint Actions; and (iii) agree not to file any
cross claim or institute separate legal proceedings against Patriot in relation to the Joint
Actions;
provided
that if it becomes clear that a Joint Action relates primarily to the
Patriot Business then from and after such time such Joint Action shall instead be deemed to be a
Patriot Action subject to clause (a) above; and
provided
,
further
, that if it
becomes clear that a Joint Action does not relate primarily to the Patriot Business then from and
after such time such Joint Action shall instead be deemed to be a PEC Action subject to clause (b)
above. PEC and Patriot shall regularly meet to review and discuss the progress of the Joint
Actions and the classification thereof. Any dispute regarding whether an Action remains a Joint
Action shall be settle pursuant to the dispute resolution mechanics of Section 15.15.
(f) Until such time as the respective Liabilities of the members of the PEC Group and Patriot
Group are determined in connection with any Joint Action, PEC and Patriot shall each pay 50% of
the cost and expenses associated with the defense of such Joint Action. The parties agree that,
to effect the foregoing sharing arrangement, counsel in connection with any Joint Action shall be
instructed to render separate bills to PEC and to Patriot. In the event that PEC pays any costs
or expenses that are the responsibility of Patriot hereunder, Patriot shall promptly reimburse PEC
for such amounts. Patriot shall have the right to employ separate counsel to represent it and
members of the Patriot Group if Patriot shall have reasonably concluded that there may be a legal
defense available to members of the Patriot Group that are different from or in addition to those
available to PEC or representation of both PEC (or any member of the PEC Group) and Patriot (or
any member of the Patriot Group) by the same counsel would be inappropriate due to actual or
potential differing interests between them, in which case fees and expenses of such counsel
incurred by Patriot shall be included in the amounts allocated by the next sentence of this
paragraph (f). Upon the determination of Liability of the members of the PEC Group and Patriot
Group in connection with any Joint Action, Patriot shall indemnify and hold harmless PEC and other
members of the PEC Group against the portion of such Liabilities relating primarily to the Patriot
Business, and PEC shall indemnify and hold harmless Patriot and other members of the Patriot Group
against the portion of such Liabilities relating primarily to the PEC Business, including, in each
case, the costs and expenses associated with the defense of such Joint Action since the beginning
of such Joint Action, which shall be allocated between PEC and Patriot in proportion to the
Liability with respect to such Joint Action of members of the PEC Group, on the one hand, and
members of the Patriot Group, on the other hand. Indemnification pursuant to this Section 5.01(f)
shall be in accordance with the indemnification provisions of Article VI.
(g) [Intentionally Omitted].
(h) [Intentionally Omitted].
(i) As of the Distribution Date, PEC shall assume the responsibility of litigating the case
of Clintwood Elkhorn Mining Co. v. United States, pending before the United States Court of
Appeals for the Federal Circuit (the
Black Lung Case
). PEC shall receive and have the
benefit of all of the proceeds of the Black Lung Case, including interest, and shall be
responsible for the payment of attorneys fees and costs.
34
(j) As of the Distribution Date, PEC shall assume the responsibility of litigating
Consolidated Coal Co. v. United States
, No. 01-254C, pending in the United States Court of Federal
Claims (the
Federal Reclamation Case
). PEC shall receive and have the benefit of all of
the proceeds of the Federal Reclamation Case, including interest, and shall be responsible for the
payment of attorneys fees and costs in connection with the Federal Reclamation Case.
Section 5.02.
Litigation cooperation
.
(a) Each of PEC and Patriot agrees that at all times from and after the Effective Time, if an
Action currently exists or is commenced by a third-party with respect to which a Party (or any
member of such Partys respective Group) is a named defendant but such Action is otherwise not a
Liability allocated to such named Party under this Agreement or any Ancillary Agreement, then the
other Party shall use commercially reasonable efforts to cause the named but not liable defendant
to be removed from such Action and such defendant shall not be required to make any payments or
contribution in connection therewith.
(b) If, in the case of any Action involving a matter contemplated by Section 5.01, there is a
conflict of interest between the Parties, or in the event that any Third Party Claim seeks
equitable relief which would restrict or limit the future conduct of the non-responsible Party or
such Partys business or operations, such Party shall be entitled to retain, at the responsible
Partys expense, separate counsel as required by the applicable rules of professional conduct
(which counsel shall be reasonably acceptable to the responsible Party) and to participate in (but
not control) the defense, compromise, or settlement of that portion of the Third Party Claim that
seeks equitable relief with respect to the named Party.
(c) PEC and Patriot shall each use commercially reasonable efforts to make available to the
other, upon written request, its officers, directors, employees and agents, and the officers,
directors, employees and agents of its subsidiaries, as witnesses to the extent that such
individuals may reasonably be required in connection with any legal, administrative or other
proceedings arising out of the business of the other, or of any entity that is part of the other
Partys Group in which the requesting Party or a member of its Group may be involved. The
requesting Party shall bear all out-of-pocket costs and expenses in connection therewith. On and
after the Effective Time, in connection with any matter contemplated by this Section 5.02(c), the
Parties will maintain any attorney-client privilege or work product immunity of any member of any
Group as required by the Common Interest Agreement.
ARTICLE VI
INDEMNIFICATION
Section 6.01.
Patriot Indemnification of the PEC Group
. On and after the Distribution
Date, Patriot shall indemnify, defend and hold harmless each member of the PEC Group, and each of
their respective directors, officers, employees and agents (the PEC Indemnitees) from and against
any and all Indemnifiable Losses incurred or suffered by any of the PEC Indemnitees and arising out
of, or due to, (a) the failure of Patriot or any member of the Patriot Group to pay, perform or
otherwise discharge, any of the Patriot Liabilities and (b) any untrue statement or alleged untrue
statement of any material fact contained in the preliminary or
35
final Form 10, the preliminary or final Information Statement or any amendment or supplement
thereto or the omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading (other than the information
about PEC included in the sections of the Information Statement attached as Exhibit 99.1 to the
Form 10 entitled Summary Our Business, Summary Summary of the Spin-Off, and The Spin-Off -
Reasons for the Spin-Off, or any amendment or supplement thereto);
provided
, that Patriot
shall have no obligation to indemnify PEC or any other member of the PEC Group with respect to any
matter to the extent that such party has engaged in any knowing violation of Law, fraud or
misrepresentation in connection therewith.
Section 6.02.
PEC Indemnification of Patriot Group
. On and after the Distribution
Date, PEC shall indemnify, defend and hold harmless each member of the Patriot Group and each of
their respective directors, officers, employees and agents (the Patriot Indemnitees) from and
against any and all Indemnifiable Losses incurred or suffered by any of the Patriot Indemnitees and
arising out of, or due to, (a) the failure of PEC or any member of the PEC Group to pay, perform or
otherwise discharge, any of the PEC Liabilities and (b) any untrue statement or alleged untrue
statement of any material fact regarding PEC included in the sections of the Information Statement
attached as Exhibit 99.1 to the Form 10 entitled Summary Our Business, Summary The
Spin-Off, and The Spin-Off Reasons for the Spin-Off, or any amendment or supplement thereto or
the omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided
, that PEC shall have no
obligation to indemnify Patriot or any other member of the Patriot Group with respect to any matter
to the extent that such party has engaged in any knowing violation of Law, fraud or
misrepresentation in connection therewith.
Section 6.03.
Contribution
. In circumstances in which the indemnity agreements
provided for in Sections 6.01(b) and 6.02(b) are unavailable or insufficient, for any reason, to
hold harmless an indemnified party in respect of any Indemnifiable Losses arising thereunder, each
indemnifying party, in order to provide for just and equitable contribution, shall contribute to
the amount paid or payable by such indemnified party as a result of such Indemnifiable Losses, in
such proportion as is appropriate to reflect the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such Indemnifiable Losses, as well as
any other relevant equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to information supplied
by Patriot or PEC, the Parties relative intents, knowledge, access to information and opportunity
to correct or prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances.
Section 6.04.
Insurance and Third Party Obligations
. No insurer or any other third
party shall be, by virtue of the foregoing indemnification provisions, (a) entitled to a benefit it
would not be entitled to receive in the absence of such provisions, (b) relieved of the
responsibility to pay any claims to which it is obligated, or (c) entitled to any subrogation
rights with respect to any obligation hereunder.
36
Section 6.05.
Indemnification Obligations Net of Insurance Proceeds and Other Amounts on a
Net-Tax Basis
.
(a) Any Liability subject to indemnification or contribution pursuant to this Article VI,
will (i) be net of Insurance Proceeds that actually reduce the amount of the Liability, (ii) be
net of any proceeds received by an Indemnified Party from any third party for indemnification for
such Liability that actually reduce the amount of the Liability (Third Party Proceeds) and
(iii) will be determined on a Net-Tax Basis. Accordingly, the amount which any Indemnifying Party
is required to pay pursuant to this Article VI to any Indemnified Party will be reduced by any
Insurance Proceeds or Third Party Proceeds theretofore actually recovered by or on behalf of the
Indemnified Party in respect of the related Liability. If an Indemnified Party receives a payment
required by this Agreement from an Indemnifying Party in respect of any Liability (an Indemnity
Payment) and subsequently receives Insurance Proceeds or Third Party Proceeds, then the
Indemnified Party will pay to the Indemnifying Party an amount equal to the excess of the
Indemnity Payment received over the amount of the Indemnity Payment that would have been due if
the Insurance Proceeds or Third Party Proceeds had been received, realized or recovered before the
Indemnity Payment was made.
(b) An insurer who would otherwise be obligated to pay any claim shall not be relieved of the
responsibility with respect thereto or, solely by virtue of the indemnification and contributions
provisions hereof, have any subrogation rights with respect thereto. The Indemnified Party shall
use commercially reasonable efforts to seek to collect or recover any third-party Insurance
Proceeds and any Third Party Proceeds to which the Indemnified Party is entitled in connection
with any Liability for which the Indemnified Party seeks contribution or indemnification pursuant
to this Article VI;
provided
that the Indemnified Partys inability to collect or recover
any such Insurance Proceeds or Third Party Proceeds shall not limit the Indemnifying Partys
obligations hereunder.
(c) The term Net-Tax Basis as used in this Article VI means that, in determining the amount
of the payment necessary to indemnify any party against, or reimburse any party for, Liabilities,
the amount of such Liabilities will be determined net of any theoretical reduction in Tax
realizable (assuming a hypothetical effective tax rate of 40%) by the Indemnified Party as the
result of sustaining or paying such Liabilities after taking into account any Tax incurred on the
receipt of Insurance Proceeds, and the amount of such Indemnity Payment will be increased (i.e.,
grossed up) by the amount necessary to satisfy any income or franchise Tax liabilities that will
be incurred by the Indemnified Party as a result of its receipt of, or right to receive, such
Indemnity Payment (as so increased), so that the Indemnified Party is put in the same net
after-Tax economic position as if it had not incurred such Liabilities, in each case without
taking into account any impact on the Tax basis that an Indemnified Party has in its assets.
Section 6.06.
Notice and Payment of Claims
. If any PEC or Patriot Indemnitee (the
Indemnified Party) determines that it is or may be entitled to indemnification by a Party (the
Indemnifying Party) under this Article VI (other than in connection with any Action or claim
subject to Section 6.07), the Indemnified Party shall deliver to the Indemnifying Party a written
notice specifying, to the extent reasonably practicable, the basis for its claim for
indemnification and the amount for which the Indemnified Party reasonably believes it is entitled
37
to be indemnified. After the Indemnifying Party shall have been notified of the amount for
which the Indemnified Party seeks indemnification, the Indemnifying Party shall, within 30 days
after receipt of such notice, pay the Indemnified Party such amount in cash or other immediately
available funds (or reach agreement with the Indemnified Party as to a mutually agreeable
alternative payment schedule) unless the Indemnifying Party objects to the claim for
indemnification or the amount thereof. If the Indemnifying Party does not give the Indemnified
Party written notice objecting to such claim and setting forth the grounds therefor within the same
30 day period, the Indemnifying Party shall be deemed to have acknowledged its liability for such
claim and the Indemnified Party may exercise any and all of its rights under applicable law to
collect such amount.
Section 6.07.
Notice and Defense of Third Party Claims
. Promptly following the earlier
of (a) receipt of notice of the commencement by a third party of any Action against or otherwise
involving any Indemnified Party or (b) receipt of information from a third party alleging the
existence of a claim against an Indemnified Party, in either case, with respect to which
indemnification may be sought pursuant to this Agreement (a Third Party Claim), the Indemnified
Party shall give the Indemnifying Party written notice thereof. The failure of the Indemnified
Party to give notice as provided in this Section 6.07 shall not relieve the Indemnifying Party of
its obligations under this Agreement, except to the extent that the Indemnifying Party is
prejudiced by such failure to give notice. Within 30 days after receipt of such notice, the
Indemnifying Party shall by giving written notice thereof to the Indemnified Party, (a)
acknowledge, as between the parties hereto, liability for, and at its option elect to assume the
defense of such Third Party Claim at its sole cost and expense or (b) object to the claim of
indemnification set forth in the notice delivered by the Indemnified Party pursuant to the first
sentence of this Section 6.07 setting forth the grounds therefor;
provided
that if the
Indemnifying Party does not within the same 30 day period give the Indemnified Party written notice
acknowledging liability or objecting to such claim and setting forth the grounds therefor, the
Indemnifying Party shall be deemed to have acknowledged, as between the parties hereto, its
liability to the Indemnified Party for such Third Party Claim. Any contest of a Third Party Claim
as to which the Indemnifying Party has elected to assume the defense shall be conducted by
attorneys employed by the Indemnifying Party and reasonably satisfactory to the Indemnified Party;
provided
that the Indemnified Party shall have the right to participate in such proceedings
and to be represented by attorneys of its own choosing at the Indemnified Partys sole cost and
expense. If the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnifying
Party may settle or compromise the claim without the prior written consent of the Indemnified
Party;
provided
that the Indemnifying Party may not agree to any such settlement pursuant
to which any remedy or relief, other than monetary damages for which the Indemnifying Party shall
be responsible hereunder, shall be applied to or against the Indemnified Party, without the prior
written consent of the Indemnified Party, which consent shall not be unreasonably withheld. If the
Indemnifying Party does not assume the defense of a Third Party Claim for which it has acknowledged
liability for indemnification under Article VI, the Indemnified Party may require the Indemnifying
Party to reimburse it on a current basis for its reasonable expenses of investigation, reasonable
attorneys fees and reasonable out-of-pocket expenses incurred in defending against such Third
Party Claim, and the Indemnifying Party shall be bound by the result obtained with respect thereto
by the Indemnified Party;
provided
that the Indemnifying Party shall not be liable for any
settlement effected without its consent, which consent shall not be unreasonably withheld. The
Indemnifying Party shall pay to the Indemnified Party in cash the
38
amount for which the Indemnified Party is entitled to be indemnified (if any) within 15 days
after the final resolution of such Third Party Claim (whether by the final nonappealable judgment
of a court of competent jurisdiction or otherwise), or, in the case of any Third Party Claim as to
which the Indemnifying Party has not acknowledged liability, within 15 days after such Indemnifying
Partys objection has been resolved by settlement, compromise or the final nonappealable judgment
of a court of competent jurisdiction.
ARTICLE VII
EMPLOYEE MATTERS
Section 7.01.
Employee Matters Agreement
. All matters relating to or arising out of
any employee benefit, compensation or welfare arrangement in respect of any present and former
employee of the PEC Group or the Patriot Group shall be governed by the Employee Matters Agreement
substantially in the form of
Exhibit B
hereto, except as may be expressly stated herein. In
the event of any inconsistency with respect to such matters between the Employee Matters Agreement
and this Agreement or any Ancillary Agreement, the Employee Matters Agreement shall govern to the
extent of the inconsistency.
ARTICLE VIII
TAX MATTERS
Section 8.01.
Tax Separation Agreement
. All matters relating to Taxes shall be
governed exclusively by the Tax Separation Agreement substantially in the form of
Exhibit F
hereto, except as may be expressly stated herein. In the event of any inconsistency with respect to
such matters between the Tax Separation Agreement and this Agreement or any Ancillary Agreement,
the Tax Separation Agreement shall govern to the extent of the inconsistency.
ARTICLE IX
ACCOUNTING MATTERS
Section 9.01.
Intercompany Accounts
(a).
(a) Each Intercompany Account outstanding immediately prior to the Effective Time, in any
general ledger account of PEC, Patriot or any of their respective Affiliates, other than those set
forth on
Schedule 9.01(a)
, shall be satisfied and/or settled by the relevant members of
the PEC Group and the Patriot Group no later than the Effective Time by (i) forgiveness by the
relevant obligor, (ii) one or a related series of distributions of and/or contributions to
capital, or (iii) cash payment by the relevant obligor to the relevant obligee, in each case as
agreed to by the Parties.
(b) To the extent intercompany accounts are not satisfied in accordance with Section 9.01(a),
each Intercompany Account outstanding immediately prior to the Effective Time under any of the
general ledger accounts of PEC, Patriot or any of their respective Affiliates set forth on
Schedule 9.01(a)
shall continue to be outstanding after the Effective Time and thereafter
(i) shall be an obligation of the relevant Party (or the relevant member of such Partys Group),
each responsible for fulfilling its (or a member of such Partys Groups) obligations in
accordance with the terms and conditions applicable to such obligation, and
39
(ii) shall be for each relevant Party (or the relevant member of such Partys Group) an
obligation to a third-party and shall no longer be an Intercompany Account.
ARTICLE X
INTELLECTUAL PROPERTY MATTERS
Section 10.01.
Software License Agreement
. All matters relating to the ownership and
right to use intellectual property, other than trademarks or as provided in Section 13.07, shall be
governed exclusively by the Software License Agreement substantially in the form of
Exhibit
D
hereto. In the event of any inconsistency with respect to such matters between the Software
License Agreement and this Agreement or any Ancillary Agreement, the Software License Agreement
shall govern to the extent of the inconsistency.
ARTICLE XI
TRANSITION SERVICES
Section 11.01.
Transition Services Agreement
. All matters relating to the provision of
support and other services by the PEC Group to the Patriot Group after the Effective Time covered
by the Transition Services Agreement, other than as provided in Section 13.07, shall be governed
exclusively by the Transition Services Agreements substantially in the form of
Exhibit G
hereto, except as may be expressly stated herein. In the event of any inconsistency with respect to
such matters between the Transition Services Agreement and this Agreement or any Ancillary
Agreement, the Transition Services Agreement shall govern to the extent of the inconsistency.
ARTICLE XII
REAL PROPERTY MATTERS
Section 12.01.
Real Property Agreements
. All matters relating to real property to be
owned, leased, subleased, occupied, or shared by the PEC Group or the Patriot Group after the
Effective Time shall be governed by the Real Property Agreements substantially in the form of
Exhibit C
hereto. In the event of any inconsistency with respect to such matters between
the Real Property Agreements and this Agreement or any Ancillary Agreement, the Real Property
Agreements shall govern to the extent of the inconsistency.
ARTICLE XIII
INFORMATION; SEPARATION OF DATA
Section 13.01.
Provision of Corporate Records
. As soon as practicable following the
Effective Time, PEC and Patriot shall each arrange for the provision to the other of existing
corporate documents (e.g. minute books, stock registers, stock certificates, documents of title,
contracts, etc.) in its possession relating to the other or its business and affairs or to any
other entity that is part of such others respective Group or to the business and affairs of such
other entity.
Section 13.02.
Access to Information
. From and after the Effective Time, PEC and
Patriot shall each afford the other and its accountants, counsel and other designated
representatives reasonable access (including using commercially reasonable efforts to give
40
access to Persons possessing information) and duplicating rights during normal business hours
to all records, books, contracts, instruments, computer data and other data and information in its
possession relating to the business and affairs of the other or a member of its Group (other than
data and information subject to an attorney/client or other privilege), insofar as such access is
reasonably required by the other including, without limitation, for audit, accounting and
litigation purposes.
Section 13.03.
Retention of Records
. Except as otherwise required by law or agreed to
in writing, each Party shall, and shall cause the members of its Group to, retain all information
relating to the others business in accordance with the past practice of such Party.
Notwithstanding the foregoing, either Party may destroy or otherwise dispose of any information at
any time in accordance with the corporate record retention policy maintained by such Party with
respect to its own records.
Section 13.04.
Confidentiality
.
(a) Notwithstanding any termination of this Agreement, for a period of five (5) years from
the Effective Time the Parties shall hold, and shall cause each of their respective subsidiaries
to hold, and shall each cause their respective officers, employees, agents, consultants and
advisors to hold, in strict confidence, and not to disclose or release or use, for any ongoing or
future commercial purpose, without the prior written consent of the other Party, any and all
Confidential Information concerning any other Party;
provided
, that the Parties may
disclose, or may permit disclosure of, Confidential Information (i) to their respective auditors,
attorneys, financial advisors, bankers and other appropriate consultants and advisors who have a
need to know such information for our auditing and other non-commercial purposes and are informed
of their obligation to hold such information confidential to the same extent as is applicable to
the Parties and in respect of whose failure to comply with such obligations, the applicable Party
will be responsible, (ii) if the Parties or any of their respective subsidiaries are required or
compelled to disclose any such Confidential Information by judicial or administrative process or
by other requirements of Law or stock exchange rule, (iii) as required in connection with any
legal or other proceeding by one Party against any other Party, or (iv) as necessary in order to
permit a Party to prepare and disclose its financial statements, or other required disclosures;
provided
,
further
, that each Party (and members of its Group as necessary) may
use, or may permit use of, Confidential Information of the other Party in connection with such
first Party performing its obligations, or exercising its rights, under this Agreement or any
Ancillary Agreement. Notwithstanding the foregoing, in the event that any demand or request for
disclosure of Confidential Information is made pursuant to clause (ii) above, each Party, as
applicable, shall promptly notify the other of the existence of such request or demand and shall
provide the other a reasonable opportunity to seek an appropriate protective order or other
remedy, which such Parties will cooperate in obtaining. In the event that such appropriate
protective order or other remedy is not obtained, the Party whose Confidential Information is
required to be disclosed shall or shall cause the other applicable Party or Parties to furnish, or
cause to be furnished, only that portion of the Confidential Information that is legally required
to be disclosed and shall take commercially reasonable steps to ensure that confidential treatment
is accorded such information.
41
(b) Notwithstanding anything to the contrary set forth herein, (i) the Parties shall be
deemed to have satisfied their obligations hereunder with respect to Confidential Information if
they exercise the same degree of care (but no less than a reasonable degree of care) as they take
to preserve confidentiality for their own similar information and (ii) confidentiality obligations
provided for in any agreement between each Party or its Subsidiaries and their respective
employees shall remain in full force and effect. Notwithstanding anything to the contrary set
forth herein, Confidential Information of any Party in the possession of and used by any other
Party as of the Effective Time may continue to be used by such Party in possession of the
Confidential Information in and only in the operation of the PEC Business or the Patriot Business,
as the case may be;
provided
, such Confidential Information may be used only so long as
the Confidential Information is maintained in confidence and not disclosed in violation of
Section 13.04(a). Such continued right to use may not be transferred (directly or indirectly) to
any third party without the prior written consent of the applicable Party, except pursuant to
Section 15.05(b).
(c) Each Party acknowledges that it and the other members of its Group may have in their
possession confidential or proprietary information of third parties that was received under
confidentiality or non-disclosure agreements with such third party prior to the Effective Time.
Such Party will hold, and will cause the other members of its Group and their respective
representatives to hold, in strict confidence the confidential and proprietary information of
third parties to which they or any other member of their respective Groups has access, in
accordance with the terms of any agreements entered into prior to the Effective Time between one
or more members of the such Partys Group (whether acting through, on behalf of, or in connection
with, the separated businesses) and such third parties.
(d) Upon the written request of a Party, the other Party shall promptly, (i) deliver to such
requesting Party all original Confidential Information (whether written or electronic) concerning
such requesting Party and/or its Subsidiaries, and (ii) if specifically requested by such
requesting Party, destroy any copies of such Confidential Information (including any extracts
there from). Upon the written request of such requesting Party, the other Party shall cause one of
its duly authorized officers to certify in writing to such requesting Party that the requirements
of the preceding sentence have been satisfied in full.
Section 13.05.
Privileged Matters
.
(a) The Parties recognize that legal and other professional services that have been and will
be provided prior to the Effective Time have been and will be rendered for the collective benefit
of each of the members of the PEC Group and the Patriot Group, and that each of the members of the
PEC Group and the Patriot Group should be deemed to be the client with respect to such
pre-separation services for the purposes of asserting all privileges which may be asserted under
applicable Law.
(b) The Parties recognize that legal and other professional services will be provided
following the Effective Time which will be rendered solely for the benefit of PEC or Patriot, as
the case may be. With respect to such post-separation services, the Parties agrees as follows:
42
(i) PEC shall be entitled, in perpetuity, to control the assertion or waiver of all
privileges in connection with privileged information which relates solely to the PEC
Business, whether or not the privileged information is in the possession of or under the
control of PEC or Patriot. PEC shall also be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information that relates
solely to the subject matter of any claims constituting PEC Liabilities, now pending or
which may be asserted in the future, in any lawsuits or other proceedings initiated against
or by PEC, whether or not the privileged information is in the possession of or under the
control of PEC or Patriot; and
(ii) Patriot shall be entitled, in perpetuity, to control the assertion or waiver of
all privileges in connection with privileged information which relates solely to the Patriot
Business, whether or not the privileged information is in the possession of or under the
control of PEC or Patriot. Patriot shall also be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information that relates
solely to the subject matter of any claims constituting Patriot Liabilities, now pending or
which may be asserted in the future, in any lawsuits or other proceedings initiated against
or by Patriot, whether or not the privileged information is in the possession of or under
the control of PEC or Patriot.
(c) The Parties agree that they shall have a shared privilege, with equal right to assert or
waive, subject to the restrictions in this Section 13.05, with respect to all privileges not
allocated pursuant to the terms of Section 13.05(b). All privileges relating to any claims,
proceedings, litigation, disputes, or other matters which involve both PEC and Patriot in respect
of which both Parties retain any responsibility or Liability under this Agreement, shall be
subject to a shared privilege among them.
(d) No Party may waive any privilege which could be asserted under any applicable Law, and in
which any other Party has a shared privilege, without the consent of the other Party, which shall
not be unreasonably withheld or delayed or as provided in subsections (e) or (f) below. Consent
shall be in writing, or shall be deemed to be granted unless written objection is made within
twenty (20) days after notice upon the other Party requesting such consent. Each Party shall use
its reasonable best efforts to preserve any privilege held by the other party if that privilege is
a shared privilege or has been allocated to the other party pursuant to Section 13.05(b).
(e) In the event of any litigation or dispute between or among any of the Parties, or any
members of their respective Groups, either such Party may waive a privilege in which the other
Party or member of such Group has a shared privilege, without obtaining the consent of the other
Party;
provided
, that such waiver of a shared privilege shall be effective only as to the
use of information with respect to the litigation or dispute between the relevant Parties and/or
the applicable members of their respective Groups, and shall not operate as a waiver of the
shared privilege with respect to third parties.
(f) If a dispute arises between the Parties or their respective subsidiaries regarding
whether a privilege should be waived to protect or advance the interest of either Party, each
Party agrees that it shall negotiate in good faith, shall endeavor to minimize any
43
prejudice to the rights of the other Party, and shall not unreasonably withhold consent to
any request for waiver by the other Party. Each Party specifically agrees that it will not
withhold consent to waiver for any purpose except to protect its own legitimate interests.
(g) Upon receipt by either Party or by any subsidiary thereof of any subpoena, discovery or
other request which arguably calls for the production or disclosure of information subject to a
shared privilege or as to which the other Party has the sole right hereunder to assert a
privilege, or if either Party obtains knowledge that any of its or any of its Subsidiaries
current or former directors, officers, agents or employees have received any subpoena, discovery
or other requests which arguably calls for the production or disclosure of such privileged
information, such Party shall promptly notify the other Party of the existence of the request and
shall provide the other Party a reasonable opportunity to review the information and to assert any
rights it or they may have under this Section 13.05 or otherwise to prevent the production or
disclosure of such privileged information.
(h) The transfer of all Information pursuant to this Agreement is made in reliance on the
agreement of PEC and Patriot as set forth in Section 13.04 and Section 13.05, to maintain the
confidentiality of privileged information and to assert and maintain all applicable privileges.
Nothing provided for herein or in any Ancillary Agreement shall be deemed a waiver of any
privilege that has been or may be asserted under this Agreement or otherwise.
Section 13.06.
Ownership of Information
. Any Information owned by one Party or any of
its subsidiaries that is provided to a requesting Party pursuant to Article VI, Article XV, or this
Article XIII shall be deemed to remain the property of the providing party. Unless specifically set
forth herein, nothing contained in this Agreement shall be construed as granting or conferring
rights of license or otherwise in any such information.
Section 13.07.
Separation of Data
. Patriot acknowledges and agrees that PEC may, after
the Effective Time, delete or cause to be deleted any Information which does not relate to the
Patriot Business which is contained in, stored in or accessible through any Software provided to
Patriot under the Software License Agreement, the Transition Services Agreement or otherwise. The
foregoing will not be deemed to be a violation of any provision of this Agreement, the Software
License Agreement, or the Transition Services Agreement. The provisions of Section 13.04 apply to
Patriots use of any such Information prior to its deletion.
ARTICLE XIV
INTEREST ON PAYMENTS
Section 14.01.
Interest
. Except as otherwise expressly provided in this Agreement or
an Ancillary Agreement, all payments by one Party to the other under this Agreement or any
Ancillary Agreement shall be paid by company check or wire transfer of immediately available funds
to an account in the United States designated by the recipient, within thirty (30) days after
receipt of an invoice or other written request for payment setting forth the specific amount due
and a description of the basis therefor in reasonable detail. Any amount remaining unpaid beyond
its due date, including disputed amounts that are ultimately determined to be payable, shall bear
interest at a rate of simple interest per annum equal to the Applicable Rate. Notwithstanding
anything to the contrary contained herein or in any Ancillary Agreement, in no
44
event shall the amount or rate of interest due and payable exceed the maximum amount or rate
of interest allowed by applicable law and, in the event any such excess payment is made or
received, such excess sum shall be credited as a payment of principal (or if no principal shall
remain outstanding, shall be refunded).
ARTICLE XV
MISCELLANEOUS
Section 15.01.
Expenses
. Except as set forth on
Schedule 15.01
or as
specifically provided in this Agreement or any Ancillary Agreement, PEC shall pay (a) all costs and
expenses incurred in connection with the spin-off and the transactions contemplated by this
Agreement (including transfer taxes and the fees and expenses of the Distribution Agent and of all
counsel, accountants and financial and other advisors), (b) all costs and expenses incurred in
connection with the preparation, execution, delivery and implementation of this Agreement and the
Ancillary Agreements, (c) all costs and expenses incurred by Patriot (including fees and expenses
of all counsel, accountants and financial advisors) in connection with Patriots Senior Credit
Facility, (d) all costs and expenses payable by Patriot to Bank of America, N.A. or Banc of America
Securities LLC (collectively,
BofA
) pursuant to the Senior Secured Credit Facility
Commitment Letter and Fee Letter, in each case dated September 24, 2007, entered into by Patriot
with BofA, representing amounts owed to BofA in connection with the establishment of Patriots
Senior Credit Facility in respect of the preparation, due diligence, syndication and closing of all
loan documentation (including, without limitation, the legal fees of counsel to BofA) and amounts
owed to BofA in respect of underwriting and administrative agency fees, and (e) all legal, filing,
accounting, printing, and other expenses in connection with the preparation, printing and filing of
the Form 10 and the Information Statement.
Section 15.02.
Notices
. All notices and communications under this Agreement shall be
in writing and shall be deemed to have been given (a) when received, if such notice or
communication is delivered by facsimile, hand delivery or overnight courier, and, (b) three (3)
business days after mailing if such notice or communication is sent by United States registered or
certified mail, return receipt requested, first class postage prepaid. All notices and
communications, to be effective, must be properly addressed to the party to whom the same is
directed at its address as follows:
|
|
|
|
|
If to PEC, to:
|
|
Peabody Energy Corporation
|
|
|
|
701 Market Street
|
|
|
|
St. Louis, MO 63101
|
|
|
|
Attention: Alexander Schoch
|
|
|
|
Executive Vice President Law
|
|
|
|
Fax: 314-342-3419
|
|
|
|
|
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If to Patriot, to:
|
|
Patriot Coal Corporation
|
|
|
|
12312 Olive Boulevard, Suite 400
|
|
|
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St. Louis, MO 63141
|
|
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Attention: Joseph W. Bean
|
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Senior Vice President, General Counsel & Corporate Secretary
|
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Fax:
|
45
Either Party may, by written notice delivered to the other Party in accordance with this
Section 15.02, change the address to which delivery of any notice shall thereafter be made.
Section 15.03.
Amendment and Waiver
. This Agreement may not be altered or amended, nor
may any rights hereunder be waived, except by an instrument in writing executed by the Party or
Parties to be charged with such amendment or waiver. No waiver of any terms, provision or condition
of or failure to exercise or delay in exercising any rights or remedies under this Agreement, in
any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver
of any such term, provision, condition, right or remedy or as a waiver of any other term, provision
or condition of this Agreement.
Section 15.04.
Entire Agreement
. This Agreement, together with the Ancillary
Agreements, constitutes the entire understanding of the Parties hereto with respect to the subject
matter hereof, superseding all negotiations, prior discussions and prior agreements and
understandings relating to such subject matter. To the extent that the provisions of this Agreement
are inconsistent with the provisions of any Ancillary Agreement with respect to the subject matter
thereof, the provisions of such Ancillary Agreement shall prevail to the extent of the
inconsistency.
Section 15.05.
Consolidation, Merger, Etc.; Parties in Interest; Termination
.
(a) Neither Party (referred to in this Section 15.05(a) as a Transferring Party) shall
consolidate with or merge into any other entity or convey, transfer or lease all or any
substantial portion of its properties and assets to any entity, unless, in each case, the other
party to such transaction expressly assumes, by a written agreement, executed and delivered to the
other Party hereto, in form reasonably satisfactory to such other Party, all of the Liabilities of
the Transferring Party under this Agreement and the Ancillary Agreements and the due and punctual
performance or observance of every agreement and covenant of this Agreement and Ancillary
Agreements on the part of the Transferring Party to be performed or observed.
(b) Neither of the Parties hereto may assign its rights or delegate any of its duties under
this Agreement without the prior written consent of each other Party. This Agreement shall be
binding upon, and shall inure to the benefit of, the Parties hereto and their respective
successors and permitted assigns. Nothing contained in this Agreement, express or implied, is
intended to confer any benefits, rights or remedies upon any Person other than members of the PEC
Group and the Patriot Group and the PEC Indemnitees and Patriot Indemnitees under Article VI
hereof.
(c) This Agreement (including Article VI hereof) may be terminated and the Distribution may
be amended, modified or abandoned at any time prior to the Distribution by and in the sole
discretion of PEC without the approval of Patriot or the shareholders of PEC. In the event of such
termination, neither Party shall have any liability of any kind arising from such termination to
the other Party or any other Person. After the Distribution, this Agreement may not be terminated
except by an agreement in writing signed by the Parties;
provided
,
however
, that
Article VI shall not be terminated or amended after the Distribution in respect of any PEC
Indemnitee or Patriot Indemnitee without the consent of such Person.
46
Section 15.06.
Further Assurances and Consents
. In addition to the actions
specifically provided for elsewhere in this Agreement, each of the Parties hereto will use
commercially reasonable efforts to (a) execute and deliver such further instruments and documents
and take such other actions as any other Party may reasonably request in order to effectuate the
purposes of this Agreement and to carry out the terms hereof and (b) take, or cause to be taken,
all actions, and do, or cause to be done, all things, reasonably necessary, proper or advisable
under applicable laws, regulations and agreements or otherwise to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, using commercially
reasonable efforts to obtain any consents and approvals, make any filings and applications and
remove any liens, claims, equity or other encumbrance on an Asset of the other Party necessary or
desirable in order to consummate the transactions contemplated by this Agreement;
provided
that no Party hereto shall be obligated to pay any consideration therefor (except for filing fees
and other similar charges) to any third party from whom such consents, approvals and amendments are
requested or to take any action or omit to take any action if the taking of or the omission to take
such action would be unreasonably burdensome to the Party or its Group or the business thereof.
Section 15.07.
Severability
. In the event that any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby, and the Parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect
of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
Section 15.08.
Governing Law; Jurisdiction
. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of Delaware, without regard to the
conflicts of law rules of such state. Each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of the courts of the State of Missouri or any federal court with subject
matter jurisdiction located in the City of St. Louis (and any appeals court therefrom) in the event
any dispute arises out of this Agreement or any Ancillary Agreement or any transaction contemplated
hereby or thereby, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court, and (c) agrees that it will not bring any
action relating to this Agreement or any Ancillary Agreement or any transaction contemplated hereby
or thereby in any court other than such courts.
Section 15.09.
Counterparts
. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original instrument, but all of which together shall
constitute but one and the same Agreement.
Section 15.10.
Third Party Beneficiaries
. Except as provided in Article VI and except
as specifically provided in any Ancillary Agreement, this Agreement is solely for the benefit of
the Parties and should not be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, cause of action or other right in excess of those existing without reference to this
Agreement.
Section 15.11.
Specific Performance
. The Parties agree that irreparable damage would
occur in the event that the provisions of this Agreement were not performed in accordance
47
with their specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled
to provisional or temporary injunctive relief in accordance therewith in any court of the United
States, this being in addition to any other remedy or relief to which they may be entitled.
Section 15.12.
Limitations of Liability
. Notwithstanding anything in this Agreement to
the contrary, no Indemnifying Party shall be liable to an Indemnified Party for any special,
indirect, incidental, punitive, consequential, exemplary, statutorily-enhanced or similar damages
in excess of compensatory damages (provided that any such liability with respect to a Third Party
Claim shall be considered direct damages) arising in connection with the transactions contemplated
by this Agreement or the Ancillary Agreements.
Section 15.13.
Force Majeure
. No Party (or any Person acting on its behalf) shall have
any liability or responsibility for failure to fulfill any obligation (other than a payment
obligation) under this Agreement or, unless otherwise expressly provided therein, any Ancillary
Agreement, so long as and to the extent to which the fulfillment of such obligation is prevented,
frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. A Party
claiming the benefit of this provision shall, as soon as reasonably practicable after the
occurrence of any such event: (a) notify the other Party of the nature and extent of any such Force
Majeure condition, and (b) use due diligence to remove any such causes and resume performance under
this Agreement as soon as reasonably practicable.
Section 15.14.
Construction
. The Parties have participated jointly in the negotiation
and drafting of this Agreement. This Agreement shall be construed without regard to any presumption
or rule requiring construction or interpretation against the party drafting or causing any
instrument to be drafted.
Section 15.15.
Disputes
.
(a) Except as otherwise provided in any Ancillary Agreement, all disputes, controversies or
claims between members of the PEC Group and the Patriot Group, which are parties to this Agreement
or any Ancillary Agreement, arising out of or relating to this Agreement or any Ancillary
Agreement or the performance by the parties of its or their terms, whether based on contract,
tort, statute or otherwise, including, but not limited to, disputes in connection with claims by
third parties (collectively, Disputes), shall be resolved only in accordance with the provisions
of this Section 15.15;
provided
,
however
, that nothing contained herein shall
preclude any party to a Dispute from seeking or obtaining (i) injunctive relief to prevent an
actual or threatened breach of any of the provisions of this Agreement or any Ancillary Agreement,
or (ii) equitable or other judicial relief to enforce the provisions of this Section 15.15 hereof
or to preserve the status quo pending resolution of Disputes hereunder.
(b) Any party or parties to a Dispute of either Group may give the parties to the Dispute of
the other Group written notice of the Dispute initiating the procedures hereunder. Within ten days
after delivery of the notice of a Dispute, the receiving parties shall submit to the other a
written response. The notice and the response shall include a statement of each partys respective
position and a summary of arguments supporting that position and the name and title of the
executive who will represent the claimants and of any other individual
48
who will accompany such executive in resolving the Dispute. Within twenty (20) days after
delivery of the first notice, the executives of both Groups shall meet at a mutually acceptable
time and place, and thereafter as often as they reasonably deem necessary, and shall negotiate in
good faith to attempt to resolve the Dispute. All reasonable requests for information made by one
party to the another will be honored. If the Dispute has not been resolved by negotiation within
forty (40) days of the notice of the Dispute, the board of directors of PEC and Patriot shall
appoint independent committees that will negotiate in good faith to attempt to resolve the
Dispute.
(c) If the Dispute has not been resolved by negotiation within sixty (60) days of the notice
of Dispute, the Dispute may, by mutual consent of both Parties, be submitted for resolution by a
panel of three arbitrators conducted in accordance with the CPR Rules for Non-Administered
Arbitration or AAA Rules (the Rules), as modified by this Section 15.15. The Claimants acting
jointly, on the one hand, and the Respondents acting jointly, on the other hand, shall each
appoint one arbitrator within fourteen (14) days after the Claimants give an arbitration notice.
The two arbitrators so appointed shall designate the third arbitrator by mutual agreement within
30 days after the arbitration notice is given. If the two arbitrators so appointed fail to
designate the third arbitrator within such period, then any Party may request the International
Institute for Conflict Prevention & Resolution (CPR) to appoint the third arbitrator within
fourteen (14) days after such request. The third arbitrator shall be a lawyer licensed to practice
in the State of Missouri who shall not be related to, employed by, affiliated with or have had a
substantial or ongoing business relationship with any member of either Group. Notwithstanding the
foregoing, if the amount in dispute is less than $5,000,000, then the Claimants and Respondents
shall appoint, together, a single arbitrator, reasonably acceptable to them, licensed to practice
in the State of Missouri who shall not be related to, employed by, affiliated with or have had a
substantial or ongoing business relationship with any member of either Group.
(d) The arbitration shall be conducted in St. Louis, Missouri (or at any other place agreed
upon by the parties and the arbitrators). The parties will facilitate the arbitration by: (i)
making available to one another and to the arbitrators for examination, inspection and extraction
all documents, books, records and personnel under their control if determined by the arbitrators
to be relevant to the dispute; (ii) conducting arbitration hearings to the greatest extent
possible on successive days; and (iii) observing strictly the time periods established by this
Section 15.15, the Rules or by the arbitrators for submission of evidence or briefs. All issues in
connection with the Dispute, including procedural issues, shall be decided by the concurrence of
at least two arbitrators, and all decisions by the arbitrators shall be accompanied by a written
opinion setting forth the findings of fact and conclusions of law relied upon in reaching the
decision. The panel of arbitrators
s
hall decide the issues submitted to it in accordance
with the language and commercial purposes of this Agreement or the relevant Ancillary Agreement
(as applicable);
provided
that all questions of law shall be governed by the internal laws
of the State of Delaware, without regard to its conflict of laws rules. The arbitrators decision
shall be final and binding as to all matters at issue in the Dispute;
provided
,
however
, if necessary such decision may be enforced by either party in any court having
jurisdiction over the parties or the subject matter of the Dispute. Unless the arbitrators shall
assess the costs and expenses of the arbitration proceeding and of the parties differently,
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each party shall pay its costs and expenses incurred in connection with the arbitration
proceeding, and the costs and expenses of the arbitrators shall be shared equally by the parties.
[Signatures appear on following page.]
50
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the
day and year first above written.
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PEABODY ENERGY CORPORATION
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By:
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/s/ Richard A. Navarre
Name: Richard A. Navarre
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Title: Executive Vice President
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PATRIOT COAL CORPORATION
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By:
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/s/ Richard M. Whiting
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Name: Richard M. Whiting
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Title: President & Chief Executive Officer
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Exhibit 10.2
EXECUTION
COPY
TAX SEPARATION AGREEMENT
This TAX SEPARATION AGREEMENT is dated as of October 22, 2007, by and among Peabody Energy
Corporation (Peabody), a Delaware corporation, and Patriot Coal Corporation (Spinco), a
Delaware corporation.
WHEREAS, as of the date hereof, Peabody is the common parent of an affiliated group of
domestic corporations within the meaning of Section 1504(a) of the Code, and the members of the
affiliated group have heretofore joined in filing consolidated federal income Tax returns (the
Affiliated Group);
WHEREAS, Peabody intends to distribute all of the outstanding shares of stock of Spinco
pro
rata
to the holders of Peabody common stock in a transaction that qualifies under sections 355 and
368 of the Code; and
WHEREAS, as a result of the Distribution, the Parties desire to enter into this Tax Separation
Agreement to provide for certain Tax matters, including the assignment of responsibility for the
preparation and filing of Tax Returns, the payment of and indemnification for Taxes (including
Taxes with respect to the Distribution and related transactions as contemplated in the other
Transaction Agreements), entitlement to refunds of Taxes, and the prosecution and defense of any
Tax controversies;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained
in this Agreement, the Parties hereby agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1.
General
. Capitalized terms used in this Agreement and not defined
herein shall have the meanings that such terms have in the Separation Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Affiliated Group shall have the meaning specified in the preamble hereof.
Agreement shall mean this Tax Separation Agreement.
Business Day or Business Days shall mean a day which is not a Saturday, Sunday or a
day on which banks in New York City are authorized or required by law to close.
Closing of the Books Method shall mean the apportionment of items between portions of
a taxable period based on a closing of the books and records on the Distribution Date (as if
the Distribution Date was the end of the taxable period),
provided
that
, any items not susceptible to such apportionment shall be apportioned on
the basis of elapsed days during the relevant portion of the taxable period.
Code shall mean the Internal Revenue Code of 1986, as amended.
Confidentiality Agreement shall mean any agreement pursuant to which the parties
named therein have agreed to terms under which they were permitted to review certain
financial information relating to Spinco or the Spinco Business.
Consolidated Return shall mean any Tax Return relating to Income Taxes filed pursuant
to Section 1502 of the Code, or any comparable combined, consolidated, or unitary group Tax
Return relating to Income Taxes filed under state or local tax law which, in each case,
includes Peabody and at least one subsidiary.
Contribution shall have the meaning specified in the Separation Agreement.
Distribution shall have the meaning specified in the Separation Agreement.
Distribution Date shall mean the Business Day on which the Distribution is effected.
Distribution-Related Liability shall mean any liability subject to indemnification
pursuant to Section 4.3.
Final Determination shall mean the final resolution of liability for any Tax for any
taxable period, including any related interest or penalties, by or as a result of: (i) a
final and unappealable decision, judgment, decree or other order by any court of competent
jurisdiction; (ii) a closing agreement or accepted offer in compromise under Section 7121 or
7122 of the Code, or comparable agreement under the laws of other jurisdictions which
resolves the entire Tax liability for any taxable period; or (iii) any allowance of a refund
or credit in respect of an overpayment of Tax, but only after the expiration of all periods
during which such refund may be recovered by the jurisdiction imposing the Tax.
Income Tax shall mean any income, franchise or similar Taxes imposed on (or measured
by) net income or net profits.
Income Tax Returns shall mean all Tax Returns relating to Income Taxes.
Indemnification Tax Benefit shall have the meaning specified in Section 2.4(b).
Indemnified Tax shall have the meaning specified in Section 2.4(b).
IRS shall mean the Internal Revenue Service.
Opinion shall mean the opinion delivered by Ernst & Young LLP pursuant to Section
3.02(j) of the Separation Agreement.
Other Tax shall mean any Tax other than an Income Tax.
Party shall mean either Peabody or Spinco, as the case maybe.
2
Payment Period shall have the meaning specified in Section 2.4(c).
Peabody shall have the meaning specified in the preamble hereof.
Proceeding shall mean any audit, examination or other proceeding brought by a Taxing
Authority with respect to Taxes.
Prohibited Acts shall have the meaning specified in Section 4.2.
Refund shall have the meaning specified in Section 2.2.
Restricted Period shall mean the two-year period commencing on the Distribution Date.
Retained Liabilities shall mean the Liabilities covered by the Liability Assumption
Agreements as defined in the Separation Agreement.
Retained Liability Payment shall have the meaning specified in Section 2.6.
Retained Liability Tax Benefit shall have the meaning specified in Section 2.6.
Ruling shall mean the private letter ruling issued by the IRS to Peabody dated
September 26, 2007, , attached hereto as Exhibit A, and any supplemental rulings related
thereto.
Separation Agreement shall mean the agreement entitled Separation Agreement, Plan of
Reorganization and Distribution, entered into by Peabody and Spinco dated as of October 22,
2007.
Spinco shall have the meaning set forth in the preamble hereof.
Spinco Business shall have the same meaning as Patriot Business as defined in the
Separation Agreement.
Spinco Pre-Closing NOL shall mean any net operating loss from a taxable period ending
on or before the Distribution Date that is allocated to Spinco after the Distribution Date
under applicable Law.
Spinco Pre-Closing Tax Credit shall mean any credit to which Section 383 of the Code
(or any corresponding provision under state, local or foreign Law) applies from a taxable
period ending on or before the Distribution Date that is allocated to Spinco after the
Distribution Date under applicable Law.
Straddle Period shall mean any taxable period commencing prior to, and ending after,
the Distribution Date.
Tax or Taxes shall mean any federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add on minimum, ad valorem, transfer or excise tax, or any
3
other
tax, custom, duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, imposed by any Taxing Authority.
Taxing Authority shall mean any governmental authority (whether United States or
non-United States, and including, any state, municipality, political subdivision or
governmental agency) responsible for the imposition of any Tax.
Tax Returns shall mean all reports or returns (including information returns and
amended returns) required to be filed or that may be filed for any period with any Taxing
Authority in connection with any Tax or Taxes (whether domestic or foreign).
SECTION 1.2.
References; Interpretation
. References in this Agreement to any gender
include references to all genders, and references to the singular include references to the plural
and vice versa. The words include, includes and including when used in this Agreement shall
be deemed to be followed by the phrase without limitation. Unless the context otherwise
requires, references in this Agreement to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to, such Agreement.
Unless the context otherwise requires, the words hereof, hereby and herein and words of
similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any
particular Article, Section or provision of this Agreement.
ARTICLE II. ALLOCATION OF TAX LIABILITIES
SECTION 2.1.
Indemnity
. (a) Subject to Article IV and without duplication, Peabody
shall indemnify Spinco from all liability for (i) Income Taxes of Spinco or any other member of the
Affiliated Group with respect to taxable periods ending on or before the Distribution Date and (ii)
Income Taxes of Spinco or relating to the Spinco Business for any Straddle Period, but only to the
extent attributable to the portion of the Straddle Period ending on or before the Distribution
Date. Taxes for a Straddle Period shall be apportioned in accordance with the Closing of the
Books Method.
(b) Spinco shall indemnify Peabody from all liability for Other Taxes (excluding any such
Taxes covered by Section 4.5(g)) of Spinco or relating to the Spinco Business for any taxable
period.
SECTION 2.2.
Refunds
. (a) Subject to Section 3.5, if a Party receives a refund,
offset, credit, or other benefit (including interest received thereon) (a Refund) of Tax which
the other Party would have been obligated to indemnify had the Refund been a payment, then the
Party receiving the Refund shall promptly pay the amount of the Refund to the other Party, less
reasonable costs and expenses incurred in connection with such Refund, including any Taxes on such
Refund or interest thereon.
(b) Each Party shall, if reasonably requested by the other Party, cause the relevant entity to
file for and use its reasonable best efforts to obtain and expedite the receipt of any Refund to
which such requesting Party is entitled under this Section 2.2.
4
SECTION 2.3.
Contests
.
(a) In the case of any Proceeding that relates to Taxes for which Peabody is responsible
under Section 2.1 hereof, Peabody shall have the right to control, in its sole discretion, the
conduct of such Proceeding. Subject to the foregoing, Spinco shall have the right to participate
jointly in any Proceeding if the consequences of the resolution of such Proceeding could reasonably
be expected to affect the tax liability of Spinco for any tax period following the Distribution.
(b) In the case of any Proceeding that relates to Taxes for which Spinco is responsible
under Section 2.1 hereof, Spinco shall have the sole right to control the conduct of such
Proceeding.
(c) In the case of any Proceeding that relates to a Straddle Period of Spinco or the Spinco
Business the parties shall use reasonable efforts to cause such Proceeding to be bifurcated between
the period ending on the Distribution Date and the period beginning after the Distribution Date.
If the parties are able to cause the audit to be so bifurcated, then Sections 2.3(a) and (b) hereof
shall govern the control of such Proceedings. To the extent that the parties are unable to cause
such bifurcation, Peabody and Spinco shall jointly control such Proceeding.
(d) After the Distribution Date, each Party shall promptly notify the other Party in writing
upon receipt of written notice of the commencement of any Proceeding or of any demand or claim upon
it, which, if determined adversely, would be grounds for indemnification from such other Party
pursuant to Section 2.1 or could reasonably be expected to have an adverse Tax effect on the other
Party. Each Party shall, on a timely basis, keep the other Party informed of all developments in
the Proceeding and provide such other Party with copies of all pleadings, briefs, orders, and other
correspondence pertaining thereto.
SECTION 2.4.
Treatment of Payments; After Tax Basis
(a) Peabody and Spinco agree to treat any indemnification payments (other than payments of
interest pursuant to Section 2.4(c)) pursuant to this Agreement, including any payments made
pursuant to Section 2.6, as either a capital contribution or a distribution, as the case may be,
between Peabody and Spinco occurring immediately prior to the Distribution, and to challenge in
good faith any other characterization of such payments by any Taxing Authority. If,
notwithstanding such good faith efforts, the receipt or accrual of any such payment (other than
payments of interest pursuant to Section 2.4(c)) results in taxable income to the indemnified
Party, such payment shall be increased so that, after the payment of any Taxes with respect to the
payment, the indemnified Party shall have realized the same net amount it would have realized had
the payment not resulted in taxable income.
(b) To the extent that any liability for Taxes that is subject to indemnification under
Section 2.1 (an Indemnified Tax) gives rise to an Indemnification Tax Benefit to the indemnified
Party in any taxable period, the indemnified Party will promptly remit to the indemnifying Party
the amount of any such Indemnification Tax Benefit actually realized. For purposes of
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this
Agreement, Indemnification Tax Benefit means a reduction in the amount of Taxes that are required
to be paid or increase in refund due, whether resulting from a deduction, from reduced gain or
increased loss from disposition of an asset, or otherwise. For purposes of this Agreement, an
indemnified Party will be deemed to have actually realized an Indemnification Tax Benefit at the
time the amount of Taxes such indemnified Party is required to pay is reduced or the amount of any
refund due is increased. The amount of any Indemnification Tax Benefit in this Section 2.4(b)
shall be calculated by comparing (i) the indemnified Partys actual Tax liability taking into
account any Indemnified Tax with (ii) what the indemnified Partys Tax liability would have been
without taking into account any Indemnified Tax. If, pursuant to this Agreement, the indemnified
Party makes a remittance to the indemnifying Party of any Indemnification Tax Benefit and all or
part of such Indemnification Tax Benefit is subsequently disallowed, the indemnifying Party will
promptly pay to the indemnified Party that portion of such remittance equal to the portion of the
Indemnification Tax Benefit that is disallowed.
(c) Payments made pursuant to this Agreement that are not made within the period prescribed in
this Agreement or, if no period is prescribed, within thirty (30) days after demand for payment is
made (the Payment Period) shall bear interest for the period from and including the date
immediately following the last date of the Payment Period through and including the date of payment
at a per annum rate equal to the Applicable Rate. Such interest will be payable at the same time
as the payment to which it relates and shall be calculated on the basis of a year of 365 days and
the actual number of days for which due.
SECTION 2.5.
Agent
. Subject to the other applicable provisions of this Agreement,
Spinco hereby irrevocably designates Peabody as its sole and exclusive agent and attorney-in-fact
to take such action (including execution of documents) as Peabody, in its sole discretion, may deem
appropriate in any and all matters (including audits) relating to any Income Tax Return for which
Peabody has an indemnification obligation under Section 2.1.
SECTION 2.6.
Retained Liabilities
.
To the extent that any
payments made by
Peabody in respect of the Retained Liabilities (a Retained Liability Payment) gives rise to a
Retained Liability Tax Benefit to Spinco in any taxable period, Spinco will promptly remit to
Peabody the amount of any such Retained Liability Tax Benefit actually realized. For purposes of
this Agreement, Retained Liability Tax Benefit means a reduction in the amount of Taxes that are
required to be paid or increase in refund due, whether resulting from a deduction, credit,
increased basis, or otherwise. For purposes of this Agreement, Spinco will be deemed to have
actually realized a Retained Liability Tax Benefit at the time the amount of Taxes Spinco is
required to pay is reduced or the amount of any refund due is increased. The amount of any
Retained Liability Tax Benefit in this Section 2.6 shall be calculated by comparing (i) Spincos
actual Tax liability taking into account any Retained Liability Payment with (ii) what Spincos Tax
liability would have been without taking into account any Retained Liability Payment. If, pursuant
to this Agreement, Spinco makes a remittance to Peabody of any Retained Liability Tax Benefit and
all or part of such Retained Liability Tax Benefit is subsequently disallowed,
Peabody will promptly pay to Spinco that portion of such remittance equal to the portion of
the Retained Liability Tax Benefit that is disallowed.
ARTICLE III. RETURNS AND TAXES ATTRIBUTABLE TO SPINCO
SECTION 3.1.
Peabodys Responsibility for the Preparation of Tax Returns and for the
Payment of Taxes
.
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(a) Peabody shall prepare and file or cause to be prepared and filed all Tax Returns of
Spinco or relating to the Spinco Business that are due on or before the Distribution Date (taking
into account any valid extensions thereof and including any Tax Returns for the short year ending
on the Distribution Date) and all Income Tax Returns of the Affiliated Group.
(b) With respect to Income Tax Returns that are to be prepared and filed by Peabody pursuant
to the preceding paragraph (including separate Tax returns of Spinco included in a Consolidated
Return but not including any Tax Returns for the short year ending on the Distribution Date)
Peabody shall provide a copy of such Tax Returns to Spinco no later than the Distribution Date.
With respect to Tax Returns for the short year ending on the Distribution Date, Peabody shall
provide to Spinco the following:
(i) An estimate of taxable income (loss) and the components of such taxable income
(loss) to be reported on such Tax Returns no later than two and one-half months after the
Distribution Date and any updates to such estimates as they occur and become available;
(ii) A copy of such Tax Returns to Spinco not later than thirty (30) days prior to
the due date for filing of such Tax Returns. Spinco shall have the right to review such Tax
Returns and to review all work papers and procedures used to prepare any such Tax Returns.
If Spinco, within ten (10) days after delivery of any such Tax Returns, notifies Peabody in
writing of any objections Spinco has to positions taken or statements made in such Tax
Returns that could reasonably be expected to have a material adverse impact on Spinco,
Peabody agrees to consider such objections in good faith. If Spinco does not so notify
Peabody of any objection, Spinco shall be considered to have consented to the filing of such
Tax Returns.
(c) To the extent that Spinco or the Spinco Business is included in any Consolidated Return
for a taxable period that includes the Distribution Date, Peabody shall include in such
Consolidated Return the results of Spinco and the Spinco Business on the basis of the Closing of
the Books Method. To the extent permitted by law or administrative practice with respect to other
Income Tax Returns, the taxable period relating to Spinco or the Spinco Business shall be treated
as ending on the Distribution Date, and if the taxable period does not, in fact, end on the
Distribution Date, the Parties shall apportion all tax items between the portions of the taxable
period before and after the Distribution Date on the Closing of the Books Method.
(d) Where Peabody prepares and files or causes to be prepared and filed a Tax Return that
reflects information related to Spinco or the Spinco Business pursuant to paragraphs (a) and (c) of
this Section 3.1, the portions of such Tax Returns relating to Spinco shall be submitted to Spinco
no later than thirty (30) days prior to the due date (including extensions) for
filing of such Tax Returns (or if such due date is within 45 days following the Distribution
Date, as promptly as practicable following the Distribution Date). Within ten (10) days after
delivery of any such portions of any Tax Return, Spinco shall provide comments to Peabody in
writing to the extent Spinco objects to any statements that could reasonably be expected to
adversely impact it, and Peabody agrees to consider such objections in good faith. If Spinco does
not so notify Peabody of any objection, Spinco shall be considered to have consented to the filing
of such Tax Return.
7
SECTION 3.2.
Spincos Responsibility for the Preparation of Tax Returns and for the
Payment of Taxes.
Spinco shall prepare and file or cause to be prepared and filed all Tax
Returns relating to Taxes of Spinco or the Spinco Business that have not been filed before the
Distribution Date, except for Income Tax Returns of the Affiliated Group and Income Tax Returns of
Spinco for any Straddle Period as described in Sections 3.1 and 3.3.
SECTION 3.3.
Responsibility for the Preparation of Straddle Period Income Tax Returns
and for the Payment of Straddle Period Income Taxes.
Peabody shall prepare and file or cause
to be prepared and filed all Income Tax Returns of Spinco for any Straddle Period. All such Income
Tax Returns that are to be prepared and filed by Peabody pursuant to this paragraph shall be
submitted to Spinco not later than thirty (30) days prior to the due date for filing of such Tax
Returns (or if such due date is within 45 days following the Distribution Date, as promptly as
practicable following the Distribution Date). Spinco shall have the right to review such Tax
Returns and to review all work papers and procedures used to prepare any such Tax Return. If
Spinco, within ten (10) business days after delivery of any such Tax Return, notifies Peabody in
writing that it objects to any of the items in such Tax Return, Peabody and Spinco shall attempt in
good faith to resolve the dispute and, if they are unable to do so, the disputed items shall be
resolved (within a reasonable time, taking into account the deadline for filing such Tax Return) by
an internationally recognized independent accounting firm chosen by both Peabody and Spinco. Upon
resolution of all such items, the relevant Straddle Period Tax Return shall be filed on that basis.
The costs, fees and expenses of such accounting firm shall be borne equally by Peabody and Spinco.
SECTION 3.4.
Manner of Preparation
. All Income Tax Returns filed on or after the
Distribution Date shall be prepared in a manner that is consistent with the Ruling and the Opinion,
or any other rulings obtained from other Taxing Authorities in connection with the Distribution (in
the absence of a Final Determination to the contrary) and shall be filed on a timely basis
(including pursuant to extensions) by the Party responsible for such filing under this Agreement.
In the absence of a Final Determination to the contrary, a controlling change in law or
circumstances, or accounting method changes pursuant to applications that are approved by the
Internal Revenue Service, all Income Tax Returns of Spinco for tax periods commencing prior to the
Distribution Date shall be prepared on a basis consistent with the elections, accounting methods,
conventions, assumptions and principles of taxation used with respect to the Spinco Business for
the most recent taxable periods for which Tax Returns of the Affiliated Group have been filed.
SECTION 3.5.
Carrybacks
. Spinco agrees not to carry back any net operating losses,
capital losses or credits for any taxable period ending after the Distribution Date to a taxable
period, or portion thereof, ending on or before the Distribution Date. To the extent that
Spinco is required by applicable law to carry back any such net operating losses, capital
losses or credits, any refund of Taxes attributable to such carryback shall be for Peabodys
account.
SECTION 3.6.
Retention of Records; Cooperation; Access.
(a) Peabody and Spinco shall, and shall cause each of their Subsidiaries to retain adequate
records, documents, accounting data and other information (including computer data) necessary for
the preparation and filing of all Tax Returns required to be filed by Peabody or
8
Spinco and for any
Proceeding relating to such Tax Returns or to any Taxes payable by Peabody or Spinco.
(b) Peabody and Spinco shall, and shall cause each of their Subsidiaries to cooperate and
provide reasonable access to (i) all records, documents, accounting data and other information
(including computer data) necessary for the preparation and filing of all Tax Returns required to
be filed by Peabody or Spinco and for any Proceeding relating to such Tax Returns or to any Taxes
payable by Peabody or Spinco and (ii) its personnel and premises, for the purpose of the
preparation, review or audit of such Tax Returns, or in connection with any Proceeding, as
reasonably requested by either Peabody or Spinco.
(c) The obligations set forth above in Sections 3.6(a) and 3.6(b) shall continue until the
longer of (i) the time of a Final Determination or (ii) expiration of all applicable statutes of
limitations, to which the records and information relate. For purposes of the preceding sentence,
each Party shall assume that no applicable statute of limitations has expired unless such Party has
received notification or otherwise has actual knowledge that such statute of limitations has
expired.
SECTION 3.7.
Confidentiality; Ownership of Information; Privileged Information
. The
provisions of Article XIII of the Separation Agreement relating to confidentiality of information,
ownership of information, privileged information and related matters shall apply with equal force
to any records and information prepared and/or shared by and among the Parties in carrying out the
intent of this Agreement.
SECTION 3.8.
Sections 382 and 383 Limitations.
Peabody agrees to make a timely and
valid election under Treasury Regulation Section 1.1502-95 and Section 1.1502-98 (and any
corresponding elections under state, local or foreign Law) to allocate to Spinco a portion of the
consolidated section 382 limitation and consolidated section 383 credit limitation (as those
terms are defined under the Treasury Regulations issued pursuant to Code Section 1502) (and any
corresponding limitations under state, local or foreign Law) of the Affiliated Group in an amount
that is equal to the sum of all applicable Spinco Pre-Closing NOLs and Spinco Pre-Closing Tax
Credits, respectively;
provided
, that Peabody shall not be required to adjust any such
allocation made pursuant to this Section 3.8 as the result of any adjustment by the IRS (or
applicable governmental authority) to any Spinco Pre-Closing NOL or Spinco Pre-Closing Tax Credit.
ARTICLE IV. DISTRIBUTION AND RELATED TAX MATTERS
Notwithstanding anything herein to the contrary, the provisions of this Article IV shall
govern all matters among the parties hereto related to a Distribution-Related Liability.
SECTION 4.1.
Compliance with the Ruling.
Spinco and Peabody hereby confirm and
agree to comply with any and all covenants, agreements and representations in the Ruling applicable
to Spinco and Peabody, respectively (including but not limited, in the case of Spinco, to agreeing
that Spinco will not cease the active conduct of its trade or business within the meaning of
Section 355(b) of the Code).
SECTION 4.2.
Opinion Requirement for Major Transactions Undertaken by Spinco During the
Restricted Period
. Spinco agrees that during the Restricted Period it will not
9
(i) merge or
consolidate with or into any other corporation, (ii) liquidate or partially liquidate (within the
meaning of such terms as defined in Section 346 and Section 302, respectively, of the Code), (iii)
sell or transfer all or substantially all of its assets (within the meaning of Rev. Proc. 77-37,
1977-2 C.B. 568) in a single transaction or series of related transactions, or sell or transfer any
portion of its assets that would violate the continuity of business enterprise requirement of
Treas. Reg. §1.368-1(d), (iv) redeem or otherwise repurchase any of its capital stock other than
pursuant to open market stock repurchase programs meeting the requirements of section 4.05(1)(b) of
Rev. Proc. 96-30, 1996-1 C.B. 696, or (v) enter into any negotiations, agreements or arrangements
with respect to transactions or events (including any transactions described in Sections
4.2(i)-(iv) (and, for this purpose, including any redemptions made pursuant to open market stock
repurchase programs), stock issuances, pursuant to the exercise of options or otherwise, option
grants, capital contributions or acquisitions, entering into any partnership or joint venture
arrangements, or a series of such transactions or events, but excluding the Distribution) that may
cause the Distribution to be treated as part of a plan pursuant to which one or more persons
acquire directly or indirectly stock of Spinco representing a 50-percent or greater interest
therein within the meaning of Section 355(d)(4) of the Code (collectively the Prohibited Acts).
Notwithstanding the foregoing, Spinco may take any of the Prohibited Acts, subject to Section 4.3,
if (x) Spinco first obtains (at its expense) an opinion in form and substance reasonably acceptable
to Peabody of a nationally recognized law firm reasonably acceptable to Peabody, which opinion may
be based on usual and customary factual representations or (y) at Spincos request, Peabody (at the
expense of Spinco) obtains a supplemental ruling from the Internal Revenue Service, that such
Prohibited Act or Acts, and any transaction related thereto, will not (a) affect any of the
conclusions set forth in the Ruling, including (i) the qualification of the Contribution under
Section 368 of the Code, (ii) the qualification of the Distribution under Section 355 of the Code,
and (iii) the nonrecognition of gain to Peabody in the Contribution and the Distribution or (b)
cause the stock of Spinco distributed in the Distribution to fail to be treated as qualified
property pursuant to Section 355(e) of the Code. Spinco may also take any of the Prohibited Acts,
subject to Section 4.3, with the consent of Peabody in its sole and absolute discretion. During
the Restricted Period, Spinco shall provide all information reasonably requested by Peabody
relating to any transaction involving an acquisition (directly or indirectly) of 5% or more of
Spinco stock. Spinco will provide Peabody with notice of all acquisitions (direct or indirect)
within the meaning of Section 355(e) of the Code once the aggregate amount of such transactions
exceeds 25% of Spinco stock.
SECTION 4.3.
Indemnification by Spinco
. If Spinco takes any action or enters into
any agreement to take any action, including any of the Prohibited Acts as defined in Section 4.2 of
this Agreement, or if there is a breach by Spinco of Section 4.1 hereof, or if there is any direct
or indirect acquisition of Spinco stock, and as a result (i) the Distribution shall fail to qualify
under Section 355 of the Code, (ii) the stock of Spinco distributed in the Distribution
shall fail to be treated as qualified property pursuant to Section 355(e) of the Code or (iii)
the Contribution fails to qualify under Section 368 of the Code or Peabody recognizes any gain in
connection with the Contribution, then Spinco shall indemnify and hold harmless Peabody against any
and all Taxes imposed upon or incurred by Peabody (and any Taxes of Peabody shareholders to the
extent Peabody is liable with respect to such Taxes, whether to a Taxing Authority, to a
shareholder or to any other person) as a result, unless such Taxes would, in any event, have been
imposed upon or incurred by Peabody without regard to such actions, breaches or events, as
determined at such time. To the extent Peabody recognizes income under clauses
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(i), (ii) or (iii)
of the preceding sentence and such income is offset by net operating losses of Peabody, the amount
of Taxes for which Spinco shall indemnify and hold harmless Peabody under this Section 4.3 shall be
determined as if such income had not been offset by such net operating losses. Peabody shall be
indemnified and held harmless under this Section 4.3 without regard to whether an opinion or
supplemental ruling pertaining to the action pursuant to Section 4.2 was obtained, and without
regard to whether Peabody gave its consent to such action pursuant to Section 4.2 or otherwise.
SECTION 4.4.
Information Sharing
. On or before the Distribution Date, Peabody
agrees to furnish Spinco with: (i) a copy of all Confidentiality Agreements, and (ii) a list of
persons who may be deemed, in Peabodys sole judgment, to have reached an agreement, understanding
or arrangement, or to have engaged in substantial negotiations with Peabody concerning a potential
acquisition of Spinco or the Spinco Business or any portion thereof at the time of the Distribution
within the meaning of Treas. Reg. § 1.355-7(d). Notwithstanding the foregoing, Spinco shall not be
relieved of any obligation under Section 4.2 or any liability to Peabody under Section 4.3 with
respect to any person not included in the list described in subsection (ii) herein.
SECTION 4.5.
Procedural Matters
.
(a)
Notice
. If either Spinco or Peabody receives any written notice of deficiency,
claim or adjustment or any other written communication from a Taxing Authority that may result in a
Distribution-Related Liability, the Party receiving such notice or communication shall promptly
give written notice thereof to the other Party, provided that any delay by Peabody in so notifying
Spinco shall not relieve Spinco of any liability to Peabody hereunder except to the extent Spinco
is materially and adversely prejudiced by such delay. Peabody undertakes and agrees that from and
after such time as Peabody obtains knowledge that any representative of a Taxing Authority has
begun to investigate or inquire into the Distribution (whether or not such investigation or inquiry
is a formal or informal investigation or inquiry), Peabody shall (i) notify Spinco thereof,
provided that any delay by Peabody in so notifying Spinco shall not relieve Spinco of any liability
to Peabody hereunder except to the extent Spinco is materially and adversely prejudiced by such
delay, (ii) consult with Spinco from time to time as to the conduct of such investigation or
inquiry, (iii) provide Spinco with copies of all correspondence between Peabody or its
representatives and such Taxing Authority or any representative thereof pertaining to such
investigation or inquiry and (iv) cooperate with Spinco to permit a representative (reasonably
satisfactory to Peabody) of Spinco to be present and participate in all meetings with such Taxing
Authority or any representative thereof pertaining to such investigation or inquiry,
provided
,
that
any costs relating to Spincos representation at such meetings shall
be borne by Spinco.
(b)
Written Acknowledgment
. Promptly upon receipt of notice as provided in Section
4.5(a), Spinco shall respond in writing to Peabody as to whether the liability asserted in the
notice of deficiency, claim or adjustment or other written communication would, if imposed upon or
incurred by Peabody or its Subsidiaries, be a Distribution-Related Liability. If Spinco believes
in good faith that such liability may not be a Distribution-Related Liability, Spinco shall set
forth in writing to Peabody the grounds for such belief. For the avoidance of doubt, Spinco will
satisfy the requirements of this Section 4.5(b) if it believes in good faith that there is
insufficient information
11
to determine whether such liability would, if imposed or incurred on
Peabody or its subsidiaries, be a Distribution-Related Liability.
(c)
Tax Proceedings Controlled by Spinco
. Any Proceeding that may result in a
Distribution-Related Liability, which is acknowledged as such by Spinco pursuant to the first
sentence of Section 4.5(b), shall be conducted in accordance with this Section 4.5(c).
(i) Promptly upon Spincos written acknowledgment that the asserted liability is a
Distribution-Related Liability pursuant to Section 4.5(b), Spinco may assume and direct the
defense or settlement of the Proceeding,
provided
that
Spinco shall permit a
representative of Peabody to be present and participate in all hearings before any court and
in all meetings with the relevant Taxing Authority or any representative thereof pertaining
to such Proceeding (with any costs solely relating to Peabodys representation at such
meetings to be borne by Peabody),
provided
further
that
, if Spinco
fails to prosecute the Proceeding in a reasonably diligent manner, Peabody may (at Spincos
expense and subject to the provisions in Section 4.5(d)) assume and direct the defense or
settlement of the Proceeding. If the Distribution-Related Liability is grouped with other
unrelated asserted liabilities or issues in the Proceeding, Peabody and Spinco shall use
their respective reasonable best efforts to cause the Distribution-Related Liability to be
the subject of a separate Proceeding. If such severance is not possible, Spinco shall
assume, direct and be responsible only for the matters relating to the Distribution-Related
Liability and Peabody shall assume, direct and be responsible for all other matters.
(ii) Upon request, during the course of the Proceeding, Spinco shall from time to
time furnish Peabody with evidence reasonably satisfactory to Peabody of its ability to pay
the full amount of the Distribution-Related Liability. If at any time during such
Proceeding, Peabody reasonably determines, after due investigation, that Spinco may not be
able to pay the full amount of the Distribution-Related Liability, if required, then Spinco
shall be required to furnish a guarantee or performance bond satisfactory to Peabody in an
amount equal to the amount of the Distribution-Related Liability asserted by the Taxing
Authority. If Spinco fails to furnish such guarantee or bond, Peabody may assume control of
the Proceedings in accordance with Section 4.5(d).
(iii) Spinco shall pay all expenses directly related to the Distribution-Related
Liability, including but not limited to reasonable fees for attorneys, accountants, expert
witnesses or other consultants retained by it and, to the extent that any such expenses have
been or are paid by Peabody or any of its Subsidiaries, Spinco shall promptly reimburse
Peabody or such subsidiary therefor.
(iv) Peabody shall, at Spincos sole cost (including but not limited to any
reasonable out-of-pocket costs incurred by Peabody), take such action as Spinco may
reasonably request (including but not limited to the execution of powers of attorney for one
or more persons designated by Spinco and the filing of a petition, complaint, amended Tax
Return or claim for refund) in contesting the Distribution-Related Liability. Spinco shall,
on a timely basis, keep Peabody informed of all developments in the Proceeding and provide
Peabody with copies of all pleadings, briefs, orders, and other written papers pertaining
thereto.
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(v) Subject to satisfaction of the conditions herein set forth, Spinco may direct
Peabody to settle the Distribution-Related Liability on such terms and for such amount as
Spinco may direct. Peabody may condition such settlement on receipt, prior to the
settlement, from Spinco of the indemnity payment with respect to the Distribution-Related
Liability less any amounts to be paid directly by Spinco to the Taxing Authority. Spinco
may direct Peabody, at Spincos expense, to pay an asserted deficiency for the
Distribution-Related Liability out of funds provided by Spinco, and to file a claim for
refund. Peabody shall not pay (unless otherwise required by a proper notice of assessment
and after prompt notification to Spinco of Peabodys receipt of notice and demand for
payment) any portion of the Distribution-Related Liability without the written consent of
Spinco, which shall not be unreasonably withheld.
(d)
Tax Proceedings Controlled by Peabody
. In the event that (i) Spinco does not
provide Peabody with the written acknowledgment contemplated by Section 4.5(b) to the effect that
Spinco confirms that the asserted liability is a Distribution-Related Liability within thirty (30)
days following receipt of notice provided in Section 4.5(a), or (ii) following such confirmation,
Spinco fails within thirty (30) days following request therefor to furnish to Peabody evidence of
its ability to pay the full amount of the Distribution-Related Liability, or (iii) Peabody
reasonably believes after due investigation that Spinco may not be able to pay the full amount of
the Distribution-Related Liability, if required, and Spinco fails to furnish a guarantee or
performance bond satisfactory to Peabody in an amount equal to the amount of the
Distribution-Related Liability then being asserted by the Taxing Authority, or (iv) should Spinco
fail to prosecute the Proceeding in a reasonably diligent manner, then Peabody may assume control
of the Proceeding upon the following terms: (1) Peabody will diligently defend against the claim of
the Taxing Authority, including the pursuit of the appeal of any adverse determinations to the
appropriate tribunal (unless advised in writing by independent outside counsel at Spincos sole
cost in its reasonable judgment that Peabody would not prevail upon any such appeal) and shall
employ such resources, including independent counsel, in conducting such defense as are reasonably
commensurate to the nature and magnitude of the claim; (2) Peabody will consult with Spinco as to
the conduct of all Proceedings, will provide Spinco with copies of all protests, pleadings, briefs,
filings, correspondence and similar materials relative to the Proceedings and will permit a
representative of Spinco to be present and participate in all meetings with the relevant Taxing
Authority and all hearings before any court; and (3) Peabody will not settle, compromise or concede
any claim that would result in a Distribution-Related Liability without Spincos consent, not to be
unreasonably withheld. Subject to the above, any such Proceeding shall be controlled and directed
exclusively by Peabody and any related expenses incurred by any member of the PEC Group, including
but not limited to, reasonable fees for attorneys, accountants, expert witnesses or other
consultants directly related to the Distribution-Related Liability shall be reimbursed by Spinco,
if Spinco admits or is found to
have incorrectly failed to acknowledge the asserted liability as a Distribution-Related
Liability as provided in Section 4.5(b); provided, however, that Peabody will not be required to
pursue the claim in the federal district court, Court of Claims or any state court if as a
prerequisite to such Courts jurisdiction, it is required to pay the asserted liability unless the
funds necessary to invoke such jurisdiction are provided by Spinco at no cost to Peabody.
(e)
Time and Manner of Payment
. Unless otherwise agreed in writing, Spinco shall pay
to Peabody the amount with respect to a Distribution-Related Liability (less any amount paid
directly by Spinco to the Taxing Authority or made available to Peabody under Section 4.5(d)) at
13
least two (2) Business Days prior to the date payment of the Distribution-Related Liability is to
be made to the Taxing Authority. Such payment shall be paid by Spinco to Peabody by wire transfer
of immediately available funds to an account designated by Peabody by written notice to Spinco
prior to the due date of such payment. If Spinco delays making payment beyond the due date
hereunder, Spinco shall pay interest to Peabody on the amount unpaid at the rate of the monthly
average of the prime rate as published in the Wall Street Journal for each day and the actual
number of days for which any amount due hereunder is unpaid; provided, however, that this provision
for interest shall not be construed to give Spinco the right to defer payment beyond the due date
hereunder.
(f)
Refund of Amounts Paid by Spinco
. Should Peabody or any other member of the
Affiliated Group receive a refund in respect of amounts paid by Spinco to any Taxing Authority on
Peabodys behalf or paid by Spinco to Peabody for payment to a Taxing Authority with respect to a
Distribution-Related Liability, or should any such amounts that would otherwise be refundable to
Peabody be applied or credited by the Taxing Authority to obligations of Peabody unrelated to a
Distribution-Related Liability, then Peabody shall, promptly following receipt (or notification of
credit), remit such refund (including any statutory interest that is included in such refund or
credited amount) to Spinco.
(g)
Transfer Taxes
. Peabody shall bear any and all stamp, duty, transfer, sales and
use or similar Taxes incurred in connection with the Contribution and Distribution.
(h)
Cooperation
. Subject to the provisions of Section 3.7, Peabody and Spinco shall
reasonably cooperate with one another in a timely manner with respect to any Tax matter covered by
this Agreement, including any Proceeding described in Section 2.3. Peabody and Spinco agree that
such cooperation shall include, without limitation, making available to the other Party, during
normal business hours, all books, records and information, officers and employees (without
substantial interruption of employment) necessary or useful in connection with any such Tax matter.
The Party requesting or otherwise entitled to any books, records, information, officers or
employees pursuant to this Section 4.5(h) shall bear all reasonable out-of-pocket costs and
expenses (except reimbursement of salaries, employee benefits and general overhead) incurred in
connection with providing such books, records, information, officers or employees.
(h)
Supplemental Rulings
. Peabody shall provide Spinco a copy of and an opportunity
to comment upon any supplemental ruling sought from the Internal Revenue Service with respect to
the Ruling and no supplemental ruling request shall be made without Spincos consent if such
supplemental ruling would materially expand Spincos indemnification obligations under Section 4.3.
ARTICLE V. MISCELLANEOUS
SECTION 5.1.
Complete Agreement; Construction
. This Agreement shall constitute the
entire agreement between the Parties with respect to the subject matter hereof and shall supersede
all previous negotiations, commitments and writings with respect to such subject matter.
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SECTION 5.2.
Counterparts
. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and shall become
effective when one or more such counterparts have been signed by both Parties.
SECTION 5.3.
Survival of Agreements
. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the Parties contained in this Agreement shall survive
the Distribution Date.
SECTION 5.4.
Notices
. All notices and other communications hereunder shall be in
writing and hand delivered or mailed by registered or certified mail (return receipt requested) or
sent by any means of electronic message transmission with delivery confirmed (by voice or
otherwise) to the Parties at the following addresses (or at such other addresses for a Party as
shall be specified by like notice) and will be deemed given on the date on which such notice is
received:
To Peabody:
Peabody Energy Corporation
701 Market Street
St. Louis, MO 63101
Attention: Alexander Schoch
Executive Vice President Law
Fax: 314-342-3419
To Spinco:
Patriot Coal Corporation
12312 Olive Boulevard, Suite 400
St. Louis, MO 63101
Attention: Joseph W. Bean
Senior Vice President, General Counsel and Corporate Secretary
Fax:
SECTION 5.5.
Waivers
. The failure of any Party to require strict performance by the
other Party of any provision in this Agreement will not waive or diminish that Partys right to
demand strict performance thereafter of that or any other provision hereof.
SECTION 5.6.
Amendments
. This Agreement may not be modified or amended except by an
agreement in writing signed by the Parties hereto.
SECTION 5.7.
Assignment
. This Agreement shall not be assignable, in whole or in
part, directly or indirectly, by any Party hereto without the prior written consent of the other
Party hereto, and any attempt to assign any rights or obligations arising under this Agreement
without such consent shall be void.
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SECTION 5.8.
Successors and Assigns
. The provisions to this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the Parties and their respective
successors and permitted assigns.
SECTION 5.9.
Additional Members
. Any new members of the Affiliated Group shall
automatically become a Party to this Agreement upon becoming members.
SECTION 5.10.
Third Party Beneficiaries
. This Agreement is solely for the benefit of
the Parties hereto and should not be deemed to confer upon third parties any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those existing without
reference to this Agreement.
SECTION 5.11.
Title and Headings
. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
SECTION 5.12.
Exhibits
. The Exhibits to this Agreement shall be construed with and
as an integral part of this Agreement to the same extent as if the same had been set forth verbatim
herein.
SECTION 5.13.
GOVERNING LAW
. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ITS CONFLICTS OF LAW RULES.
SECTION 5.14.
Consent to Jurisdiction
. The Parties hereto hereby agree that the
appropriate forum and venue for any disputes between any of the Parties hereto arising out of this
Agreement shall be any state or federal court sitting in St. Louis, Missouri and each of the
Parties hereto hereby submits to the personal jurisdiction of any such court. The foregoing shall
not limit the rights of any Party to obtain execution of judgment in any other jurisdiction.
SECTION 5.15.
Severability
. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The Parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the
economic effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day
and year first above written.
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PEABODY ENERGY CORPORATION
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By:
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/s/ Richard A. Navarre
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Name:
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Richard A. Navarre
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Title:
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Executive Vice President
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PATRIOT COAL CORPORATION
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By:
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/s/ Richard M. Whiting
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Name:
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Richard M. Whiting
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Title:
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President & Chief Executive Officer
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Exhibit 10.6
Execution Version
COAL SUPPLY AGREEMENT
This Coal Supply Agreement (this
Agreement
) is made and entered into as of October 22, 2007
(the
Execution Date
) by and between COALSALES II, LLC, FORMERLY KNOWN AS PEABODY COALSALES
COMPANY (hereinafter
COALSALES II
), and PATRIOT COAL SALES LLC, a Delaware limited liability
company (
Patriot
).
RECITALS:
A.
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COALSALES II currently purchases coal from one or more affiliates of Patriot for resale to
COALSALES IIs customers (each such customer, an
End Customer
; and each contract for the
sale of coal from COALSALES II to an End Customer, an
End Customer Contract
).
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B.
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Patriot operates one or more coal mines designated as approved sources as set forth in the
the terms and conditions in
Exhibit A
attached hereto (such terms and conditions, the
Exhibit A Terms
); and such mine(s) have supplied coal to COALSALES II to enable COALSALES II
to fulfill its supply obligations under the End Customer Contract(s).
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C.
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Immediately prior to the Effective Date (which, for purposes
hereof, shall be October 31, 2007, and, when relevant,
11:59 p.m. on such date), COALSALES II and Patriot were both indirect
subsidiaries of Peabody Energy Corporation. Commencing on or after the Effective Date, as a
result of a spin-off transaction, Patriot will no longer be an indirect subsidiary of Peabody
Energy Corporation.
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D.
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It is the intent of the parties to allow COALSALES II to continue to meet its obligations
under the End Customer Contract(s) with respect to Specification A coal by purchasing
Specification A coal from Patriot in accordance with the terms and conditions of this
Agreement.
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AGREEMENT:
NOW, THEREFORE, COALSALES II and Patriot agree as follows:
1.
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INCORPORATION OF EXHIBIT A TERMS
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1.1
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Incorporation of Exhibit A Terms.
It is the intent of the parties that, except
where expressly provided otherwise in the body this Agreement, the Exhibit A Terms
(including the rights, obligations and benefits of Seller and Buyer thereunder)
shall apply to Patriot as if Patriot were the named Seller thereunder, and to
COALSALES II as if COALSALES II were the named Buyer thereunder. Accordingly, the
Exhibit A Terms are hereby incorporated by reference into this Agreement, with the same
force and effect as if fully set forth herein, subject to the modifications thereto set
forth below.
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1.2
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No Assignment or Privity.
For the avoidance of doubt, this Agreement does not
constitute a subcontract, delegation or assignment by COALSALES II of the End Customer
Contract(s), and there will be no privity of contract between End Customer(s) and
Patriot under or in respect of the End Customer Contract(s).
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1.3
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Communications For Scheduling, Transportation, and Related Activities.
Patriot
shall have the right, without obtaining the prior written consent of COALSALES II, to
communicate directly with End Customer for any purposes and/or activities which by
their nature require direct communication between Patriot and End Customer, such as
scheduling and transportation, but expressly excluding any communications that a
reasonable person would perceive as detrimental to COALSALES IIs interests under the
End Customer Contract(s) including, without limitation, communications relating to
pricing, amendments to the End Customer Contract(s), termination of the End Customer
Contract(s), or any material modifications to price, quality, or quantity terms.
Patriot shall promptly notify COALSALES II of all substantive communications exchanged
between Patriot and End Customer in relation to the End Customer Contract(s). Where End
Customers direct involvement is necessary to effectuate the scheduling and
transportation of the coal, Patriot shall be responsible for making the necessary
arrangements with End Customer to satisfy the obligations of COALSALES II under the End
Customer Contract(s) that address the specific performance obligations expected from
End Customer related to coal shipped to End Customer hereunder. Under no circumstances
shall COALSALES II be liable to Patriot for damages of any kind arising out of or
relating to End Customers failure to meet any of its obligations relating to the
scheduling and transportation of coal; provided, that if Patriot has any claims or
defenses arising under COALSALES IIs rights in connection with a failure of the End
Customer to satisfy its performance obligations under the End Customer Contract(s),
COALSALES II shall, subject to Section 1.6 hereof, use commercially reasonable efforts
to pursue all such rights and defenses on Patriots behalf or for the benefit of
Patriot.
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1.4
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Assumption of Rights, Remedies, Responsibilities and Obligations.
In
furtherance of the foregoing, Patriot hereby assumes toward COALSALES II all
obligations and responsibilities that the Seller has toward the Buyer under the
Exhibit A Terms; and COALSALES II will have the benefit of all rights and remedies
against Patriot that the Buyer has against the Seller under the Exhibit A Terms, in
each case subject to the modifications set forth below. Likewise, except for certain
obligations for which End Customer may assume direct responsibility pursuant to
separate communications between Patriot and End Customer as set forth in Sections 1.3
and 4.3 hereof, COALSALES II hereby assumes toward Patriot all obligations and
responsibilities that the Buyer has toward the Seller under the Exhibit A Terms;
and Patriot will have the benefit of all rights and remedies against COALSALES II that
the Seller has against the Buyer under the Exhibit A Terms, in each case subject to
the modifications set forth below. For the sake of clarity, the Exhibit A Terms, as
modified by the body of this Agreement, will apply to Specification A coal that is resold by
COALSALES II.
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1.5
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Conflicting Terms.
If there is a conflict or inconsistency between a provision
of the Exhibit A Terms and a provision of the body of this Agreement, the provision of
the body of this Agreement will control.
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1.6
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Legal Proceedings.
In addition to all other rights and remedies available under
this Agreement, including the Exhibit A Terms, the following shall apply:
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(a)
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COALSALES II will use commercially reasonable efforts to defend
its rights against End Customer(s) under the End Customer Contract(s) and to
pursue all necessary legal action to enforce its rights against End Customer(s)
under the End Customer Contract(s); provided, however, that COALSALES II shall
have the right, in its sole discretion, to determine whether or not it will
pursue or defend a given legal action; and in the event COALSALES II determines
not to pursue or defend a given legal action, it shall notify Patriot of such
determination. COALSALES II agrees that in the course of defending or pursuing
its rights against End Customer(s) under the End Customer Contract(s) that it
will exercise commercially reasonable efforts to avoid taking any actions that
it knows or would reasonably be expected to know would be detrimental to
Patriot without first advising Patriot of such actions. Notwithstanding the
foregoing, nothing in this Section 1.6(a) will be construed to limit any right
that Patriot may have against COALSALES II under this Agreement as a result of
such action by, or inaction of, COALSALES II.
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(b)
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If the parties are co-defendants in any legal proceeding
arising out of the End Customer Contract(s), the parties agree to work together
in good faith and in the spirit of mutual cooperation to defend such action in
a manner beneficial to both parties, provided, that each party shall have the
right to engage counsel of its choosing, and will bear the costs of its own
legal defense.
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2.
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COAL PREPAYMENT 2008-2011
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2.1
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Monthly Prepayment; Prepayment Supply Period.
As consideration for Patriots
entering in to this Agreement, subject to fulfillment by Patriot of its obligations
hereunder, and as additional consideration for coal deliveries to be made during the
period beginning January 1, 2008 and ending December 31, 2011 (the
Prepayment Supply
Period
), COALSALES II shall pay to Patriot forty eight (48) equal, monthly,
non-refundable payments in the amount of $1,041,666 (each a
Monthly Prepayment
),
beginning on December 20, 2007 and continuing through November 20, 2011. Each Monthly
Prepayment shall represent consideration for the coal deliveries made to COALSALES II
during the month of the Prepayment Supply Period immediately following the month in which such
Monthly Prepayment is due and payable. (By way of example, the Monthly Prepayment
made on December 20, 2007 shall represent consideration
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for the coal deliveries made during January, 2008 of the Prepayment Supply Period, and each Monthly Prepayment
thereafter shall likewise be applied as consideration for each consecutive month of
the Prepayment Supply Period). In the event no coal deliveries are made during a
given month of the Prepayment Supply Period, the Monthly Prepayment made with
respect to that month shall not be refunded, but shall be applied as additional
consideration for coal deliveries made during the following month of the Prepayment
Supply Period. The Monthly Prepayments shall entitle COALSALES II to a first
priority right for production for quantities to be delivered under this Agreement
from the sources and reserves of coal for Specification A coal shown on Exhibit 1
of the Exhibit A Terms, except, that if Patriot experiences an event of force
majeure, as that term is described in Article XII of the Exhibit A Terms, deliveries
shall be distributed in accordance with the terms of Article XII of the Exhibit A
Terms. For the avoidance of doubt, the Monthly Prepayment is in addition to, and
shall not serve as a reduction of, any amounts due and payable by COALSALES II under
Sections 4.7 and 4.8.
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2.2
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Taxes and Royalties
. If at any point in time Patriot notifies COALSALES II in
writing that it is obligated to pay federal, state or local taxes (except for taxes on
Patriots income or property), or private royalties as a result of a Monthly Prepayment
received, then COALSALES II shall promptly reimburse Patriot for all such taxes or
royalties assessed against and actually paid by Patriot related to such Monthly
Prepayment.
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3.
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GENERAL MODIFICATIONS TO EXHIBIT A TERMS
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The purpose of this Agreement is to allow COALSALES II to continue to meet its obligations
under the End Customer Contract(s) with respect to Specification A coal by purchasing
Specification A coal from Patriot in accordance with the terms and conditions agreed to
hereunder. Accordingly, this Agreement will be construed and performed in furtherance of
such purpose notwithstanding that the parties may not have adequately modified the Exhibit A
Terms.
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The following provisions of this Article 3 set forth general modifications to be made to,
and rules of construction to be applied to, the Exhibit A Terms.
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3.1
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Notices and Information.
To the extent certain provisions of the Exhibit A
Terms require that the Buyer or the Seller provide the other with notice within a
period of two (2) business days or less, for purposes of incorporating such requirement
into this Agreement, each party hereto shall use commercially reasonable efforts to
promptly relay such notice to the other party, taking into consideration the notice
requirement under the Exhibit A Terms. In all other situations under the Exhibit A
Terms requiring the Buyer to provide notice or information to the Seller within a
period of time greater than two (2) business days, for purposes of incorporating such requirement into this Agreement, such
period of time shall be extended by two (2) business days to account for the
possibility that End Customer(s) may not provide such notice or information to
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COALSALES II under the End Customer Contract(s) until the end of the specified
period, provided, however, that upon receipt of any notice given by End Customer,
COALSALES II will use commercially reasonable efforts to promptly forward such
notice to Patriot. Likewise, except for any provisions under the Exhibit A Terms
requiring two (2) business days or less notice, whenever the Exhibit A Terms
require the Seller to provide notice or information to the Buyer within a
specified period of time, for purposes of incorporating such requirement into this
Agreement, such period of time shall be shortened by two (2) business days to enable
COALSALES II sufficient time to provide the same notice or information to End
Customer(s) under the End Customer Contract(s).
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3.2
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Confidentiality.
To the extent that Patriot has possession or knowledge of the
terms of existing End Customer Contract(s), Patriot covenants that during the term of
this Agreement and continuing after termination of this Agreement until otherwise
permitted in writing by COALSALES II, it will hold the End Customer Contract(s) and the
information contained therein in strictest confidence and will protect the End Customer
Contract(s) from any unauthorized disclosure. Except as expressly provided for herein,
Patriot will not disclose to any third parties any information of any nature, specific
or general, pertaining to the End Customer Contract(s), and will only disclose such
information to those of its employees who have a need to know in order for Patriot to
perform its obligations hereunder. In the event Patriot has a legitimate business
and/or financial need to disclose the terms of the End Customer Contract(s) to a third
party, Patriot shall promptly notify COALSALES II of the circumstances necessitating
the need to disclose, and COALSALES II shall act in good faith and use commercially
reasonable efforts to obtain the End Customers written consent to Patriots disclosure
of the End Customer Contract(s) under those limited circumstances. The foregoing
notwithstanding, either party may disclose the terms of this Agreement to such partys
lenders, counsel, accountants or prospective permitted purchasers, directly or
indirectly, of all or substantially all of such partys assets or of any rights under
this Agreement, in each case who have agreed to keep such terms confidential, or in
order to comply with any applicable law, order, regulation or exchange rule; provided,
such party shall notify the other party of any proceeding of which it is aware which
may result in disclosure and use reasonable efforts to prevent or limit the disclosure.
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3.3
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Audit and Inspection Rights.
Whenever the End Customer Contract(s) grants End
Customer(s) the right to conduct an audit or inspection of, or access to coal
production facilities, processes, books, records, or otherwise, End Customer(s) will be
entitled, as applicable, to enforce or exercise such audit, inspection and/or access
rights against Patriot. If COALSALES II has the right under an End Customer Contract to
conduct any inspections of an End Customers books, records, or premises, such right
does not directly pass through to Patriot under this Agreement; however, Patriot may
request such inspection rights from COALSALES II, and COALSALES II shall contact that End Customer and use commercially
reasonable efforts to obtain that End Customers consent to such request. In the
event End Customer refuses Patriots request to inspect,
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COALSALES II shall be obligated to promptly conduct the inspection on Patriots behalf and at Patriots
sole expense, and shall report the results of such inspection to Patriot promptly
upon completion, provided, that disclosure of such results does not violate the
terms of confidentiality under the End Customer Contract(s). Notwithstanding the
foregoing, this Section 3.3 does not eliminate or modify COALSALES IIs audit,
inspection or access rights under the Exhibit A Terms with respect to Patriot or
Patriots facilities, processes, books or records.
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3.4
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Rejected Deliveries.
If, pursuant to the Exhibit A Terms, COALSALES II
exercises its right to reject any non-conforming coal shipments or to suspend
deliveries, COALSALES II shall, subject to the notice provisions set forth in Section
3.1 hereof, notify Patriot. Patriot will, at its sole expense, take all necessary
measures to correct the conditions giving rise to the failure of the coal to conform to
specifications under the Exhibit A Terms, and will reimburse COALSALES II for any and
all costs and expenses incurred by COALSALES II as a result of Patriots shipment of
non-conforming coal. COALSALES II and Patriot will work together in good faith to
expeditiously resolve any disputes arising from non-conforming coal or suspended
shipments. If, however, an End Customer exercises its right to hold COALSALES II in
anticipatory breach of its End Customer Contract as a result of Patriots failure to
provide conforming coal pursuant to this Agreement, and not as a result of any action
or inaction of COALSALES II, Patriot shall indemnify COALSALES II in accordance with
the terms of Section 3.8 hereof for any damages arising on or after the Effective Date
hereof that are pursued by End Customer against COALSALES II by reason of such breach.
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3.5
|
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References to End Customer Contract(s).
Notwithstanding anything in this
Agreement to the contrary, references herein to the End Customer Contract(s) shall not
expand Patriots liability to COALSALES II beyond the liability Patriot has to
COALSALES II according to the terms and conditions of this Agreement.
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3.6
|
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Assignment.
Neither party shall assign this Agreement without the prior written
consent of the other party, which consent shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, either party may, without the need of consent
from the other party (and without relieving itself from liability hereunder), (a)
transfer, sell, pledge, encumber, or assign this Agreement or the account, revenues or
proceeds hereof in connection with any financing or other financial arrangement; (b)
transfer or assign this Agreement to an affiliate of such party; or (c) transfer or
assign this Agreement to any person or entity succeeding to all or substantially all of
the assets of such party by way of merger, reorganization, or otherwise, provided,
however, that in each such case, any such assignee shall agree in writing to be bound
by the terms and conditions hereof, and that no such assignment shall in any way
relieve the assignor from liability or full performance under this Agreement.
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3.7
|
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Venue and Dispute Resolution.
Subject to Article 6 of this Agreement, venue for
the resolution of disputes between COALSALES II and Patriot under this
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Agreement will lie exclusively in the federal courts of jurisdiction in the Eastern District of
Missouri.
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3.8
|
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Indemnification.
Subject to the limitations in Article XVIII of the Exhibit A
Terms, each party hereto (as the
Indemnifying Party
) shall indemnify, defend and hold
harmless the other party, its directors, officers, employees, agents and affiliates
(collectively, the
Indemnified Party
) from and against any and all suits, actions,
legal or administrative proceedings, claims, demands, actual damages, fines, punitive
damages, losses, costs, liabilities, interest, and attorneys fees (including any such
fees and expenses incurred in enforcing this indemnity) incurred by the Indemnified
Party arising from a breach by the Indemnifying Party of its obligations to the
Indemnified Party under this Agreement.
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3.9
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Specification A Coal and Sourcing.
It is understood and agreed by the parties
hereto that this Agreement applies solely to Specification A coal, as defined in the
Exhibit A Terms, and such coal shall be supplied from the sources and reserves of coal
for Specification A coal shown on Exhibit 1 of the Exhibit A Terms plus any
additional sources approved pursuant to this Agreement.
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4.
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SPECIFIC MODIFICATIONS TO EXHIBIT A TERMS
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The following provisions of this Article 4 set forth specific modifications to be made to
specified provisions of the Exhibit A Terms. All references to sections or pages are to
sections or pages of the Exhibit A Terms, unless specifically indicated otherwise.
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4.1
|
|
Definitions.
All defined terms in the Exhibit A Terms shall have the same
meanings under this Agreement; and all capitalized terms herein that are not otherwise
defined shall have the meaning ascribed to them in the Exhibit A Terms.
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4.2
|
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Article 1, Section 1 (Term of Agreement).
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(a)
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Original and Extended Terms
. The Original Term (as
defined in the Exhibit A Terms) when applied to this Agreement shall commence
on the Effective Date hereof and continue until December 31, 2012. If it is
determined that an existing End Customer has the valid right to extend its End
Customer Contract, and if End Customer exercises such right, on or before
January 1, 2012 to extend the term of that End Customer Contract (the
Extended
Term
), then the term of this Agreement will likewise be extended for the same
period of time. In such event, COALSALES II shall notify Patriot of the
Extended Term and the volume of coal tonnage required under such Extended Term
(if known) within 10 business days after COALSALES IIs receipt of End
Customers notice to extend the term of its End Customer Contract.
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(b)
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Expiration of this Agreement
. This Agreement will
expire upon the later of (a) the end of the Original Term or (b) the end of the
Extended Term, subject to earlier termination as provided under Section 4.2(c)
hereof.
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Following expiration of this Agreement, neither party hereto shall have, after the effective date of such expiration, any further obligation under
this Agreement to the other, provided, however, that such expiration shall not
affect any rights or obligations of each party existing under this Agreement
for coal shipped or required to be shipped prior to the effective date of said
expiration.
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(c)
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Early Termination of this Agreement
. If COALSALES II
exercises its rights under Article VI, Section 3(c)(i) or Article IX, Section 2
of the Exhibit A Terms to terminate this Agreement prior to the expiration of
the Original Term or Extended Term, then (i) Article 2 and Sections 3.8 and
4.12 hereof shall survive termination of this Agreement and (ii) neither party
hereto shall have, after the effective date of such early termination, any
further obligation under this Agreement to the other, provided, however, that
such early termination shall not affect any rights or obligations of each party
existing under this Agreement for coal shipped prior to the effective date of
said termination.
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4.3
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Article II (Quantities and Deliveries; Related Communications).
For purposes of
ensuring the seamless delivery of the coal to End Customer(s), Patriot shall comply
with the Seller obligations under Article II of the Exhibit A Terms, including, without
limitation, all requirements as to quantity, delivery, specifications, quality,
loading, transport, delivery, and establishment of a demurrage account. For
Specification A coal to be shipped to End Customer(s), all required notices and other
communications related to the foregoing shall be made by Patriot directly to End
Customer(s) within the stated notice period. In addition to its obligation to
communicate directly with the End Customer(s) to fulfill the Seller obligations under
Article II of the Exhibit A Terms, Patriot may, pursuant to Section 1.3 of this
Agreement, exchange information directly with End Customer(s) at the address(es)
provided to it by COALSALES II for purposes of coordinating transportation, scheduling,
loading days, quantity, delivery and any other details for which End Customer(s) must
have direct involvement. Subject to Section 1.3 hereof, Patriot agrees that any and all
decisions made between Patriot and End Customer(s) as a result of such direct
communications are outside of COALSALES IIs control, and as such, COALSALES II
disclaims all responsibility for, and any and all liability for damages incurred by
Patriot, or claimed against Patriot by End Customer(s), arising from the scheduling and
transportation of the coal between End Customer(s) and Patriot. To the extent copies
of any written communications under the End Customer Contract(s) in connection with
scheduling, transportation and related activities are required by Patriot to perform
its obligations hereunder, COALSALES shall provide Patriot with copies of such
communications.
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4.4
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Article II, Section 1 (Quantity and Maximum Quantity Coal Purchases).
The
terms
Contract Year
and
Contract Half Year
when referenced under this Agreement
shall have the same meaning ascribed to it under Article II, Section 1(a) of the
Exhibit A Terms. The term
Quantity
when used under this
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-8-
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Agreement shall mean the amount of coal to be purchased by COALSALES II from Patriot under this Agreement for a
particular Contract Half Year. For each Contract Half Year, the Quantity of coal
purchased shall equal the quantity shown in the following chart with respect to that
same Contract Half Year.
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QUANTITY PURCHASES PER CONTRACT HALF YEAR
:
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|
CONTRACT YEAR
|
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QUANTITY PER CONTRACT HALF YEAR
|
2007
|
|
288,000 tons
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2008
|
|
1,600,250 tons
|
2009
|
|
1,412,500 tons
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2010
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|
1,412,500 tons
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2011
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|
1,412,500 tons
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2012
|
|
1,412,500 tons
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4.5
|
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Article II, Sections 3 and 4 (Approved Rail and Barge Shipping Origins).
Patriot shall comply at all times with the Exhibit A Terms regarding railcars and
barges provided by End Customer, the approved rail and barge shipping origin(s) listed
on Exhibit 1, Minimum Trainload Requirements and Maximum Load Limit Requirements of the
Exhibit A Terms, all of which shall be communicated by COALSALES II to Patriot along
with any changes thereto as requested by COALSALES II pursuant to its rights under this
Agreement. Any penalties arising from Patriots failure to comply with the foregoing
requirements, except those caused by End Customer, shall be paid by Patriot to
COALSALES II who shall pass along such payments to End Customer. Any changes desired by
Patriot to the approved rail or barge shipping origin(s) listed on Exhibit 1 of the
Exhibit A Terms are subject to the prior written consent of COALSALES II, and all
increased transportation, barging, and/or handling costs arising therefrom shall be
borne solely by Patriot. If prior consent of End Customer is required for COALSALES II
to make such change under the End Customer Contract, COALSALES II shall exercise
commercially reasonable efforts to gain End Customers consent, and if such consent is
obtained, COALSALES II will grant its consent to make the change under this Agreement.
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4.6
|
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Article III,
Section 1(b)
(Substitution Rights).
Patriot may, at any time
during the course of this Agreement, request the right to provide coal to COALSALES II
from substitute sources, and COALSALES II shall have the right, in its sole
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discretion, to grant or deny such request, provided, however, that if COALSALES II is not fully
utilizing the substitution rights provided to it under the End Customer Contract(s),
the parties agree to meet periodically to discuss alternatives to optimize the
substitution rights under the End Customer Contract(s) to the mutual benefit of the
parties. Notwithstanding anything to the contrary in this Agreement, Patriot shall not
have any liability nor have any obligation and/or responsibilities with respect to coal
supplied by COALSALES II from sources other than Patriot under this Agreement to
satisfy the delivery requirements under the End Customer Contract(s). For purposes of
clarity, the Quantity of coal to be supplied under this Agreement shall not be reduced
by deliveries of coal under the End Customer Contract(s) by COALSALES II from any
sources not provided by Patriot. In addition, should End Customer claim a force majeure
event under the End Customer Contract(s) during any period of time when COALSALES II is
supplying coal from any sources not provided by Patriot under the End Customer
Contract(s), then COALSALES II shall prorate among Patriot and such other sources any
reduction in deliveries claimed by End Customer resulting from such force majeure event
in proportion to the quantity of scheduled shipments from Patriot and such other
sources during the period of the such force majeure event.
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4.7
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Article IV (Payment).
For coal purchased hereunder that is shipped to End
Customer(s) under existing End Customer Contract(s) having destination weights and
analyses, promptly after receipt from End Customer(s) of weight, analytical, and
pricing data for a given half-month, as required under the End Customer Contract(s),
COALSALES II shall submit such information to Patriot; and Patriot shall, as soon as
commercially practicable after receipt of such information, prepare and submit to
COALSALES II the invoice for the half-month that corresponds to such information. For
all other coal purchased hereunder, certified origin weights and analysis provided by
Patriot shall govern payment and quality adjustments will be determined based upon
formulas set forth in the Exhibit A Terms utilizing such certified origin weights and
analyses. All invoices shall be submitted by Patriot directly to COALSALES II at the
billing address(s) provided by COALSALES II (e.g. mail, facsimile and EDI as
applicable), in accordance with the same procedures governing COALSALES IIs submission
of invoices to End Customer under the Exhibit A Terms. COALSALES II shall have twenty
two (22) calendar days after the close of such half-month to submit payment to Patriot.
Patriot agrees that in the event of a payment dispute between COALSALES II and End
Customer, it will cooperate fully with COALSALES II and will take all reasonable
measures to assist COALSALES II in resolving any issues with End Customer relating to
invoices, payment, and collection of all outstanding amounts due from End Customer.
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4.8
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Article VI, Sections 1 4 (Base Price and Base Price Adjustments).
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(a)
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Relationship of Monthly Prepayments to Price
. For
purposes of clarity, the Monthly Prepayment obligations of COALSALES II under
Article 2 hereof shall not be credited against the Patriot Base Price or the
Patriot Selling Price, nor shall the Patriot Base Price or the Patriot Selling
Price
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be reduced as a consequence of the Monthly Prepayments made under Article 2.
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(b)
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Patriot Base Price During Original Term
. The
Patriot
Base Price
for quantities of Specification A coal purchased by COALSALES II
hereunder during a given Contract Year in the Original Term shall equal the
Patriot Base Price set forth in the following table:
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PATRIOT BASE PRICE*
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CONTRACT YEAR
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(per ton)
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2007
|
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$45.000
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2008
|
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$51.249
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2009
|
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$52.080
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2010
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$52.080
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2011
|
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$45.000
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2012
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$45.000
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*
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Before adjustments for premiums, penalties and changes in law.
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(c)
|
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[Intentionally blank]
|
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(d)
|
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Patriot Selling Price During Original Term
. The
Patriot Selling Price
per ton at which COALSALES II will purchase coal from
Patriot under this Agreement during the Original Term will equal:
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(i)
|
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the Patriot Base Price per ton (as determined
above under this Section 4.8),
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(ii)
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adjusted
pursuant to Article VI of the Exhibit
A Terms, and
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(iii)
|
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adjusted for
quality pursuant to Section 4.10
of this Agreement.
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4.9
|
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Article VI,
Section 3(c)
(Changes in Law).
With respect to changes of law
occurring during the period from November 1, 2007 through and inclusive of December 31,
2008: (i) Base Price adjustments for changes in laws pursuant to Article VI, Section 3(c) of the Exhibit A Terms shall be made only to the extent
that COALSALES II is able to recover such adjustments from End Customer(s) on an End
Customer by End Customer basis; and (ii) COALSALES II shall use commercially
reasonable efforts to obtain the consent of End Customer(s) to such adjustments.
With respect to End Customer Contracts entered into after November 1, 2007,
COALSALES II shall use commercially reasonable efforts to
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-11-
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include in such contracts a right to adjust prices for changes in laws similar to Article VI, Section 3 of the
Exhibit A Terms.
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4.10
|
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Article VII Adjustment of Price for Quality.
Premiums and penalties per ton
to be paid or credited by COALSALES II to Patriot under this Agreement shall be
calculated on the Base Price charged by COALSALES II to End Customer under the formulas
set forth in Article VII of the Exhibit A Terms.
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4.11
|
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Article XIX (Notices).
Notices provided for or required herein shall be given
by postage prepaid, certified mail, addressed as follows:
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Patriot Coal Sales LLC
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COALSALES II, LLC
|
12312 Olive Boulevard, Suite 400
|
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701 Market Street
|
St. Louis, Missouri 63141
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St. Louis, Missouri 63101
|
Attention: General Counsel
|
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Attention: Senior Vice President, Sales and Marketing
|
5.
|
|
PATRIOT SELLING PRICE DURING EXTENDED TERM
|
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5.1
|
|
Scope of Article 5
. This Article 5 governs the price of coal purchased
by COALSALES II from Patriot under this Agreement during the Extended Term, if any. The
price of coal purchased by COALSALES II from Patriot under this Agreement during the
Original Term will be governed by Section 4.8.
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5.2
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Extended Term Pricing Periods
. For purposes of determining the Market
Price (as defined below), and consequently the Patriot Base Price and Patriot Selling
Price, during the Extended Term, the Extended Term will be divided into the following
three pricing periods:
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(1)
|
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The
First Extended Term Price Period
will commence upon the
start of the Extended Term and, if the Extended Term is longer than 24 months,
will end at the end of the 24
th
month of the Extended Term.
|
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(2)
|
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If the Extended Term is longer than 24 months, the
Second
Extended Term Price Period
will commence upon the end of the First Extended
Term Price Period and, if the Extended Term is longer than 48 months, will end
at the end of the 48
th
month of the Extended Term.
|
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(3)
|
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If the Extended Term is longer than 48 months, the
Third
Extended Term Price Period
will commence upon the end of the Second Extended
Term Price Period and will end upon the expiration of the Extended Term.
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The First, Second and Third Extended Term Price Periods will each be referred to
herein as an
Extended Term Price Period
.
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-12-
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5.3
|
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Determination of Market Price.
|
|
(a)
|
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Market Price
per ton of Specification A coal for each
Extended Term Price Period will be determined: (i) by mutual agreement of the
parties in accordance with Section 5.3(b) hereof during the First Negotiation
Period (as defined in Section 5.3(b)(i) hereof); (ii) if the parties are unable
to mutually agree upon a Market Price after the First Negotiation Period, then
the Market Price will be determined by mutual agreement of the parties in
accordance with Section 5.3(b) hereof during the Second Negotiation Period (as
defined in Section 5.3(b)(ii) hereof); or (iii) if the parties are unable to
mutually agree upon a Market Price after the Second Negotiation Period, then
the Market Price will be determined pursuant Sections 5.3(c) through 5.7
hereof.
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(b)
|
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During the First Negotiation Period and, if necessary, the
Second Negotiation Period, the parties shall meet regularly and work together
exercising good faith attempts to reach a mutually agreed Market Price for
Specification A coal, which Market Price shall not be adjusted pursuant to
Section 5.7.
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(i)
|
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The
First Negotiation Period
shall mean (1)
for the First Extended Term Price Period, the period January 15, 2012
through March 1, 2012, (2) for the Second Extended Term Price Period,
the period January 15, 2014 through March 1, 2014, and (3) for the
Third Extended Term Price Period, the period January 15, 2016 through
March 1, 2016.
|
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(ii)
|
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The
Second Negotiation Period
shall mean (1)
for the First Extended Term Price Period, the period May 1, 2012
through May 31, 2012, (2) for the Second Extended Term Price Period,
the period May 1, 2014 through May 31, 2014, and (3) for the Third
Extended Term Price Period, the period May 1, 2016 through May 31,
2016.
|
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(c)
|
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If the parties are unable to mutually agree upon a Market Price
under Section 5.3(b) hereof after the Second Negotiation Period, then the
Market Price will be determined in accordance with this Section 5.3(c).
Commencing on the first day of each Market Price Period (as defined in Section
5.3(c)(i)), for each business day during which data is available, COALSALES II
will calculate the simple average of the daily bid and ask prices from the
three Approved Pricing Sources (as defined in Section 5.3(c)(ii)) for the
Central Appalachian CSX-BSK 12,500 Btu/lb <1% sulfur rail product for the
applicable Extended Term Price Period. This average will be the
Index Based
Market Price
.
|
|
(i)
|
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Market Price Period
shall mean (1) for the First Extended Term Price Period, the period February 1, 2012 through
May 31,
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2012, (2) for the Second Extended Term Price Period, the period February 1, 2014 through May 31, 2014, and (3) for the Third Extended
Term Price Period, the period February 1, 2016 through May 31, 2016.
|
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(ii)
|
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The three
Approved Pricing Sources
under this
Agreement are: ICAP United, Inc.; Evolution Markets, Inc.; and TFS
Energy, LLC. If any of the foregoing Approved Pricing Sources is
discontinued, altered or otherwise becomes unavailable, then either
party may suggest a replacement, but if the parties are unable to agree
upon a replacement, the Index Based Market Price shall be determined
using the average of the remaining two Approved Pricing Sources. If two
of the three Approved Pricing Sources are discontinued, altered or
otherwise become unavailable, the parties shall work in good faith to
choose one mutually agreeable replacement broker source (which shall
thereafter be deemed an Approved Pricing Source); and the Index Based
Market Price shall henceforth be determined using the average of the
remaining Approved Pricing Source and the newly appointed Approved
Pricing Source. If the parties are unable to reach agreement within a
reasonable period of time as to such replacement Approved Pricing
Source, the matter shall be determined by arbitration in accordance
with Section 6.3 of this Agreement.
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5.4
|
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SO
2
Adjustment
. The Index Based Market Price shall be adjusted to
reflect a sulfur value of 1.2lbs SO
2
/MMBtu.
|
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|
SO
2
Adjustment = (((1.60 1.20) x 12,500 Btu)/1,000,000) X SA
|
Where:
|
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|
SA
|
|
means the simple average value of the
published monthly Air Daily Price Index for an SO
2
emission
allowance for the months of the applicable Market Price Period
or, if such index ceases to be published, by such mutually
agreed substitute broker which accurately measures the market
value of SO2 emission allowances.
|
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5.5
|
|
Btu Adjustment
. The Index Based Market Price will be adjusted to
reflect contract calorific value according to the following formula:
|
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|
|
|
Btu Adjustment = Index Based Market Price x ((12,300 12,500)/12,500)
|
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5.6
|
|
Patriots Premium
.
Patriots Premium
equals the fixed amount of
$1.00/ton, which represents a premium to the Index Based Market Price to reflect the
volume and terms and conditions under the Exhibit A Terms.
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-14-
|
5.7
|
|
Market Price During Extended Term
. If the Market Price is being
determined pursuant to Section 5.3(c) hereof, then the Market Price per ton during each
Extended Term Price Period will equal:
|
|
(a)
|
|
the Index Based Market Price per ton for that Extended Price
Term Period, as determined under Section 5.3(c),
|
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|
(b)
|
|
plus
the SO
2
Adjustment determined under Section
5.4,
|
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|
(c)
|
|
plus
the Btu Adjustment determined under Section 5.5, and
|
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|
(d)
|
|
plus
Patriots Premium determined under Section 5.6.
|
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|
|
COALSALES II will provide the Market Price, along with the calculation thereof
pursuant to this Section 5.7, to Patriot within fifteen (15) days following the
Second Negotiation Period, and Patriot will provide written notice of its acceptance
or rejection of the Market Price to COALSALES II no later than June 30
th
of that year. In the event Patriot rejects COALSALES IIs calculation of the Market
Price, then the calculation of Market Price will be determined by one or more
arbitrators in an arbitration proceeding pursuant to Article 6 of this Agreement,
and such determination will be final and binding upon the parties. Such arbitration
proceeding must be completed within 90 days after commencement.
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5.8
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Patriot Base Price During Extended Term
. The
Patriot Base Price
will
equal the Market Price for each Extended Term Price Period.
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5.9
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Patriot Selling Price During Extended Term
. The
Patriot Selling Price
per ton at which COALSALES II will purchase coal from Patriot under this Agreement
during each Extended Term Price Period will equal:
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(a)
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the Patriot Base Price per ton for that Extended Term Price
Period, as determined under Section 5.8, and
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(b)
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adjusted for
quality pursuant to Section 4.11 of this
Agreement.
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For the sake of clarity, during the Extended Term, the Patriot Selling Price will
not be reduced pursuant to Article V of the Exhibit A Terms.
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6.
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RESOLUTION OF DISPUTES
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6.1
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Notice of Dispute
. Disputes arising pursuant to this Agreement shall be
resolved in accordance with this Section. Either party may invoke the procedures of
this Section by written notice to the other party claiming the existence of a dispute and
describing the nature of that dispute (the
Dispute Notice
).
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6.2
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Resolution of Disputes
. Any dispute between the parties arising under
this Agreement first shall be referred for resolution to a senior representative of
each
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-15-
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party. Upon receipt of a notice describing the dispute, designating the notifying partys senior representative and indicating that the dispute is to be resolved by the
parties senior representatives under this Agreement, the other party shall promptly
designate its senior representative to the notifying party. The senior representatives
so designated shall attempt to resolve the dispute on an informal basis as promptly as
practicable. The parties agree that they shall negotiate expeditiously in good faith in
an effort to resolve any disputes arising under this Agreement. In the event a dispute
cannot be resolved by negotiation within thirty (30) days after the date that the
Dispute Notice was received by the other party, or within such other period as the
parties may jointly agree, the parties agree to consider the use of a mini-trial or
other informal procedure such as umpire settlement (
Informal Procedure
) to resolve
the dispute. An Informal Procedure shall be utilized only if the parties agree in
writing on the procedures to be followed and whether the resulting determination shall
be binding. All disputes that are resolved by negotiation or through a binding Informal
Procedure shall be acknowledged in writing by both parties. Any dispute that is not
resolved nor committed to final and binding resolution by means of an Informal
Procedure within ninety (90) days of the date the Dispute Notice was received by the
other party may, within one hundred (100) days of the date of the Dispute Notice, be
referred to arbitration by either party and the same shall be resolved not later than
one hundred fifty (150) days after such referral to arbitration in accordance with
Section 6.3 below. A disputed matter that is not submitted to arbitration as provided
herein shall be deemed to have been waived.
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6.3
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Arbitration.
Any controversies or claims arising out of or relating to
this Agreement or the breach hereof which are not resolved by negotiations between the
parties, or which is not committed to final and binding resolution by means of an
Informal Procedure, shall be determined by arbitration in accordance with Commercial
Arbitration Rules of the American Arbitration Association; provided, however, the
arbitrator(s) selected shall be a person knowledgeable of the subject matter of the
arbitration. Judgment may be entered on the arbitration award in any court having
jurisdiction. Unless otherwise agreed in writing by COALSALES II and Patriot,
performance of their respective obligations under this Agreement shall be continued in
full by the parties during the arbitration process. The parties stipulate that this
Agreement constitutes a contract evidencing a transaction involving commerce and that
this section is enforceable under the Federal Arbitration Act (9 U.S.C.A. §§ 1 et
seq.).
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[REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURES ON NEXT PAGE.]
-16-
IN WITNESS WHEREOF, COALSALES II and Patriot have executed this Agreement as of the Execution
Date.
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COALSALES II, LLC, formerly known as
Peabody Coalsales Company
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By:
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/s/ John F. Quinn, Jr.
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Name:
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John F. Quinn, Jr.
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Title:
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Vice President
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PATRIOT COAL SALES LLC
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By:
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/s/ Michael V. Altrudo
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Name:
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Michael V. Altrudo
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Title:
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President
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-17-
Exhibit A
Table of Contents
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ARTICLE
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TITLE
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Page
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I
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Term of Agreement
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2
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II
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Quantities & Deliveries
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2
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III
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Specifications, Quality & Weight
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12
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IV
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Payment
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19
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V
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Price
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20
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VI
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Base Price & Base Price Adjustments
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20
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VII
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Adjustment of Price for Quality
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25
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VIII
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Sampling and Analysis
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27
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IX
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[Intentionally blank]
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30
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X
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Major Technological Improvements
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30
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XI
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Administrative Program
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31
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XII
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Force Majeure
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32
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XIII
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Warranties and Dedication
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34
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XIV
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Buyers Right to Market Coal with Origin Weights and Analyses
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35
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XV
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[Intentionally blank]
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35
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XVI
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Government Compliance Certificate
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36
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XVII
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[Intentionally blank]
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36
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XVIII
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Waiver and Limitation of Damages
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36
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XIX
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[Intentionally blank]
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37
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XX
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[Intentionally blank]
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37
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XXI
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Confidentiality
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37
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XXII
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Finality
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37
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XXIII
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Governing Law
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38
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Exh. 1
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Sellers Production Source(s), Reserves of Coal, Approved
Coal, Approved Rail Shipping Origin(s), and
Approved Barge Shipping Origins
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39
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Exh. 2
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West Virginia Severance Tax
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41
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Exh. 3
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Government Contractor Compliance Certificate
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42
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ARTICLE I
TERM OF AGREEMENT
Section 1.
The term of this Agreement shall be for the period commencing
October 31,
2007, and continuing through and including December 31, 2012, (hereinafter original term) except
as provided elsewhere in this Agreement.
Section 2.
Provided this Agreement is still in effect, Buyer shall have the optional
right, but not the obligation, to extend the term of this Agreement for a period of up to sixty
(60) months beyond the original term (such extended period hereinafter referred to as extended
term) for coal produced from reserves of coal dedicated to this Agreement. Buyer shall give
written notice of its election to extend the term for such additional period on or before January
1, 2012. Such notice by Buyer shall designate the length of the extended term. If such optional
right of Buyer is exercised, all provisions of this Agreement shall continue in full force and
effect over the extended term designated by Buyer.
ARTICLE II
QUANTITIES & DELIVERIES
Section 1.
(a) For the purposes of this Agreement, the term Contract Year shall be
defined as the period commencing January 1 of each calendar year and ending December 31 of each
calendar year. Each following Contract Year shall commence on January 1 thereof and continue for a
12-month period thereafter. Each Contract Year shall consist of two Contract Half-Year periods,
which shall respectively consist of the first six (6) months and the last six (6) months of each
calendar year.
(b) Seller shall supply coal meeting the requirements of Specification A coal.
2
(c) At least sixty (60) calendar days prior to the beginning of each Contract Half-Year,
Seller shall propose to Buyer, in writing, a schedule of monthly deliveries and shipping origin for
such Contract Half-Year (the scheduled quantity); such proposed schedule shall provide for
deliveries in approximately equal monthly quantities, and unless Seller is notified otherwise by
Buyer, such schedule of monthly quantity obligations shall be accepted and implemented by both
parties hereunder. It is acknowledged that such scheduled shipping origins (but not monthly
quantity obligations) are to be provided for planning purposes and may be adjusted from time to
time in accordance with the following sentence. Seller may by notice in writing by the twentieth
(20
th
) day of the month prior to shipment, change the scheduled shipping origins for any
subsequent month; provided, however, such changes shall not increase or decrease the total amount
required to be delivered in such month.
Section 2.
The term ton shall mean a net ton of 2,000 pounds avoirdupois weight.
Section 3.
(a) Except as provided in Article II, Section 4, Seller shall cause the
coal that is to be delivered hereunder to be loaded into carrier- or Buyer-provided railcars (at
Buyers option) at approved rail shipping origin(s) (hereinafter the approved rail shipping
origin), as described on Exhibit 1, attached hereto and hereby made a part hereof, and properly
consign such shipment in accordance with Section 5 of this Article and in accordance with Buyers
or any of its existing End Customers rail transportation contract(s), as amended or superseded.
New amendments or provisions to such rail transportation contract placing new or revised
requirements on Seller regarding the loading of railcars and/or consignment of shipments hereunder,
other than that provided for herein, shall be subject to Sellers approval which shall not be
unreasonably withheld.
3
Seller shall not have the right to ship coal to be delivered under this Agreement from any
rail shipping origin other than the approved rail shipping origin(s) listed on Exhibit 1, unless
Seller shall first have obtained Buyers written approval of such additional shipping origin.
Title to the coal and risk of loss thereof shall pass to Buyer as the loaded railcars are pulled
from any such origin.
Seller shall add on each Bill of Lading or Mine Card documents such notation(s) as may be
designated by Buyer to Seller. Seller shall cause the loadings to be tendered in unit train
consignments each consisting of at least ninety (90) railcars, which shall be tendered in unit
train consignments of at least ninety-six (96) railcars. If Seller is unable to load any railcar
that has been placed for loading due to an unserviceable condition of a railcar, and has notified
the railroad and Buyer of such unserviceable condition, Seller shall be relieved of any penalties
for failure to comply with the minimum train size requirements that are attributable to such
unserviceable railcar. Should Seller be limited to seventy-five (75) railcars at any approved rail
shipping origin, and tender unit train consignments consisting of between seventy-five (75) and
ninety (90) railcars, then Seller shall pay Buyer an amount equal to one-half of one percent (0.5%)
of the Base Price for each ton of coal in such unit train.
Seller shall provide, maintain, and operate at each approved rail shipping origin (except as
further provided herein) a unit train loading facility, including coal storage and track to
facilitate the proper loading of each unit train within twenty-four (24) hours of actual or
constructive placement by the railroad. Seller agrees to operate said loading facility(ies) on a
twenty-four (24) hours per day, seven (7) days per week basis.
Seller agrees to load each unit train to comply with the Buyers Minimum Trainload
Requirements and Maximum Load Limit requirements. To comply with Buyers Minimum
4
Trainload Requirements, Seller shall load each unit train of coal to full visible capacity and
an average lading weight of at least ninety-eight (98) tons per steel railcar and one hundred seven
(107) tons per aluminum railcar if such railcars are Buyer-provided railcars. Seller shall load
each unit train to a minimum of ninety-eight percent (98%) of the total marked load capacity of all
the railcars in the unit train if such railcars are carrier-provided railcars. Additionally,
Seller recognizes that Buyer shall be assessed a penalty by the railroad for phantom tons in the
event that Seller fails to load each unit train to a lading weight of ninety-eight percent (98%) of
the total of the marked load limit of all the railcars in the unit train. To comply with Buyers
Maximum Load Limit Requirements, Seller shall not load any railcar in excess of a gross load limit,
including lading and railcar, of 270,000 pounds. Buyer shall have the right to alter the Minimum
Trainload Requirements and Maximum Load Limit Requirements by giving Seller seven (7) days prior
written notice; provided, however, Buyers Minimum Trainload Requirements shall not require Seller
to load railcars to within two (2) tons of the Maximum Load Limit Requirement.
If Seller fails to comply with the foregoing origin loading requirements and/or the Maximum
Load Limit Requirements, Seller shall pay to Buyer the penalty charges assessed by the railroad.
The charges will be those actually paid to the railroad and will not exceed those published in the
railroads Freight Tariff No. ICC-CSXT-8200, Series, in effect when such charges were incurred. If
Seller fails to comply with Buyers Minimum Trainload Requirement, then Seller shall pay to Buyer a
penalty charge of $0.03 per ton or part of a ton that the average lading weight per railcar falls
short of the Minimum Trainload Requirement times the actual number of tons in the unit train.
5
(b) Should Buyer, in accordance with the terms of Article III of this Agreement, reject any
railcar load(s) of coal in any shipment, Seller shall arrange for the removal of such rejected
railcar(s). All costs assessed by the railroad, including but not limited to reconsignment
charges, transportation charges, and demurrage charges, shall be to the account of Seller. In
addition, if the rejected railcar(s) of coal are Buyer-provided railcar(s), then Seller shall also
pay the per diem and mileage charges as defined in the Car Hire Tables of the Official Railway
Equipment Register, ICC-REF-6411 Series, as amended. Such per diem charges shall be effective as
of the first 7:00 AM following Buyers rejection until the railcar(s) are unloaded at a destination
specified by Seller and then returned to a destination specified by (or by the railroad, if
applicable) for further utilization. Such mileage charges shall be based on the loaded and empty
miles traveled by the rejected railcar(s) from the point of rejection to such specified return
destination.
(c) During periods of freezing temperatures, Buyer shall provide notice on a weekly basis,
regarding freeze-proofing. When directed by Buyer to use freeze-proofing agents, Seller shall
cause these agents to be properly applied during loading in sufficient quantity for the coal to
comply with the free flowing requirements (when received at the consigned destination) expressed
elsewhere in this Agreement, and Seller shall include the statement Freeze Treatment Applied on
the shipping manifests. For each ton of coal delivered under this Agreement to which such
freeze-proofing has been applied in strict accordance herewith, an amount of one and one-half
percent (1.5%) of the Base Price applicable thereto shall be added to the Selling Price of such
coal.
(d) Seller shall indemnify, save harmless, and defend Buyer, its agents, and its affiliates
(all referred to in this sentence as Buyer) from and against any liabilities, expenses,
6
claims, and all other obligations whatsoever, including without limitation, all judgments
rendered against and all fines and penalties imposed upon Buyer (whether severally, or in
combination with others) and any reasonable attorneys fees and any other costs of litigation (all
of which are hereinafter referred to as liabilities) arising out of injuries or death to any
person(s), or damage to any property, caused by or related to, in whole or in part, the railcars
furnished hereunder (as applicable), between the time that such railcars are delivered to Seller or
Sellers agent and the time that custody thereof is properly returned to Buyer (or to Buyers agent
carrier, if applicable), except for that portion of any such liabilities that rise out of Buyers
contributing negligent acts or negligent omissions. Any injury or death to person(s) or damage to
property as hereinbefore described shall be reported to Buyer by Seller immediately upon the
occurrence thereof, and confirmed in writing as soon as possible.
Section 4.
If, during any calendar month(s), Buyer and Seller mutually agree to
deliver all or any portion of the scheduled quantity obligation of Specification A coal FOB barge
rather than FOB rail, Seller shall load such Specification A coal into Buyer-provided barges.
Seller shall load all Specification A coal to be delivered hereunder into Buyer-provided barges
at the approved barge shipping origin(s) (hereinafter the approved barge shipping origin) as
described on Exhibit 1, attached hereto and hereby made a part hereof, at which time delivery and
title for coal conforming to this Agreement shall pass to Buyer. Such barge shipments shall be
tendered by Seller loaded to each barges normal draft capacity (each such barge of coal
hereinafter referred to as bargeload lot) unless otherwise directed by Buyer or its agents.
The loading, switching, movement, and fleeting of barges between the time Buyer delivers the
barges and the time Buyer picks up the barges shall be at Sellers risk and expense.
7
Except for the movement between Anker Rail & River Terminal and Dippel Barge Facility, Seller
shall not move, nor permit the movement of, any barge(s) provided by Buyer, or its agent, to any
other location once the barge(s) are delivered at an approved barge shipping origin for loading,
unless otherwise agreed to by Buyer. The movement of any barge(s) requested by Seller and approved
by Buyer shall be arranged and directed by Buyer at Sellers expense.
In the event that an approved barge shipping origin is utilized by more than one supplier of
coal to Buyer, Buyer shall arrange for the allocation and placement of barges on a weekly basis in
response to the suppliers reasonable requests. Barge requests are to be made by Seller under this
Agreement so as to provide for approximately equal weekly shipments in fulfillment of Sellers
monthly quantity obligation hereunder.
Seller shall not have the right to ship coal to be delivered under this Agreement from any
barge shipping origin other than the approved barge shipping origin(s) unless Seller shall first
have obtained Buyers written approval of such proposed shipping origin. Such written approval
shall not be unreasonably withheld and shall further be conditioned upon Sellers agreement to pay
any increase in barging and/or handling costs that would be incurred by Buyer for shipments made
from the proposed shipping origin as compared to the Alloy Dock at Milepost 89.7 on the Kanawha
River.
(a) It shall be Sellers obligation to provide adequate dock and harbor facilities at the
approved barge shipping origin(s), to load barges in accord to Buyers or its agents request, and
to dispatch and otherwise comply with reasonable requirements of Buyer or its agents barging and
operating schedule.
8
Seller shall indemnify, save harmless, and defend Buyer, its agents, and its affiliates (all
referred to in this sentence as Buyer) from and against any liabilities, expenses, claims, and
all other obligations whatsoever, including without limitation, all judgments rendered against and
all fines and penalties imposed upon Buyer (whether severally, or in combination with others) and
any reasonable attorneys fees and any other costs of litigation (all of which are hereinafter
referred to as liabilities) arising out of injuries or death to any person(s), or damage to any
property, caused by or related to, in whole or in part, the barges furnished hereunder, between the
time that such barges are delivered to Seller or Sellers agent and the time that custody thereof
is properly returned to Buyer (or to Buyers agent carrier, if applicable), except for that portion
of any such liabilities that arise out of Buyers contributing negligent acts or negligent
omissions. Any injury or death to person(s) or damage to property as hereinbefore described shall
be reported to Buyer by Seller immediately upon the occurrence thereof, and confirmed in writing as
soon as possible.
(b) Seller shall be responsible for all loss of, or damage to, any barge provided hereunder
and for the loss of any coal in said barge (other than damage or loss due to normal wear and tear,
latent or patent defects in the barge existing at the time of delivery) occurring after such barge
has been delivered to Seller at the approved barge shipping origin and while in the custody,
control, and possession of Seller. Seller shall reimburse Buyer for the cost to Buyer of repairing
or replacing any such barge in an amount not to exceed its replacement value at the time of its
loss or damage. Said replacement value shall be defined as the remaining year of life of said
barge, divided by the expected life of said barge when new, and multiplied by the current market
value of a new barge having similar design and capacity at the time of loss or damage. A barge
shall be deemed to have been delivered to Seller and be in Sellers custody, control, and
9
possession, when it has been secured by or on behalf of Buyer or its agent at an approved
barge shipping origin to await loading and shall be deemed to be picked up when untied for pick up
by or on behalf of Buyer from such approved barge shipping origin.
Seller shall have the right, but not the duty, to refuse to load any barges which Seller
considers unseaworthy or contain an excessive amount of residual coal or extraneous material or are
otherwise in unserviceable condition upon delivery to Seller. In such event, Seller shall promptly
notify Buyer.
(c) Seller shall be allowed three (3) free loading days for the loading of each barge
delivered by Buyer to an approved barge shipping origin. A loading day shall commence at 7:00 AM
of a calendar day and end at 7:00 AM the next calendar day. The first free loading day shall
commence at the later of 7:00 AM of a calendar day immediately following the delivery of said
barge, or 7:00 AM on the delivery date of the barge for loading specified in Sellers notice.
(d) The three (3) free loading days for a barge delivered shall end seventy-two (72)
consecutive hours after they commenced. Actual loading days for a barge shall commence
concurrently with the commencement of the three (3) free loading days and shall continue until the
barge has been loaded and Buyer has been advised that the barge is loaded and available at the
approved barge shipping origin for pick up by Buyer or its agent.
(e) Seller shall maintain a demurrage account in which debits and credits for the loading of
barges shall be recorded. One credit for each barge delivered to be loaded with coal shall be
recorded in the demurrage account for each loading day for which the actual loading time for the
barge is less than the free loading days for the barge set forth above, and one debit for each
barge delivered to be loaded with coal shall be recorded in the demurrage account for each loading
day, or part of a loading day, for which the actual loading time for the barge is
10
greater than the free loading days provided above for loading the barge, and for each
demurrage day accrued for each barge in a bargeload shipment rejected by Buyer as hereinafter
provided.
(f) At the end of each calendar quarter throughout the term of this Agreement, the demurrage
account shall be balanced and settled as follows: Credits in the demurrage account shall be used
to cancel debits in the demurrage account with one credit canceling one debit. Seller shall pay to
Buyer the daily barge demurrage rate of $100.00 (which amount shall be adjusted in an amount
proportional to the adjustments to the Base Price under Article VI hereof), for each debit in a
demurrage account not so cancelled. There shall not be a payment for credits in the demurrage
account. Excess credits in a demurrage account accumulated during each calendar quarter which
remain unused following the balancing and settlement of the demurrage account shall be cancelled.
(g) Should Buyer, in accordance with the terms of Article III of this Agreement, reject any
bargeload lot(s) as provided for herein, Seller shall pay all barge transportation cost(s)
associated with the shipment of such rejected bargeload lot(s), including the daily barge demurrage
rate effective as of the first 7:00 AM following Buyers rejection and all other costs incurred by
Buyer with respect to said shipment(s) from the time said bargeload lot(s) is (are) rejected until
the barge(s) is (are) unloaded at a location designated by Seller and subsequently transported to a
destination specified by Buyer for further utilization.
Section 5.
The coal to be delivered hereunder shall be properly consigned by Seller
(Rail Freight Collect if shipped by rail) for rail or barge delivery to Buyers designated
destination (also referred to in this Agreement as Plant). Buyer shall notify Seller of the
designated destination of shipments, and Seller, at its own risk and expense, shall have the right
to have an observer present at the unloading of such shipments.
11
Section 6.
For each unit train or bargeload lot shipment of coal hereunder, Seller,
within twenty-four (24) hours of the completion of loading of such shipment, shall provide via
computer or telecopier (actual method specified by Buyer) to the applicable consigned destination,
and to Buyer, a shipping notice showing unit train and railcar number(s) or barge number(s),
estimated weight of the coal in each railcar or barge, shipping date, the rail shipping origin or
the barge shipping origin from which shipment was consigned.
Section 7.
Seller shall sample and analyze the coal as it is loaded into each unit
train or bargeload (lot(s) and notify Buyer, by telecopy, and/or Telex of the type of coal being
shipped (i.e., Specification A) and the short proximate (calorific value per pound, percent
moisture, percent ash, and percent sulfur) average analytical results of each unit train lot
shipment or bargeload lot shipment, including the identifying number of the railcars or barges
comprising such lot, within one (1) business day after the coal is loaded into the unit train or
bargeload lot for delivery.
ARTICLE III
SPECIFICATIONS, QUALITY & WEIGHT
Section 1.
The coal to be delivered hereunder shall be produced at approved
production source(s) as defined in Exhibit 1. Seller shall have no right to deliver coal under
this Agreement from any other production source without Buyers written consent that Seller may do
so, which consent shall not be unreasonably withheld.
In the event that Seller desires to supply coal from any other production source, Seller shall
notify Buyer in writing of such proposed new source, documenting as follows: location of mineral
tract(s); status of all legal interests in such tract(s); coal seam(s) designation (by tract[s]);
typical proximate analysis from such seam(s); typical ultimate analysis from such seam(s); typical
ash mineral analysis from such seam(s); trace element analysis from such
12
seam(s); analysis of fusion temperatures, both in oxidizing and reducing atmospheres, from
such seam(s); an analysis of the sulfur forms from such seam(s); an analysis of Hardgrove
grindability for such seam(s); and any other pertinent information requested by Buyer.
Seller shall not have the right to ship coal under this Agreement from any such proposed new
production source except upon Buyers written approval of Sellers request pursuant to the
preceding paragraph, which shall be based upon Buyers reasonable determination of the suitability
of such proposed source for Buyers purposes hereunder. Buyer shall require prior to its approval
that: (i) the coal would meet the requirements of Article III, Section 2 and the Contracted
specifications of Article III, Section 3 of this Agreement; (ii) none of the aforementioned
analyses (proximate, ultimate, ash mineral, trace element, fusion temperatures, sulfur forms, or
grindability) differ in material respect from the coal from production sources initially approved
in Exhibit 1; (iii) Seller owns or controls the reserves from which such coal would be produced;
(iv) the reserves of coal are located in the state of West Virginia; and (v) the supplying of such
coal shall not result in a higher delivered price (¢/MMBtu) to Buyer than the coal shipped from the
Harris loadout (OPSL No. 65289).
In the event that Buyer gives written approval for such new source, subsequent shipments from
such source shall be subject to this Agreement in all respects.
Section 2.
The coal to be delivered hereunder shall have a maximum top size of two
inches (2), and shall be free flowing and free of extraneous material upon uploading at Buyers
Plant.
Section 3.
The coal from each respective approved rail shipping origin based upon the
applicable analyses obtained pursuant to Article VIII, shall meet the following Contracted
specifications under the table entitled
SPECIFICATION A
on a Contract Half-Month basis
13
(except for lbs. SO
2
/MMBtu on both a Contracted and Suspension Half-Month weighted
average basis, and for Volatile Matter on a Contracted Half-Month weighted average basis, which
shall be additionally based on the combined weighted average of all shipping origins for
Specification A coal as further provided for in footnote ***). Further, for the purposes of this
Article, the following Suspension specifications under the table
SPECIFICATION A
shall
also be applicable to the coal from each such respective origin on the indicated bases.
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SPECIFICATION A
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As-Received Basis
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Contracted
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Suspension Basis
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Half-Month
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Half-Month
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Applicable Lot
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Wtd. Avg.
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Wtd. Avg. (A)*
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Wtd. Avg. (B)*
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Minimum
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Maximum
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Minimum
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Maximum
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Caloric Value (Btu/lb.)
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12,300
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12,000
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N/A
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11,800
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N/A
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Moisture (%)
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8.0
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N/A
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9.0
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N/A
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10.0
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Ash (%)
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13.0
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N/A
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14.0
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N/A
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15.0
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**Ash Loading
(lbs. Ash/MMBtu)
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11.0
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N/A
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12.0
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N/A
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13.0
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Volatile Matter (%)
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³
30.0
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***
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N/A
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N/A
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27.0
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N/A
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Hardgrove Grindability
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³
44.0
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N/A
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N/A
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(c)
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*
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N/A
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Sulfur (%)
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N/A
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0.7
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N/A
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N/A
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N/A
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**Sulfur Dioxide
(lbs. SO
2
/MMBtu)
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£
1.45
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***
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N/A
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1.45
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***
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N/A
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1.50
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Ash Fusion Temp.
(H=1/2W)
°
F, Red. Ats.
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³
2700
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N/A
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N/A
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2650
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N/A
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*
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Definitions:
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(A)=
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the half-month weighted average analysis result (as determined under Article
IV).
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(B)=
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the analysis result of the sample (or composite of samples,
if more than one) representing each unit train of coal.
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(C)=
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the suspension specification for grindability shall be no
less than X, where X = 12,300 times 44.0, divided by the actual weighted
average As-Received calorific value for such period.
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N/A: Not applicable.
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**
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For the purpose of determining the pounds of sulfur dioxide per
million Btu and pounds ash per million Btu, the figures shall be rounded to the
nearest one hundredth. For example, 1.604 pounds SO
2
per million
Btu shall mean 1.60 pounds SO
2
per million Btu, while 1.605 pounds
SO
2
per million Btu shall mean 1.61 pounds SO
2
per
million Btu and shall be deemed, for example, not to have met a 1.60 pounds
SO
2
per million Btu specification.
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***
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The Half-Month weighted average SO
2
from each
approved rail shipping origin (except as hereafter provided) and collectively
from all approved shipping origins shall not exceed a maximum 1.45 pounds
SO
2/
MMBtu effective May 1, 2001 and thereafter. Additionally, the
maximum Contracted and Suspension Basis Half-Month weighted
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14
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average for sulfer dioxide (1bs. SO
2/
MMBtu) shall be 1.50 lbs.
effective September 1, 1999 and thereafter for coal shipped from each of the
following rail shipping origins: the Harris Mine, Rocklick Complex, and the
Wells Complex. The Contracted Half-Month weighted average volatile matter
from all approved rail shipping origins shall be greater than or equal to
30.0%. Additionally, the Contracted Half-Month weighted average for
volatile matter shall be 27.0% (minimum) for coal shipped from the Harris
Mine rail shipping origin.
|
Section 4.
In addition to all other remedies at law or in equity, except as
specifically limited elsewhere in this Agreement, and in addition to the price adjustments provided
for in Article VII, Buyer shall have the following rights and remedies upon Sellers failure to
conform with the requirements as set forth in Sections 1, 2, and 3 of this Article and/or Article
II, Section 1.
(a) Buyer shall have the right to reject any shipment if the coal in such shipment fails to
conform to any requirement set forth in Article III, Sections 1 or 2. Buyer shall also have the
right to reject a shipment if the coal in such shipment fails to conform to any requirement set
forth in Article III, Section 3, applicable to said shipment. Should Buyer elect to exercise such
right of rejection, it shall notify Seller of its election, such notification to be promptly
confirmed in writing.
(b) Buyer shall have the right to suspend further shipments of coal hereunder from any
approved shipping origin(s) in the event the coal quality from such shipping origin(s) fails to
meet the defined minimum or exceeds the defined maximum Suspension specifications as set forth in
Section 3 of this Article, or if the coal fails to conform to any requirement set forth in Sections
1 or 2 of this Article and/or Article II, Section 1. Should Buyer exercise such right to suspend
further shipments, Buyer shall notify Seller in writing within twenty (20) calendar days after the
day or half-month period in which such failure occurs.
15
(c) Upon receipt of Buyers notice of suspension, Seller shall suspend further shipments from
such shipping origin(s) and make every reasonable effort to correct the conditions giving rise to
the shipment(s) of coal failing to conform to specifications. Seller shall inform Buyer in writing
on a weekly basis of such corrective actions taken by Seller.
During such suspension, Seller shall, upon prior notice and subject to Sellers reasonable
safety requirements, permit Buyers full access to the mine(s) designated in Exhibit 1, and to all
relevant engineering data and facilities related to such shipping origin(s). Buyer shall have the
right, but not the duty, to participate in discussions relating to the matter and to recommend
procedures to correct said matter.
Such suspension shall continue until Seller provides buyer with assurances in writing that are
acceptable to Buyer (such acceptance not to be unreasonably withheld) stating that the conditions
causing shipment of nonconforming coal have been corrected and that Seller can and shall deliver
coal meeting Article III, Sections 1 and 2 and Article II, Section 1 requirements and meeting all
of the applicable specifications of Article III, Section 3.
Upon receipt by Buyer of Sellers satisfactory written assurances, shipments shall be resumed
at the rate specified in Article II.
(d) In the event that: (i) Seller fails to provide Buyer with satisfactory assurances within
thirty (30) days after the date of Buyers notice of suspension as described in Article III,
Section 4(b); or (ii) having provided such assurances, Seller fails to correct such conditions and
resume shipments in the ensuing thirty (30) days thereafter; or (iii) after such resumption of
shipments, Sellers subsequent deliveries from the suspended shipping origin(s) at any time during
the ensuing sixty (60) days fall below the minimum or exceed the maximum applicable Suspension
specifications in Article III, Section 3, or fail to conform to the requirements of
16
Article III, Sections 1 and 2, and Article II, Section 1; then Buyer shall have the right to
hold Seller in anticipatory breach of this Agreement and enforce any and all claims for past,
present, and future damages incurred or to be incurred by reason of such breach, subject to the
limitation of consequential damages as specified in Article XVIII, Section 2.
(e) Whether shipments suspended pursuant to Article III, Section 4(b) hereof shall be made up
shall be subject to Buyers sole discretion, subject to a mutually agreeable schedule so that such
make up tonnage shall be shipped no later than 365 calendar days following the date of the
resumption of deliveries after such suspension.
(f) Seller shall, at all times, exercise reasonable care and diligence in its efforts to ship
to Buyer coal which conforms to the Contracted specifications of Section 3 of this Article III.
Section 5.
The weight of the coal delivered pursuant to this Agreement shall be
determined by Buyer at its expense. For rail deliveries, the accuracy of scale(s) shall be
maintained between
+
0.20 percent. Scale(s) shall be calibrated at least once every six (6)
months in accordance with the guidelines established by the national Institute of Standards and
Technology Handbook #44. Such calibrations shall be performed by a party, mutually agreeable to
Buyer and Seller, in accordance with the aforementioned guidelines. For barge deliveries, conveyor
belt scales at the barge unloading facility(ies) shall be calibrated once each month to maintain
them to within
+
0.50 percent accuracy. The testing and calibration of such conveyor belt
shall be accomplished in accordance with the guidelines outlined in the National Institute of
Standard and Technology Handbook #44, or other procedures which shall be mutually acceptable to
Seller and Buyer. At Sellers request, which Seller may make from time to time,
17
Buyer shall inform Seller of the result of such testing and calibration. It shall be the
responsibility of Buyer to arrange and schedule scale calibrations when required.
Buyer shall give prompt notice by telephone or telegram and confirm such notice in writing to
Seller if and when any scales are discovered to be in error beyond the limits established above.
During any period when such scales are inoperable, determination of the quantities of coal
delivered shall be made by a procedure to be established by agreement of Buyer and Seller. Seller
shall have the right, but not the duty, to have a representative present at any and all times to
observe the determination of weights and/or recalibration or testing of scales; however, Buyer
shall not be obligated to notify Seller to be present. If Seller should at any time question the
accuracy of the weights thus determined, Seller shall so advise Buyer and confirm the same in
writing. Buyer shall arrange to test the scales and shall give written notice to Seller of the
date of such test so that Seller may have a representative present. If such test shows the scales
to be in error, they shall be adjusted to the required accuracy established above. If such test
requested by Seller shows the scales to be within the applicable limits established above for the
respective scale, then Seller shall pay all costs of such test, otherwise Buyer shall pay all such
cost.
If, upon testing pursuant to the above paragraph, the scales are determined to be in error
beyond the limits established above, an adjustment of the payment to Seller shall be made based on
the assumption that the condition causing the scales to be in error beyond such limits shall have
existed with respect to all coal unloaded on and after thirty (30) calendar days prior to Sellers
notification to Buyer that Seller questions the accuracy of the weights, or the date of the
previous scale calibration, whichever is later. Such adjustments shall be in an amount equal to
the difference in the weights as specified in the applicable invoices and the weights that would
18
have been obtained had the scales not been inaccurate, multiplied by the price per ton as
stated in said invoices.
If, upon any regular calibration of the scales, the scales are determined to be in error
beyond the limits established above, an adjustment shall be made in the same manner provided in the
preceding paragraph, such adjustment to be based on the assumption that the condition causing the
scales to be in error beyond such limits shall have existed with respect to all shipments weighed
on and after a date thirty (30) calendar days prior to such determination, or the date of the
previous scale calibration, whichever is later.
Any payments due by either party to the other, as a result of adjustments made pursuant to
this Article III, Section 5, shall be paid within thirty (30) calendar days from the date of the
determination thereof.
ARTICLE IV
PAYMENT
Buyer shall pay Seller by wire transfer (recipient account per Sellers advice) in United
States Funds for all coal received, unloaded, taken into account, and accepted hereunder.
Buyer shall submit to Seller the weight, analytical, and pricing data on such coal taken into
account and accepted during each half-month within five (5) working days after each such
half-month. Thereafter, Seller shall mail to Buyer, within two (2) working days of receipt of such
information, an invoice (referencing the contract number designated by Buyer), in triplicate,
covering such half-month unloadings.
Buyer shall make payment to Seller within twenty (20) calendar days after the close of such
half-month, provided Sellers invoice is submitted in accordance with the preceding paragraph.
19
For the purpose of this Agreement, month shall mean a calendar month and half-month shall
mean either the first fifteen (15) calendar days of a month or the calendar days in a month after
the fifteenth (15
th
) calendar day thereof, as the case may be.
ARTICLE V
PRICE
For coal accepted hereunder, the FOB railcar or FOB barge price for all approved shipping
origins to be paid to Seller by Buyer (hereinafter Selling Price) for each ton thereof shall be
the then applicable Base Price (as determined under Article VI) plus or minus such other charges or
credits to the Base Price as determined pursuant to Article VII, and Article II, Section 3, if
applicable.
ARTICLE VI
BASE PRICE & BASE PRICE ADJUSTMENTS
Section 1.
The initial Base Price shall be $45.00 per ton, effective November 1, 2007.
Such Base Price shall be subject to adjustments in accordance with the provisions hereinafter set
forth in this Article VI.
Section 2.
The Base Price shall be redetermined, to the nearest tenth of a cent by the
methods prescribed in Section 3 of this Article. The Base Price as so adjusted shall be the Base
Price applicable to any coal shipped on and after the effective date of any such adjustment and
shall remain in effect until the Base Price is again adjusted pursuant to this Article.
Section 3.
Adjustable Components.
(a) [Intentionally blank]
(b)
Assessments Components
. The Assessments Component shall be adjusted effective on
the first day of the next half-month following the effective date of any change occurring after
November 1, 2007 (except when such change is effective on the first day of a
20
month in which case the Assessments Component shall be adjusted as of such date) in the
assessment to Seller for Federal Reclamation Fee, Federal Black Lung Excise Tax, West Virginia
Special Reclamation Tax, and West Virginia Mines and Minerals Operations Fund Tax, as further
defined in this Section 3(b). Such amounts shall be adjusted for any related tax credits allowed
Seller. For the purposes of calculating price adjustments under this Section 3(b), all adjustments
shall be deemed to be based on those assessments applicable to underground mining.
The initial amounts of the Federal Reclamation Fee and the Federal Black Lung Excise Tax as shown
in Section 4 below are net of a four percent (4%) deduction for moisture content in excess of
inherent moisture ($.135 $.005 = $.130 Federal Reclamation Fee, and $1.100 $0.044 = $1.056
Federal Black Lung Excise Tax). In the event of an adjustment to the base amounts of $0.150 per
ton and $1.100 per ton for the Federal Reclamation Fee and the Federal Black Lung Excise Tax
respectively, the adjusted amounts pursuant to this Section 3(b) shall reflect said four percent
(4%) deduction for moisture content in excess of inherent moisture. Said four percent (4%)
deduction shall be fixed and firm for the term of this Agreement.
(c)
Changes in Law
. Seller hereby certifies that to the best of its knowledge the
approved production source(s) are in good faith compliance with the rules, practices, and standards
issued by any governmental agency with respect to legislation, regulations, rules, or mandates
which were in effect either by interim or final rules, or passed, adopted, or promulgated but to go
into later effect, as of November 1, 2007.
(i) In the event of the enactment, modification, revision, or changes in the interpretation as
set forth in a legally enforceable written policy memorandum from the applicable governmental
entity or decision by a court of competent jurisdiction of any federal, state or local legislation,
regulations, rules, or mandates issued pursuant thereto, including but
21
not limited to the Federal Mine Safety & Health Act of 1977 and the Surface Mining Control and
Reclamation Act of 1977, after November 1, 2007, which affect the bituminous coal industry with
respect to reclamation; conservation; environmental protection; mine safety; mine working
conditions and practices; ventilation; health; occupational hazards; research, reclamation, and
conservation of mined area; or other aspects of coal production, and which increases or decreases
Sellers cost of producing coal under this Agreement, an equitable adjustment will be made to the
current Base Price to recognize such changed cost; provided, however, there shall be no changes
made in the Base Price hereunder for changed costs related to labor related benefits or taxes, real
or personal property taxes, corporate net income and franchise taxes, Federal Reclamation Fee,
Federal Black Lung Excise Tax, West Virginia Special Reclamation Tax, and West Virginia Mines and
Minerals Operations Fund Tax, inasmuch as the exclusive adjustments for such items are provided for
in Subsection (a) and (b) hereof, (should any such item listed for exclusion become known by a
different name, or should a new tax or assessment be levied for the same purpose(s), there shall
likewise be no change under this Subsection (c) for any such item).
Buyer shall have the right, but not the obligation, to terminate this Agreement should any
such adjustment cause the Base Price to be increased by more than twenty-five percent (25%) of its
then current amount or should the total of all such adjustments under this Section 3(c) cause the
Base Price to be increased by more than fifty percent (50%) of its initial amount as of November 1,
2007. Should Buyer terminate the Agreement as provided in the prior sentence, Seller may nullify
such termination by giving written notice to Buyer within ten (10) calendar days after receiving
Buyers notice of such termination that Seller permanently waives its right to the amount of such
adjustment which is in excess of any such limits, as applicable.
22
If any of the foregoing governmental actions cause Seller to incur any increase in costs as
hereinbefore described, then Seller shall consider and, if in its good faith judgment determines it
is warranted (as further defined), contest or appeal the legal basis of such actions and/or its
application to Seller, with the objective of mitigating any resulting increase in the Base Price
under this Article. Seller shall consult with Buyer in conjunction with making such determination,
which shall be based upon, by way of illustration but not of limitation, the likelihood of
prevailing in such action and by the economic impact, absent such contest or appeal, upon such Base
Price.
Seller shall notify Buyer in the event of any governmental action applicable under this
Article and shall submit detailed documentation to allow determination of any such adjustment.
Notwithstanding Article XI, Section 3, if Seller and Buyer are unable to agree within ninety (90)
days of receipt by Buyer of Sellers documentation as to the amount the price per ton should be
adjusted or as to whether the event is applicable, then the matter shall be submitted to a firm of
mining engineers and/or independent certified public accountants mutually agreeable to the parties
for final determination, which shall be binding upon the parties. The costs associated with any
such mining engineers and/or certified public accountants review shall be shared equally by the
Buyer and Seller.
If upon agreement or final determination, an adjustment in the cost per ton is found to be
appropriate, appropriate credit for such amount on all tons shipped and accepted on and after the
effective date of any such change resulting in such price adjustment, plus interest computed on the
basis of the prime rate in effect at Citibank, N.A., commencing sixty (60) days after the effective
date of such change, shall be made to the party to whom the benefit of such credit is due;
provided, however, that Seller shall not be entitled to any such credit for such tonnage
23
delivered prior to the date upon which Sellers written request for such adjustment is
received by Buyer, nor for interest for a period of sixty (60) days subsequent to such date of
Buyers receipt.
(ii) If Buyer elects to terminate this Agreement under the provisions of this Article VI,
Section 3(c), then neither party shall have, after the effective date of such termination, any
further obligation under this Agreement; provided, however, that such termination shall not affect
any rights or obligations of Buyer or Seller existing under this Agreement for coal shipped or
required to be shipped prior to the effective date of said termination.
(d)
West Virginia Severance Tax Component
. The Base Price includes a component for
West Virginia Severance Tax in the amount of five percent (5.00%) of the Base Price. Any time
there is a change in any of the Base Price Components or a change in the Severance Tax rate, a new
Severance Tax Component shall be calculated in accordance with the formula set forth in Exhibit 2,
attached hereto and hereby made a part hereof. Such components shall be adjusted for any related
tax credits allowed Seller.
Section 4.
The amount of the initial Base Price allocated to each Component thereof,
and the method to be used for the adjustment of each such Component, are as follows:
24
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|
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|
|
|
|
|
|
Initial Amount
|
|
|
Component
|
|
Per Ton of Base Price
|
|
Comments
|
Unadjusted Fixed Portion
|
|
|
41.621
|
|
|
|
Assessments
|
|
|
|
|
|
|
a. Federal
Reclamation Fee
|
|
|
.130
|
|
|
Shall be adjusted pursuant to Article
VI, Section3(b)
|
b. Federal Black
Lung Excise Tax
|
|
|
1.056
|
|
|
|
c. WV Special
Reclamation Tax
|
|
|
.030
|
|
|
|
d. WV Mines and
Minerals
Operations Fund
Tax
|
|
|
.020
|
|
|
|
Changes in Law
|
|
|
0.000
|
|
|
Shall be adjusted
pursuant to Article
VI, Section3(c)
|
WV Severance Tax
|
|
|
2.143
|
|
|
Shall be adjusted
pursuant to Article
VI, Section 3(d)
|
INITIAL FOB BASE PRICE
|
|
$
|
45.000
|
|
|
|
ARTICLE VII
ADJUSTMENT OF PRICE FOR QUALITY
In order for the Selling Price to accommodate variations in calorific value and the sulfur
dioxide value of the coal delivered hereunder, there shall be an amount added to or subtracted from
the Base Price as provided in this Article.
25
Section 1.
If the weighted average calorific value of the Specification A coal
received at each respective consigned destination during the half-month period is greater than the
applicable Contracted half-month weighted average specification (Guaranteed) Btu per pound,
then there shall be an amount added to the Base Price, as determined by the following formula, to
arrive at the Selling Price for such coal:
|
|
|
|
|
Amount Per Ton of
Increase for
Caloric Value
|
=
|
(Actual Btu Guaranteed
Btu) x .73
(Guaranteed Btu)
|
x
|
Base
Price Redetermined
Pursuant to Article
VI
|
provided, however, that no premium shall be paid for the increment, if any, by which the calorific
value of such coal exceeds the Guaranteed Btu by 1000 Btu per pound.
Section 2.
If the weighted average calorific value of the Specification A coal
received at each respective consigned destination during the half-month period is less than the
Guaranteed Btu per pound, then there shall be an amount subtracted from the Base Price, as
determined by the following formula, to arrive at the Selling Price for such coal:
|
|
|
|
|
Amount Per Ton of
Decrease for
Caloric Value
|
=
|
(Guaranteed Btu Actual
Btu)
(Guaranteed Btu)
|
x
|
Base Price
Redetermined
Pursuant to Article
VI
|
Section 3.
An initial amount of three dollars ($3.00) per ton, subject to adjustment
of such initial amount as provided herein, shall be deducted from the Base Price to arrive at the
Selling Price for each unit train lot or bargeload lot (or a composite of two (2) or more bargeload
lots) of coal shipped having a sulfur dioxide (SO
2
) value greater than the maximum
SO
2
26
Applicable Lot Suspension specification applicable under Article III, Section 3. This
deduction shall be in addition to the Btu quality adjustment as provided in Sections 1 and 2 of
this Article and to Buyers other remedies as provided in Article III of this Agreement.
At any time such shipments occur, the percentage change (carried out four decimal places, e.g.,
6.124% shall be 0.0612) between the initial Base Price and the adjusted Base Price applicable to
such coal shall be multiplied by three dollars ($3.00) and the amount obtained (rounded to the
nearest tenth of a cent) shall be added to or subtracted from, as the case may be, the three
dollars ($3.00) in lieu of any such previous adjustment thereto and the amount thus obtained shall
be the applicable Selling Price deduction for SO
2
quality of such coal.
Section 4.
[Intentionally blank]
Section 5.
In addition to the foregoing provisions of this Article, if the combined
weighted average sulfur dioxide per million Btu value of Specification A coal received at the
consigned destination from all approved shipping origins during a half-month period is more than
1.20 lbs. per million Btu, then there shall be an amount subtracted from the Base Price as
determined by the following formula, to arrive at the Selling Price for such coal:
|
|
|
|
|
Amount Per Ton
of Decrease for
Excess SO
2
Value
|
=
|
Actual lbs.
SO
2
/Btu
1.20 lbs.
SO
2
/Btu
X 0.150 X
|
|
Base Price Redetermined
Pursuant to Article VI
|
ARTICLE VIII
SAMPLING AND ANALYSES
Section 1.
All coal delivered hereunder shall be sampled by Buyer using a mechanical
sampling system before it is commingled with other coal and approximately at the time it is
weighed. The sampling party shall determine, by proper analyses made in its laboratory
27
and at its expense, the as-received quality and characteristics of the coal. The sampling
and analyses shall be performed in accordance with methods approved by the American Society for
Testing and Materials (ASTM), or such other method as may be mutually acceptable. Except as
otherwise provided in this Article, the results of the sampling and analyses by the sampling party
shall be accepted as the quality and characteristics of the coal delivered hereunder.
Section 2.
Seller shall have the right to have a representative present at any and all
times to observe the sampling and to receive a split of the resultant laboratory pulp when sampling
is being performed pursuant to Section 1 above, and Seller may also analyze the coal either from
its own samples or from samples taken by Buyer. Buyer shall retain the remaining portion of the
laboratory pulp of each coal sample until the twentieth (20
th
) day following the
calendar half-month in which the applicable lot of coal represented by such sample was unloaded at
the Plant so that Seller (and/or a commercial laboratory employed by Seller) may obtain and analyze
a portion of such laboratory pulp. Sellers analytical results obtained from such pulp portion,
however, shall not be relevant for any purpose under the Agreement.
Section 3.
The results of the sampling and analyses by Buyer shall be accepted as the
quality and characteristics of the coal delivered hereunder at each respective consigned
destination; provided, however, that if Seller should at any time question the correctness of
either the sampling or the analyses made by Buyer, Seller shall have the right to have up to two
(2) unit trains of coal or up to six (6) bargeload lot(s) of coal hereunder individually sampled
and analyzed by a commercial testing laboratory, mutually chose, and using mutually acceptable
procedures. The results of such commercial testing laboratorys sampling and analyses shall be
accepted as the quality and characteristics of such coal. If the average of one or more of the coal
quality parameter values of the gross samples separately collected and analyzed by the
28
commercial testing laboratory differ by more than the ASTM (or other mutually agreed
methodology) reproducibility tolerance ranges for such respective coal quality parameter, when
compared to the average values of the gross samples separately collected and analyzed by the Buyer
when both sets of samples have been taken from the same delivery of coal, then Buyer shall pay such
charges of such commercial testing laboratory, otherwise Seller shall pay such charges.
Section 4.
Unless Seller challenges, pursuant to Section 3 of this Article, the
accuracy of either the sampling or analyses made by Buyer by written notice to Buyer within thirty
(3) calendar days after receipt of Buyers notice of such analytical results, Seller shall be
deemed to have waived all claims with respect to such sampling and analyses.
Section 5.
Coal received, unloaded, and taken into account that is not sampled but not
analyzed for reasons beyond Buyers control shall be taken into account as follows: If during any
half-month at least seventy-five (75) percent (by weight) of coal delivered from an approved
shipping origin at a respective consigned destination during such period has been sampled and
analyzed, then the weighted average analytical results of such samples shall be applicable to all
coal delivered from such shipping origin to such consigned destination during such half-month
period. If at least seventy-five (75) percent (by weight) of coal delivered from an approved
shipping origin at a consigned destination during any such half-month period has not been sampled
and analyzed, then the weighted average analytical results of the portion of sampled and analyzed
coal shall apply to such portion, and the weighted average analytical result of the last preceding
four (4) half-months in which at least seventy-five (75) percent (by weight) of the coal delivered
from such shipping origin to such consigned destination was sampled and analyzed
29
shall be applicable to such portion of the coal delivered from such shipping origin which was
not sampled and/or was not analyzed for such half-month period.
ARTICLE IX
[Intentionally blank]
ARTICLE X
MAJOR TECHNOLOGICAL IMPROVEMENTS
The parties hereto recognize that major technological improvements during the term hereof in
mining, hauling, handling, or processing coal may provide Seller the opportunity to reduce its
costs of supplying coal hereunder. Seller agrees to consider the introduction of any such new
technology in mining, hauling, handling, or processing coal at the approved production sources and
shall implement such new technology if feasible. The Selling Price for all coal delivered from any
approved production source where any such new technology is introduced shall be reduced by fifty
percent (50%) of the difference between Sellers normal production, hauling, handling, and
processing costs per ton without such new technology and such production, hauling, handling, and
processing costs per ton subsequent to the implementation of such new technology, including
depreciation of any related capital expenditures(s), amortization of any costs related to
installation of such new technology, and a rate of return on such expenditures and costs at the
then existing prime rate of Citibank, N.A., prorated over the normal useful life of any such
capital expenditure(s).
The Selling Price hereunder shall not be reduced pursuant to this Article X based on Sellers
use in the approved production sources of any technology, if such technology was generally
available for commercial use in the mining industry as of November 1, 2007.
30
ARTICLE XI
ADMINISTRATIVE PROGRAM
Section 1.
[Intentionally blank]
Section 2.
In the event that supervening events or circumstances shall render
inapplicable any of the methods set forth in Article VI for computing price adjustments hereunder,
the parties hereto shall meet promptly to consider and agree upon new and revised methods
appropriate to the circumstances then prevailing.
Section 3.
Seller and Buyer shall keep accurate up-to-date records and books of
account showing all costs, payments, price revisions, credits, debits, weights, analyses, and all
other data required of each of them for the purpose of administering this Agreement.
Each time the price is to be revised in accordance with Article VI and at any other reasonable
time upon ten (10) days notice from Buyer, Seller shall furnish to Buyer a detailed statement (a
claim) showing Sellers calculations of the price which should then be in effect under the
provisions of this Agreement.
Buyer shall make a preliminary review of the claim within a reasonable amount of time. Upon
completion of Buyers preliminary review, Buyer may submit to Seller a letter explaining the
differences, if any, in the price as shown on the claim and the price as determined by Buyers
preliminary review. Buyer shall then submit a letter agreement to Seller for its review and
countersignature to establish a tentative price adjustment. The price adjustment as agreed to in
the fully executed letter agreement, either a debit or credit, shall be processed using Buyers
normal payment procedures and, if necessary, a tentative retroactive adjustment shall be made by
payment to the party to whom such tentative adjustment is due.
From time to time, representatives of Buyer shall audit Sellers claim(s) and recommend final
price adjustments associated with such claim(s). Thereafter, Buyer shall submit a letter
31
agreement to Seller for its review and countersignature to establish a final price adjustment.
The price adjustment as agreed to in the fully executed letter agreement, either a debit or
credit, shall be processed using buyers normal payment procedures and, if necessary, a final
retroactive adjustment shall be made by payment to the party to whom such final adjustment is due.
Section 4.
Buyer and its designated representatives and/or agents including its
auditors, engineers, and geologists, shall at reasonable times, upon reasonable notice, have access
to the mine(s) producing coal under this Agreement; to all support facilities and to all records
pertaining to the coal reserves covered by this Agreement); to all records pertaining to
transportation costs, the determination of weights, and to any adjustments in price under this
Agreement; and to all records relating to the sampling and analytical determinations made pursuant
to Article VIII of this Agreement.
ARTICLE XII
FORCE MAJEURE
No party shall be subject to liability to the other party for the failure to perform in
conformity with this Agreement where such failure results from an event or occurrence beyond the
control of the party affected thereby (and, in regard to Sellers failure, is due solely to an
event or occurrence pertaining to the approved production source[s] making then current deliveries
to Buyer), such as without limitation, acts of God, war, insurrection, riots, nuclear disaster,
strikes, labor disputes, threats of violence, labor and material shortages, fires, explosions,
floods, river water levels or freeze-ups, breakdowns or damage to mines, plants, equipment or
facilities (including emergency outages or an extension of a scheduled outage of equipment or
facilities to make repairs to avoid breakdowns thereof or damage thereto), interruptions to or
slowdowns in transportation, railcar shortages, barge shortages, river lock outages, embargoes,
orders or acts of civil or military authority, laws, regulations, or
32
administrative rulings. The provisions of the above sentence shall not excuse a party from
performing unless such party shall give written notice to the other party and furnish full
information as to the cause of the force majeure event and probable extent thereof within thirty
(30) calendar days after such cause occurs. Failure to give such notice and furnish such
information within the time specified shall be deemed a waiver of all rights under this Article for
such period of time during which notice was not given. No suspension or reduction by reasons of
force majeure shall invalidate the remainder of this Agreement but, on the removal of the cause,
shipments shall resume at the specified rate. (During such periods when a force majeure event or
occurrence claimed by Seller results in a reduction in shipments, shipments from the affected
production source(s) for ultimate delivery under this Agreement shall not be reduced below the pro
rata share which the average rate of such shipments therefrom pursuant to this Agreement for the
six (6) months preceding the force majeure event bears to the total contractual commitments to all
parties from such production source(s) as of the date of the force majeure event.) Deficiencies in
shipments under this Article shall be made upon in accordance with a mutually agreeable schedule.
Delivery of make up tonnage shall be scheduled so that such deliveries shall be shipped no later
than 365 calendar days following the date of the termination of the force majeure event which gave
rise to the suspension or reduction of shipments to be made up; provided, however, that the
delivery rate for any make up tons shall not exceed twenty-five thousand (25,000) tons per month,
unless otherwise required by Buyer and agreed to by Seller.
Without limiting the generality of this Article, in the event of a partial or total
curtailment of the generating capacity at the Plant or partial or total curtailment of transmission
or distribution of electricity therefrom, or any other force majeure event pertaining to Buyer,
Buyer
33
shall be relieved under this Article from its obligation to accept any portion or all
deliveries form Seller based upon the quantity of Sellers coal scheduled for delivery under this
Agreement during the period over which such force majeure event or occurrence exists or existed.
Seller shall furnish Buyer a monthly statement by the fifteenth (15
th
) day of the
calendar month setting force the amount of tonnage not shipped because of force majeure causes
asserted during the preceding calendar month, and shall inform Buyer in writing on a weekly basis
during the duration of such force majeure event as to the progress of the alleviation thereof.
Nothing herein contained shall be construed as requiring Seller or Buyer to accede to any
demands of labor, or labor unions, or suppliers, or other parties which Seller or Buyer considers
unacceptable.
ARTICLE XIII
WARRANTIES AND DEDICATION
In addition to all other warranties and representations made by Seller in this Agreement,
Seller represents and warrants that (i) Seller has sufficient reserves of coal as defined in
Exhibit 1 to satisfy the quantity and quality provisions of this Agreement during the original term
hereof, including, but not limited to any elections of Buyer as to quantity under Article II,
Section 1; (ii) Seller is or will be, at the time specified for the first delivery of coal
hereunder, in good faith compliance with all laws and regulations regarding the mining and sale of
coal (notices and orders issued under the Federal Coal Mine Health and Safety Act and State and
Federal Reclamation Acts excepted); and (iii) Seller has filed or will have filed in a timely
manner to have obtained by said time all licenses, permits, certificates, and other documents
necessary for it to fulfill its obligations hereunder. Seller shall furnish, within thirty (30)
days of Buyers request, which Buyer may make from time to time and at any time, to Buyer a
statement
34
indicating the amount of reserves that remain to fulfill the quantity and quality requirements
of this Agreement.
Seller covenants that it will, and does hereby, dedicate to this Agreement such quantity of
said coal reserves and appurtenant facilities as is required for the full performance of Sellers
obligations hereunder during the original term (including Buyers options of quantity) and that
Seller will not sell nor contract to sell to others nor take for its own use coal from said
reserves in such quantity and quality as to jeopardize its ability to deliver the total quantity
and quality of coal called for by this Agreement. Nothing in this Article XIII shall be construed
as preventing Seller from mining and selling coal from said reserves to others nor from utilizing
said facilities provided Seller complies with the foregoing provisions with respect thereto.
ARTICLE XIV
BUYERS RIGHT TO MARKET COAL WITH ORIGIN WEIGHTS AND ANALYSES
Buyer reserves the right, at any time, and from time to time, at its sole discretion to sell
to any person, firm, or corporation whether or not associated or affiliated with Buyer any or all
coal purchased by Buyer under this Agreement where origin weights and analyses by Seller apply.
In the event of any such sales by Buyer, and Buyer does not sample, analyze, and weigh said
coal, Sellers analyses and weights shall govern for the purpose of payment to Seller, subject to
Buyers right, at Buyers sole risk and expense, to examine Sellers sample, analyses, and weight
records and to have representatives present when Seller performs the sampling, analyses, and
weighing; provided, that in the event that Buyer challenges in writing the accuracy of the
sampling, analyses, or weights of Seller, then buyer shall have all of the rights and obligations
of Seller pursuant to Article III, Section 5 and Article VIII of this Agreement, and Seller shall
have all of the rights and obligations of Buyer under such provisions.
35
ARTICLE XV
[Intentionally blank]
ARTICLE XVI
GOVERNMENT COMPLIANCE CERTIFICATE
Seller hereby agrees that it does, and for the term of this Agreement will, comply with the duties
of SELLER under the Government Contractor Compliance Certificate, attached hereto and hereby
made a part hereof marked Exhibit 3.
ARTICLE XVII
EMPLOYEE INTEREST
Seller represents to Buyer that Seller has not given and will not give, directly or
indirectly, anything of value to any employee or other representative of Buyer or its subsidiaries
or affiliates with the view of securing this Agreement or obtaining favorable treatment with
respect to the performance of this Agreement. If such representation is untrue, or becomes untrue,
Buyer shall have the right to terminate this Agreement, to sue for damages, and to take such other
action as may be provided by law. If Seller obtains knowledge at any time that any such employee
has a direct or indirect interest in Seller or its affiliates, it will immediately inform Buyer of
such fact.
ARTICLE XVIII
WAIVER AND LIMITATION OF DAMAGES
Section 1.
The failure of any party to insist in any one or more instances upon strict
performance of any of the provisions of this Agreement or to take advantage of any of its rights
hereunder shall not be construed as a future waiver of any such provisions or the relinquishment of
any such rights, but the same shall continue and remain in full force and effect for the term of
this Agreement.
36
Section 2.
Neither Seller nor Buyer shall be liable for any special, incidental, or
consequential damages which exceed, in the aggregate, twenty-five million dollars ($25,000,000.00)
for the entire term of this Agreement.
ARTICLE XIX
[Intentionally blank]
ARTICLE XX
[Intentionally blank]
ARTICLE XXI
CONFIDENTIALITY
The parties and their agents or representatives who, by this Agreement or otherwise, obtain
any documents or other information relative to this Agreement, shall, except for the acceptable
disclosure of information to other affiliated companies which shall also keep the same
confidential, keep confidential the terms and conditions of this Agreement, the transactions
provided for herein, and any such documents or other information unless readily ascertainable from
public information or sources, requested by a regulatory commission, or required by law to be
disclosed.
ARTICLE XXII
FINALITY
This Agreement is intended as the final, complete, and exclusive statement of the terms of the
Agreement between the parties. The parties agree that parol or extrinsic evidence may not be used
to vary or contradict the express terms of this Agreement. This Agreement shall not be amended or
modified and no waiver of any provision hereof shall be effective, unless set forth in a written
instrument authorized and executed with the same formality as this Agreement.
37
The titles of the articles and sections of this Agreement have been inserted as a matter of
convenience for reference only.
ARTICLE XXIII
GOVERNING LAW
This Agreement shall be construed, enforced, and performed in accordance with the laws of the
State of West Virginia.
38
EXHIBIT 1
Page 1 of 2
Revision Effective November 1, 1995
SELLERS PRODUCTION SOURCE(S), RESERVES OF COAL, APPROVED RAIL
SHIPPING ORIGIN(S), AND APPROVED BARGE SHIPPING ORIGIN(S)
The production source(s) and reserves of coal to which reference is made to
in Section 1 of Article III and in Article XIII, respectively, consist of the
following:
Sources and Reserves of Coal for Specification A Coal:
1)
|
|
Big Mountain Complex (as depicted on the map attached hereto and
hereby made a part hereof) extracting the reserves consisting of the
Kittanning, Coalburg, Stockton, Dorothy, Chilton, and Hernshaw seams of coal
in Boone County, West Virginia.
|
2)
|
|
Colony Bay Mine (as depicted on the map attached hereto and hereby
made a part hereof) extracting the reserves consisting of the Kittanning,
Coalburg, and Stockton seams of coal in Boone County, West Virginia.
|
3)
|
|
Rocklick Complex (as depicted on the map attached hereto and hereby
made a part hereof) extracting the reserves consisting of the Winifrede,
Hernshaw, and No. 2 Gas seams of coal in Boone County, West Virginia.
|
4)
|
|
Wells Complex (as depicted on the map attached hereto and hereby made
a part hereof) extracting the reserves consisting of the Powellton, No. 2
Gas, and Eagle seams of coal in Boone County, West Virginia.
|
5)
|
|
Harris Mine (as depicted on the map attached hereto and hereby made a
part hereof) extracting the reserves consisting of the Eagle and No. 2 Gas
seams of coal in Boone County, West Virginia.
|
6)
|
|
Robin Hood Complex (as depicted on the map attached hereto and hereby
made a part hereof) extracting the reserves consisting of the Dorothy,
Williamson, Chilton, and Kittanning seams of coal in Boone County, West
Virginia.
|
7)
|
|
NuEast Mine (as depicted on the map attached hereto and hereby made a
part hereof) extracting the reserves consisting of the Kittanning, Clarion,
Stockton, Coalburg, Winifred, No. 2 Gas, Powellton, and Eagle seams of coal
in Kanawha, Fayette, and Boone Counties, West Virginia.
|
8)
|
|
Cook Mountain Reserve (as depicted on the map attached hereto and
hereby made a part hereof) extracting the reserves consisting of the
Kittanning, Stockton-Lewiston, and Coalburg seams of coal in Boone County,
West Virgina.
|
EXHIBIT 1
Page 2 of 2
Revision Effective May 1, 1996
SELLERS PRODUCTION SOURCE(S), RESERVES OF COAL,
APPROVED RAIL SHIPPING ORIGIN(S), AND
APPROVED BARGE SHIPPING ORIGIN(S)
Approved Rail Shipping Origin(s) for Specification A Coal
:
|
|
|
|
|
Facility
|
|
Origin rail Station
|
|
OPSL No.
|
Big Mountain
Wells
Rocklick
Colony Bay
Harris
Robin Hood
Cook Mountain
Cook Mountain
|
|
Prenter, WV
Wells Prep Plant, WV
Lick, WV
Wharton, WV
Harris, WV
Robin Hood, WV
Wells Prep Plant, WV
Robin Hood, WV
|
|
CSXT 64790
CSXT 65275
CSXT 65288
CSXT 65285
CSXT 65289
CSXT 65325
CSXT 65275
CSXT 65325
|
Exhibit 2
WEST VIRGINIA SEVERANCE TAX
Whenever there is any change in the Base Price or a change in the West Virginia Severance Tax
Rate, a new West Virginia Severance Tax subcomponent shall be calculated and the Base Price shall
be adjusted to reflect such change in accordance with the following:
where:
|
T =
|
|
Revised West Virginia Severance Tax Subcomponent
|
|
|
R =
|
|
The Statutory West Virginia Severance Tax Rate
|
|
|
BPE =
|
|
The Current Base Price, excluding the West Virginia Severance Tax
subcomponent
|
Exhibit 3
Government Compliance Certificate