Exhibit 10.1
Dated as of December 31, 2005
Arch Coal, Inc.
and
Magnum Coal Company
 
PURCHASE AND SALE AGREEMENT
 

 

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TABLE OF CONTENTS

         
ARTICLE I Definitions; Interpretation; Schedules
    2  
1.1      Definitions
    2  
1.2      Interpretation
    14  
1.3      Schedules and Exhibits
    15  
ARTICLE II Purchase and Sale; Funding of VEBAs
    15  
2.1      Purchase and Sale of Arch Equity Interests
    15  
2.2      Funding of VEBAs
    15  
ARTICLE III Purchase Price
    15  
3.1      Purchase Price
    15  
3.2      Working Capital Adjustment
    16  
ARTICLE IV Representations and Warranties; Limitations
    17  
4.1      Company Representations
    17  
4.2      Arch Representations
    19  
4.3      Waiver of Known Breaches
    45  
ARTICLE V Closing Conditions
    46  
5.1      Closing
    46  
5.2       General Conditions
    47  
5.3      Conditions of Obligations of Company
    47  
5.4      Conditions of Obligations of Arch
    49  
ARTICLE VI Covenants
    51  
6.1      Covenants of All Parties
    51  
6.2      Covenants of Arch
    52  
6.3      Covenants of the Company
    59  
ARTICLE VII Non-solicitation of Employees
    61  
ARTICLE VIII Arch Guarantees
    62  
8.1      Arch Guarantees
    62  
ARTICLE IX Costs and Expenses
    62  
9.1      Costs and Expenses
    62  
ARTICLE X Further Assurances; Termination; Indemnification
    63  
10.1     Further Assurances
    63  
10.2     Termination
    63  
10.3     Indemnification
    64  
10.4     Survival
    68  
ARTICLE XI Miscellaneous
    68  
11.1     Consents; Restriction on Assignment
    68  
11.2      Tax Matters
    69  
11.3     Grant of License
    70  
11.4     Assignment; Successors and Assigns
    71  
11.5     No Third Party Rights
    71  
11.6     Counterparts
    71  
11.7     Governing Law
    71  
11.8     Submission to Jurisdiction
    71  
11.9     Waiver of Jury Trial
    72  
11.10    Severability
    72  

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11.11    Amendment or Modification
    72  
11.12    Integration
    73  
11.13    Notices
    73  
11.14    No Consequential Damages
    74  
11.15    Payments
    74  

Schedules

                    The following schedules are attached hereto:
                    Accounting Policies
                               Schedule 1.1(a)
                     Apogee Properties
                              Schedule 1.1(b)
                     Catenary Properties
                               Schedule 1.1(c)
                     Form Statement
                               Schedule 1.1(d)
                     Hobet Properties
                               Schedule 1.1(e)
                     Arch Individuals with Knowledge
                               Schedule 1.1(f)
                     Material Books and Records
                               Schedule 1.1(g)
                     Robin Properties
                               Schedule 1.1(h)
                     TC Sales Agreements
                               Schedule 1.1(i)
                     Company Governmental Approvals and Consents
                               Schedule 4.1(d)
                     Capacity; Organization
                               Schedule 4.2.1(c)
                     Coal Mining Interests and Real Property
                               Schedule 4.2.4(a)
                               Schedule 4.2.4(b)

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                               Schedule 4.2.4(c)(1)
                               Schedule 4.2.4(c)(2)
                               Schedule 4.2.4(e)
                               Schedule 4.2.4(f)
                     No Conflicts/Consents
                               Schedule 4.2.5(b)
                               Schedule 4.2.5(c)
                     Governmental Approvals and Filings
                               Schedule 4.2.6
                     Absence of Changes
                               Schedule 4.2.9
                     Undisclosed Liabilities
                               Schedule 4.2.10
                     Taxes
                               Schedule 4.2.11
                     Legal Proceedings
                               Schedule 4.2.12(a)
                               Schedule 4.2.12(b)
                     Compliance with Laws
                               Schedule 4.2.13
                     Benefits Plans; ERISA
                               Schedule 4.2.14(a)(i)
                               Schedule 4.2.14(a)(ii)
                               Schedule 4.2.14(a)(iii)
                               Schedule 4.2.14(b)
                               Schedule 4.2.14(g)
                               Schedule 4.2.14(h)
                               Schedule 4.2.14(j)
                               Schedule 4.2.14(k)
                               Schedule 4.2.14(m)
                               Schedule 4.2.14(n)
                               Schedule 4.2.14(o)
                     Tangible Personal Property
                               Schedule 4.2.16(a)(1)
                               Schedule 4.2.16(a)(2)
                               Schedule 4.2.16(a)(3)

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                     Contracts
                               Schedule 4.2.18(a)
                               Schedule 4.2.18(b)
                     Licenses
                               Schedule 4.2.19(1)
                               Schedule 4.2.19(2)
                     Insurance
                               Schedule 4.2.20(1)
                     Affiliate Transactions
                               Schedule 4.2.21(1)
                               Schedule 4.2.21(2)
                               Schedule 4.2.21(3)
                     Employees; Labor Relations
                               Schedule 4.2.22
                     Environmental Matters
                               Schedule 4.2.23
                     Substantial Customers and Suppliers
                               Schedule 4.2.24(a)
                               Schedule 4.2.24(b)(1)
                               Schedule 4.2.24(b)(2)
                               Schedule 4.2.24(b)(3)
                     Bank and Brokerage Accounts
                               Schedule 4.2.25
                     Directors and Officers; Powers of Attorney
                               Schedule 4.2.26(1)
                               Schedule 4.2.26(2)
                     Accounts Receivable
                               Schedule 4.2.27
                     Reclamation Bonds
                               Schedule 4.2.31(1)
                               Schedule 4.2.31(2)
                     Sufficiency of Assets
                               Schedule 4.2.33

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                     Arch Consents
                               Schedule 5.3
                     Carryover Tonnage
                               Schedule 6.2(p)
                     Miscellaneous Bonds
                               Schedule 8.1(a)
                     Indemnification
                               Schedule 10.3(d)
                     Outstanding Tax Claims relating to Arch Companies
                               Schedule 11.2(c)
Exhibits
The following Exhibits are attached hereto:
                     Exhibit A — Apogee Properties
                     Exhibit B — Blue Creek Lease Agreement (Lease and Memo of
Lease)
                     Exhibit C — Blue Creek Option to Purchase
                     Exhibit D — Catenary Properties
                     Exhibit E — Hobet Properties
                     Exhibit F — Master Coal Sales and Services Agreement
                     Exhibit G — Permit Assignment and Assumption Agreements
                     Exhibit H — Transition Services Agreement

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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made and entered into on
this 31st day of December, 2005, by and between Arch Coal, Inc., a Delaware
corporation (“Arch”) and Magnum Coal Company, a Delaware corporation (the
“Company”) (each, individually, a “Party,” together, the “Parties”).
RECITALS
WHEREAS, Arch, the Company, ArcLight Energy Partners Fund I, L.P. (“ArcLight”)
and Tim Elliott (collectively, the “MCA Parties”) entered into a Master
Contribution Agreement (“Master Contribution Agreement”) dated as of October 7,
2005 pursuant to which Arch, Tim Elliott and ArcLight were going to contribute
certain assets to the Company.
WHEREAS, the MCA Parties have entered into an agreement dated December 30, 2005
pursuant to which the MCA Parties have consented to the Company and Arch
entering into this Agreement and which provides for the termination of the MCA
Parties’ rights under the Master Contribution Agreement upon the Closing (as
defined below) of the transactions contemplated under this Agreement;
WHEREAS, the Company desires to purchase certain assets from Arch and Arch
desires to sell certain assets to the Company;
WHEREAS, in furtherance of accomplishing the objectives and purposes set forth
in the preceding recital, except as otherwise expressly provided for herein, the
following actions will be taken on or prior to the Closing Date (together with
all related actions, the “Arch Reorganization Transactions”):

  1.   Arch will form Robin Land (as defined below), to which Arch will cause to
be contributed the Robin Properties (as defined below) in exchange for all the
membership interests in Robin Land.     2.   Arch will form TC Sales (as defined
below), to which Arch will cause to be assigned the TC Sales Agreements (as
defined below) in exchange for all the membership interests in TC Sales.     3.
  Arch will form each of the Arch Holding Companies (as defined below) as
parents of each of Apogee Coal Company, Catenary Coal Company, and Hobet Mining,
Inc., respectively.     4.   Arch will cause Catenary Coal Company to convert to
Catenary Coal Company, LLC.     5.   Arch will cause Apogee Coal Company to
convert to Apogee Coal Company, LLC.     6.   Arch will cause Hobet Mining, Inc.
to convert to Hobet Mining, LLC.

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  7.   Arch will cause Hobet Mining, Inc. and Apogee Coal Company, Inc. to
establish a Voluntary Employee Beneficiary Association pursuant to
Section 501(c)(9) of the Code (as defined below) (“VEBA”) for each of Hobet
Mining, Inc. (the “Hobet VEBA”) and Apogee Coal Company, Inc. (the “Apogee
VEBA”), respectively.

NOW, THEREFORE, in consideration of their mutual undertakings and agreements
hereunder, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
undertake and agree as follows:
ARTICLE I
Definitions; Interpretation; Schedules
     1.1 Definitions.
          The following capitalized terms have the meanings given below:
          “A.T. Massey Coal Company Case” means the case of A.T. Massey Coal
Company, et al. v. JO ANNE B. BARNHART, COMMISSIONER OF SOCIAL SECURITY, et al.,
pending in the USDC, D. Maryland., Civil No.: RDB 03-3389.
          “Accountant” has the meaning assigned to such term in Section 3.2(c).
          “Accounting Policies” means those policies set forth on
Schedule 1.1(a) attached hereto.
          “Accounting Records” has the meaning assigned to such term in
Section 3.2(a).
          “Actions or Proceedings” means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
          “Actual Closing Working Capital Statement” has the meaning assigned to
such term in Section 3.2(a).
          “Adjusted Closing Working Capital” has the meaning assigned to such
term in Section 3.2(a).
          “Adjusted Closing Working Capital Statement” has the meaning assigned
to such term in Section 3.2(a).
          “Affiliate” means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the Person specified (and for this
purpose, the term “control” means the power to direct the management and
policies of such Person (directly or indirectly), whether through ownership of
voting securities, by Contract or otherwise (and the terms “controlling” and
“controlled” have meanings correlative to the foregoing).

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          “Agreement” has the meaning assigned to such term in the preamble.
          “Allegheny” means Allegheny Land Company, a Delaware corporation.
          “Ancillary Documents” means the Transition Services Agreement, the
Blue Creek Lease and Option Agreement, the Master Coal Sales and Services
Agreement and the Conveying Documents.
          “Apogee” means Apogee Coal Company, LLC, a Delaware limited liability
company and its predecessor, Apogee Coal Company, a Delaware corporation.
          “Apogee Properties” means the properties identified as being owned,
leased or subleased by any Arch Company on the maps attached hereto as Exhibit A
and the facilities located thereon and the equipment the book value of which is
in excess of $100,000 identified as being owned, leased or subleased by Apogee
on Schedule 1.1(b).
          “Apogee VEBA” has the meaning assigned to such term in the preamble.
          “Arch” has the meaning assigned to such term in the preamble.
          “Arch Benefit Plan” has the meaning assigned to such term in
Section 4.2.14.
          “Arch Coal Sales” means Arch Coal Sales Company, Inc., a Delaware
corporation.
          “Arch Companies” means Catenary, Hobet, Apogee, Robin Land and TC
Sales.
          “Arch Companies Plans” has the meaning assigned to such term in
Section 4.2.14(a).
          “Arch Companies Plans Employees” has the meaning assigned to such term
in Section 4.2.14(a).
          “Arch Credit Agreement” means the credit agreement between Arch, PNC
Bank, National Association, as administrative agent, Citicorp USA, Inc.,
JPMorgan Chase Bank, N.A. and Wachovia Bank, National Association, as
co-syndication agents, and Fleet National Bank as documentation agent and
various lenders, dated December 22, 2004 in relation to a $700 million revolving
credit facility.
          “Arch Equity Interests” means 100% of the membership interests of each
of Robin Land, TC Sales, Catenary, Apogee and Hobet.
          “Arch ERISA Entities” has the meaning assigned to such term in
Section 4.2.14.
          “Arch Guarantees” has the meaning assigned to such term in
Section 8.1.
          “Arch Holding Companies” means each of the holding companies that will
be formed prior to the Closing as parent companies of Apogee Coal Company,
Catenary Coal

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Company, and Hobet Mining, Inc., each of which will be a Delaware corporation
and a direct or indirect wholly-owned Subsidiary of Arch.
          “Arch Material Adverse Effect” means a material adverse effect on the
performance, operations, business, property, assets, liabilities, or condition
(financial or otherwise) of the Arch Companies taken as a whole; provided that
the term “Arch Material Adverse Effect” shall exclude any effect (a) resulting
from changes in general United States economic and political conditions
(including changes in commodity prices, interest rates and/or currency exchange
rates), or applicable Law and generally accepted accounting principles that do
not disproportionately affect the Arch Companies, or (b) resulting from changes
affecting companies in the United States coal mining industry generally, in each
case, that do not disproportionately affect the Arch Companies.
          “Arch Mine Properties” means the mines located on the Apogee
Properties, the Catenary Properties and the Hobet Properties.
          “Arch Plans” has the meaning assigned to such term in
Section 4.2.14(a).
          “Arch Reorganization Transactions” has the meaning assigned to such
term in the preamble to this Agreement.
          “Arch Taxes” has the meaning assigned to such term in Section 11.2.
          “Arch Unaudited Financial Statements” has the meaning assigned to such
term set forth in Section 4.2.8 (b).
          “Arch VEBA Contributions” means the aggregate contributions made by
Hobet Mining, Inc. and Apogee Coal Company, or their successor entities, to the
Hobet VEBA and the Apogee VEBA, respectively.
          “ArcLight” has the meaning assigned to such term in the preamble.
          “Ark Land” means Ark Land Company, a Delaware corporation.
          “Assets and Properties” of any Person, means all assets and properties
of every kind, nature, character and description (whether real, personal or
mixed, whether tangible or intangible, whether absolute, accrued, contingent,
fixed or otherwise and wherever situated), including the goodwill related
thereto, owned, leased or subleased by such Person, including without limitation
cash, cash equivalents, Investment Assets, accounts and notes receivable,
chattel paper, documents, instruments, general intangibles, Licenses, real
estate, equipment, inventory, goods and Intellectual Property.
          “Audited Financial Statement Date” means, as to any Person, the last
day of the most recent fiscal year of such for which audited financial
statements are delivered pursuant to this Agreement.
          “Basket” has the meaning assigned to it in Section 10.3(a).

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          “Benefits Covered Employee” means any former employee of one of Arch
of Kentucky, Arch of Alabama, Sharples Coal Company, Zapata Coal Company, Arch
of Illinois, Arch on the Green, Old Hickory Coal Company or Dal-Tex Coal Company
who (1) by virtue of their employment by one of the foregoing entities under the
NBCWA or its predecessor agreements is, or becomes entitled to receive retiree
medical benefits (“Union Employees”), or (2) is a former salaried employee of
one of the foregoing entities who is currently receiving retiree medical
benefits by virtue of that employment.
          “Blue Creek Lease” means the Lease Agreement and Option to Purchase to
be entered into between Ark Land and Robin Land, in substantially the forms
attached as Exhibits B and C.
          “Books and Records” means, with respect to each Arch Company, all
files, documents, instruments, papers, books and records pertaining thereto,
including without limitation financial statements, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, personnel
records, ledgers, journals, deeds, title policies, minute books, stock
certificates and books, stock transfer ledgers, Contracts, Licenses, customer
lists, computer files and programs, retrieval programs, operating data and plans
and environmental studies and plans.
          “Cap” has the meaning assigned to it in Section 10.3(a).
          “Capital Lease” means, as applied to any Person, any lease of
property, whether real, personal or mixed by that Person as lessee which, in
conformity with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
          “Cash Balance” has the meaning assigned to such term in
Section 6.2(j).
          “Catenary” means Catenary Coal Company, LLC, a Delaware limited
liability company and its predecessor, Catenary Coal Company, a Delaware
corporation.
          “Catenary Properties” means the properties identified as being owned,
leased or subleased by any Arch Company on the maps attached hereto as Exhibit D
and the facilities located thereon and the equipment the book value of which is
in excess of $100,000 identified as being owned, leased or subleased by Catenary
on Schedule 1.1(c).
          “CERCLA” means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and the rules and regulations promulgated
thereunder.
          “CERCLIS” means the Comprehensive Environmental Response and Liability
Information System, as provided for by 40 C.F.R. §300.5.
          “Change in Control” has the meaning assigned to such term in
Section 11.3.
          “Closing” has the meaning assigned to such term in Section 5.1.
          “Closing Date” means December 31, 2005.

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          “Closing Date Balance Sheet ” has the meaning assigned to such term in
Section 3.2(a).
          “Closing VEBA Contribution” means an amount equal to $15,000,000 less
the Initial Cash Payment.
          “Closing Working Capital” shall mean an amount equal to Current Assets
less Current Liabilities of the Arch Companies on a consolidated basis.
          “Coal Act” means the Coal Industry Retiree Health Benefit Act of 1992,
26 U.S.C. §§9701, et seq.
          “Coal Act Benefits” means any and all liabilities of the Company
and/or its Affiliates with respect to the Benefits Covered Employees under the
Coal Act.
          “Coal Sales Agreements” mean the Coal Sales Agreement between Infinity
Coal Sales, LLC as agent for the Company and Arch Coal Sales Company, Inc. dated
January 1, 2006 with respect to low ash and the Coal Sales Agreement between
Infinity Coal Sales, LLC as agent for the Company and Arch Coal Sales Company,
Inc. dated January 1, 2006 with respect to high ash.
          “Code” means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
          “Common Stock” has the meaning assigned to such term in Section 4.1.
          “Company” has the meaning assigned to such term in the preamble.
          “Company Material Adverse Effect” means a material adverse effect on
the performance, operations, business, property, assets, liabilities, or
condition (financial or otherwise) of the Company and its Subsidiaries taken as
a whole; provided that the term “Company Material Adverse Effect” shall exclude
any effect (a) resulting from changes in general United States economic and
political conditions (including changes in commodity prices, interest rates
and/or currency exchange rates), or applicable Law and generally accepted
accounting principles that do not disproportionately affect the Company and its
Subsidiaries, or (b) resulting from changes affecting companies in the United
States coal mining industry generally, in each case, that do not
disproportionately affect the Company and its Subsidiaries.
          “Confidentiality Agreement” means the Agreement of Confidentiality
entered into on the 30th day of November, 2005 by and between Arch and the
Company.
          “Contract” means any agreement, lease, sublease, license, deed of
trust, evidence of Indebtedness, mortgage, indenture, security agreement or
other contract (whether written or oral).
          “Conveying Documents” means every deed, bill of sale, security or
other conveyance document executed in connection with the transactions
contemplated by this Agreement.

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          “Covered Employee” has the meaning assigned to such term in
Section 6.3.
          “Current Assets” shall mean those items set forth as current assets on
the Form Statement under the heading ”Current Assets.”
          “Current Liabilities” shall mean those items set forth as current
liabilities on the Form Statement under the heading “Current Liabilities.”
          “Damages” has the meaning assigned to such term in Section 10.3.
          “Effective Time” shall mean 11:59 p.m. EST on the Closing Date.
          “Employee Benefits” means the Coal Act Benefits and the Workers’
Compensation Benefits.
          “Environmental Claim” means, with respect to any Person, any written
notice, claim, demand or other communication (collectively, a “claim”) by any
other Person alleging or asserting such Person’s liability for investigatory
costs, cleanup costs, Governmental or Regulatory Authority response costs,
damages to natural resources or other property, personal injuries, fines or
penalties arising out of, based on or resulting from (a) the presence, or
Release into the environment, of any Hazardous Material at any location, whether
or not owned by such Person, or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law. The term
“Environmental Claim” shall include, without limitation, any claim by any
Governmental or Regulatory Authority for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and any claim by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence of Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
          “Environmental Law” means any Law or Order relating to the regulation
or protection of human health, safety or the environment (including Surface
Mining Control and Reclamation Act of 1977, as amended (or any comparable state
statute)) or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes into the environment (including, without limitation, ambient air,
soil, surface water, ground water, wetlands, land or subsurface strata), or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, chemicals
or industrial, toxic or hazardous substances or wastes.
          “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
          “ERISA Affiliate” means each member of a controlled group (as defined
in ERISA Section 4001(a)(14)(A)) of which an entity is a member and which is
under common control (within the meaning of ERISA Section 4001(a)(14)(B) and the
regulations thereunder) with such entity.

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          “Execution Date” means the date by which the last party hereto has
executed this Agreement.
          “Executive Officer” means, as to any Person, any authorized officer of
such Person.
          “FAS 106 Benefits” means those post-retirement medical benefits which
are required to be reflected on the balance sheet of a Person pursuant to
Financial Accounting Standard 106.
          “Form Statement” means the form Working Capital Statement attached
hereto as Schedule 1.1(d).
          “GAAP” means generally accepted accounting principles in effect in the
United States from time to time including, where appropriate, generally accepted
auditing standards, including, without limitation, the pronouncements and
interpretations of appropriate accountancy administrative bodies, applied on a
consistent basis both as to classification of item and amounts.
          “Governmental or Regulatory Authority” means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.
          “Hazardous Material” means (A) any petroleum or petroleum products,
flammable explosives, radioactive materials, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation and transformers or
other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls (PCBs); (B) any chemicals or other materials or
substances which are now included in the definition of “hazardous substances,”
“hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,”
“restricted hazardous wastes,” “toxic substances,” “toxic pollutants” or words
of similar import under any Environmental Law; and (C) any other chemical or
other material or substance, exposure to which is now limited or regulated by
any Governmental or Regulatory Authority under any Environmental Law.
          “Hobet ” means Hobet Mining, LLC, a West Virginia limited liability
company and its predecessor, Hobet Mining, Inc. a West Virginia corporation.
          “Hobet Properties” means the properties identified as being owned,
leased or subleased by any Arch Company on the maps attached hereto as Exhibit E
and the facilities located thereon and the equipment the book value of which is
in excess of $100,000 identified as being owned, leased or subleased by Hobet on
Schedule 1.1(e)
          “Hobet VEBA” has the meaning assigned to that term in the preamble.
          “HSR Act” means Section 7A of the Clayton Act (Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the rules
and regulations promulgated thereunder.

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          “Incentive Compensation Accrual” has the meaning assigned to that term
in Section 3.1(a).
          “Incentive Compensation Amount” has the meaning assigned to that term
in Section 3.1(b).
          “Income Taxes” means any Taxes imposed upon or measured by net income
or gross income (excluding any Tax based solely on gross receipts) including any
interest, penalty or additions thereto.
          “Indebtedness” means and includes, as to any Person, without
duplication, (a) obligations for borrowed money which has been incurred in
connection with the acquisition of property or assets or for the deferred
payment of the cost of construction or improvement thereof or for the deferred
purchase price of property (other than current accounts payable),
(b) obligations secured by a Lien or other charge upon property or assets of
such Person, (c) obligations for the deferred purchase price of property created
or arising under any conditional sale or other title retention agreement with
respect to property acquired notwithstanding the fact that the rights and
remedies of the seller, bank or lessor under such agreement in the event of
default are limited to repossession or sale of the property (d) obligations
(other than obligations under any lease which is not a Capital Lease in
accordance with GAAP and obligations in an amount equal to the demand component
of any contract providing for usual and customary, utility services, including
gas, water, electricity and wastewater treatment services) to purchase any
property or services made regardless of whether such property is delivered or
such services are performed, except that no obligation shall constitute
Indebtedness solely because the contract provides for liquidated damages or
reimbursement of expenses following cancellation, (e) all Indebtedness of any
other Person guaranteed by such Person, (f) all Capital Leases entered into or
assumed, (g) obligations in respect of letters of credit but, only to the extent
that, the letter of credit does not support an obligation already included in
Indebtedness or which would constitute a current account payable of such Person,
(h) all obligations of such Person to purchase securities (or other property)
which arise out of or in connection with the sale of the same or substantially
similar securities (or property) and (i) all obligations in respect of any
hedging agreement.
          “Indemnified Party” has the meaning assigned to such term in
Section 10.3 (i).
          “Indemnifying Party” has the meaning assigned to such term in
Section 10.3(h).
          “Initial Cash Payment” has the meaning assigned to such term in
Section 3.1(a).
          “Intellectual Property” means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and copyright rights, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, processes, designs, methodologies, computer programs (including all
source codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights.

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          “Investment Assets” means, as to any Person, all debentures, notes and
other evidences of Indebtedness, stocks, securities (including rights to
purchase and securities convertible into or exchangeable for other securities),
interests in joint ventures and general and limited partnerships, mortgage loans
and other investment or portfolio assets owned of record or beneficially by such
Person and issued by any Person other than such Person (other than trade
receivables generated in the ordinary course of business of such Person).
          “Knowledge” or “Known” means as to Arch, the actual knowledge of any
of the individuals listed on Schedule 1.1(f) and what such individual would
reasonably be expected to have known after reasonable inquiry within the scope
of such individual’s job responsibilities.
          “Land Management Software” means the proprietary software systems
developed by Arch and known as Land Management System (LMS), Real Property
System, and various Microsoft Excel models which are used by Arch to manage and
track its leased and owned properties, including without limitation, to compute
production royalties, minimum royalties, and wheelage charges, as well as
existing programs which permit interfacing with Ellipse. The Land Management
Software includes, where applicable and available, source code, executable code,
data base structures, and any documentation, in each case, in such form as is,
and to the extent it is, existing as of the date hereof. For clarification, the
Land Management Software does not include FoxPro, Microsoft Access, or Microsoft
Excel.
          “LTD Individuals” has the meaning assigned to such term in
Section 4.2.14(s).
          “Laws” means any and all laws, statutes, ordinances, rules or
regulations promulgated by a Governmental or Regulatory Authority.
          “Liabilities” means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
          “Licenses” means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
          “Lien” means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale contract, title retention contract or other contract to
give any of the foregoing.
          “Loss” or “Losses” means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including without limitation interest (at the
rate of interest per annum publicly announced from time to time by Citibank,
N.A. as its prime rate in effect at its principal office in New York City plus
one percent from the date the Loss occurred through the date of payment in full
thereof), court costs, reasonable fees of attorneys, accountants and other
experts or other expenses of litigation or other proceedings or of any claim,
default or assessment).
          “MCA Parties” has the meaning assigned to such term in the preamble.

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          “Master Coal Sales and Services Agreement” means the Master Coal Sales
and Services Agreement to be entered into between Arch Coal Sales and TC Sales,
in substantially the form attached hereto as Exhibit F.
          “Master Contribution Agreement” has the meaning assigned to such term
in the preamble.
          “Material Books and Records” means the Books and Records identified on
Schedule 1.1(g).
          “Mine Properties” means the Arch Mine Properties.
          “Miscellaneous Bonds” has the meaning assigned to it in
Section 8.1(a).
          “Multiemployer Plan” means multiemployer pension or benefit plans
within the meaning of Section 3(37) of ERISA or Sections 9702(a)(3)(C) or
9712(a)(2)(C) of the Code.
          “NBCWA” means the National Bituminous Coal Wage Agreement of 2002, any
amendments thereto, and all documents incorporated by reference therein.
          “NPL” means the National Priorities List under CERCLA.
          “Notice of Dispute” has the meaning assigned to such term in
Section 3.2(c).
          “Option” means with respect to any Person means any security, right,
subscription, warrant, option, “phantom” stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any membership
interests of such Person or any security of any kind convertible into or
exchangeable or exercisable for any membership interests of such Person or (ii)
receive or exercise any benefits or rights similar to any rights enjoyed by or
accruing to the holder of membership interests of such Person, including any
rights to participate in the equity or income of such Person or to participate
in or direct the election of any directors or officers of such Person or the
manner in which any membership interests of such Person are voted.
          “Order” means any writ, judgment, decree, cessation order, notice of
violation requiring steps to abate a violation, injunction or similar order of
any Governmental or Regulatory Authority.
          “PBGC” means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
          “Party” or “Parties” have the meaning assigned to such terms in the
preamble.
          “Permit Assignment and Assumption Agreements” means one or more Permit
Assignment and Assumption Agreements in substantially the form of Exhibit G.
          “Permitted Lien” means (a) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been

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established in accordance with GAAP, (b) pledges and deposits made in the
ordinary course of business in connection with workman’s compensation,
unemployment insurance and social security benefits, (c) deposits made in the
ordinary course of business securing the performance of bids, trade contracts,
leases, statutory obligations, surety, customs and appeal bonds and other
obligations of like nature incurred as or incidental to and in the ordinary
course of business, (d) any statutory Lien arising in the ordinary course of
business by operation of Law with respect to a Liability that is not yet due or
delinquent, (e) any imperfection of title or similar Lien, (f) any terms and
conditions included in any Contracts relating to the applicable Assets and
Properties, (g) easements, zoning restrictions, rights-of-way, encroachments and
similar encumbrances on real property imposed by law or arising in the ordinary
course of business or which are necessary or desirable in connection with the
business or the development thereof and (h) any Lien that would be apparent from
a physical inspection of the applicable Assets and Properties; provided (i) that
the term “Permitted Lien” shall not include any Lien securing Indebtedness and
(ii) in the case of Liens described in clauses (e), (f), (g) and (h) above, such
Liens individually or in the aggregate with other such Liens do not materially
impair the value of the Assets and Properties subject to such Lien or the use of
such Assets and Properties in the conduct of the business of any of the Arch
Companies.
          “Person” means any natural person, corporation, general partnership,
limited partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority.
          “Plan” means any employment, bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, sick pay, workmen’s compensation or other
insurance, severance, separation, fringe benefit or other employee benefit plan,
practice, policy or arrangement of any kind, whether written or oral, including,
but not limited to, any “employee benefit plan” within the meaning of
Section 3(3) of ERISA.
          “Purchase Price” has the meaning assigned to such term in
Section 3.1(a).
          “Reclamation Bonds” means all cash (or cash equivalent), letters of
credit and surety bonds posted by or for the benefit of any of the Arch
Companies to secure the performance of their respective reclamation or other
obligations pursuant to, in connection with or as a condition of the licenses
held by any of them, as set forth on Schedule 4.2.31(1).
          “Release” means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
          “Retention Agreements” means the retention agreements relating to
those employees of Hobet, Apogee and Catenary, a list of whom has been
previously provided to the Company by Arch, that remain employees immediately
after giving effect to the Closing and under which the aggregate liability to
all such employees does not exceed $2,197,871.

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          “Retirement Account Plan” has the meaning assigned to such term in
Section 4.2.14(t).
          “Robin Land” means Robin Land Company, LLC, a Delaware limited
liability company that will be formed prior to Closing.
          “Robin Properties” means those properties described on
Schedule 1.1(h).
          “Securities Act” means the Securities Act of 1933, as amended.
          “Securities Exchange Act” means the Securities Exchange Act of 1934,
as amended.
          “Specified Arch Affiliates” means Ark Land, Allegheny, Arch Coal Sales
and the Arch Holding Companies.
          “Subsidiary” means, with respect to any Person (the “Parent”) at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent’s consolidated financial statements if such financial
statements were prepared in accordance with generally accepted accounting
principles in the United States as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held, or (b) that is, as of such date, otherwise
controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent. Unless otherwise specified,
“Subsidiary” includes direct and indirect Subsidiaries.
          “Tax Benefit” has the meaning assigned to such term set forth in
Section 11.2(e).
          “Tax Return” means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any such
document prepared on a consolidated, combined or unitary basis and also
including any schedule or attachment thereto, and including any amendment
thereof.
          “Taxes” means all taxes, including all charges, fees, duties, levies
or other assessments in the nature of taxes, imposed by any federal, state,
local or foreign law or Governmental or Regulatory Authority, including income,
gross receipts, excise, property, sales, gain, use, license, custom duty,
unemployment, inheritance, corporation, capital stock, transfer, franchise,
payroll, withholding, social security, minimum estimated, profit, gift,
severance, value added, disability, premium, recapture, credit, occupation,
service, leasing, employment, stamp, goods and services, ad valorem, utility,
utility users and other taxes, and shall include interest, penalties or
additions to tax (whether or not disputed) attributable thereto or attributable
to any failure to comply with any requirement regarding Tax Returns.
          “TC Sales” means TC Sales Company, LLC, a Delaware limited liability
company that will be formed prior to Closing.

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          “TC Sales Agreements” means those agreements described on
Schedule 1.1(i).
          “Transition Services Agreement means the Transition Services Agreement
to be entered into between Arch and the Company in substantially the form
attached hereto as Exhibit H.
          “Unaudited Financial Statement Date” means, as to any Person, June 30,
2005.
          “Underlying Assets” means, as to the Arch Equity Interests, the Assets
and Properties of each of the Arch Companies.
          “Union Employees” has the meaning assigned to such term in the
definition of Benefits Covered Employees.
          “Warranty Breach” has the meaning assigned to such term in
Section 10.3.
          “Weir” means Weir International Mining Consultants, Inc.
          “Workers’ Compensation Benefits” has the meaning assigned to such term
in Section 10.3(h).
     1.2 Interpretation.
          In this Agreement:
     (a) the definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined;
     (b) whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms;
     (c) the words “include”, “includes” and “including” shall be deemed to be
followed by the phrase “without limitation”;
     (d) the word “will” shall be construed to have the same meaning and effect
as the word “shall”;
     (e) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or
other document as, from time to time, amended, supplemented, restated or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth therein);
     (f) any reference herein to any Person shall be construed to include such
Person’s successors and permitted assigns;
     (g) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof;

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     (h) all references herein to Sections and Schedules shall be construed to
refer to sections of, and Schedules to, this Agreement unless otherwise
indicated; and
     (i) the headings used in this Agreement are for convenience of reference
only and are not to affect the construction of or to be taken into consideration
in interpreting this Agreement.
     1.3 Schedules and Exhibits.
          The Schedules and Exhibits listed in the Table of Contents are
attached hereto. Each of such Schedules and Exhibits constitutes an integral
part of this Agreement and is incorporated by reference herein and any reference
to this “Agreement” shall include such Schedules and Exhibits.
ARTICLE II
Purchase and Sale; Funding of VEBAs
     2.1 Purchase and Sale of Arch Equity Interests.
          Upon the terms and subject to the conditions of this Agreement, on the
Closing Date, Arch agrees to sell, convey, transfer or deliver (or cause the
sale, transfer, conveyance or delivery) to the Company, free and clear of all
Liens, all of its or their respective right, title and interest in, to and under
the Arch Equity Interests and the Company hereby agrees to purchase and accept
such Arch Equity Interests and rights relating thereto.
     2.2 Funding of VEBAs.
          Arch shall or shall cause each of Apogee and Hobet to, contribute
$7,500,000 to each of the Apogee VEBA and the Hobet VEBA, respectively, for the
purpose of paying certain FAS 106 Benefits to the those Benefits Covered
Employees who are Union Employees, in accordance with the applicable Trust
Agreements with PNC Bank, N.A. The funding of the Arch VEBA Contributions shall
be done in accordance with Section 5.1.
ARTICLE III
Purchase Price
     3.1 Purchase Price.
          (a) The purchase price (“Purchase Price”) that the Company shall pay
to Arch and/or the Arch Holding Companies, as directed by Arch, for all the Arch
Equity Interests and the other rights of the Company hereunder shall be an
amount (the “Initial Cash Payment”) equal to $15,000,000 less (i) an amount
equal to $2,256,000 which represents the aggregate amount of accrued payroll for
the Arch Companies through December 31, 2005 for the payroll to be paid on
January 4, 2006 and (ii) $680,000 (the “Incentive Compensation Accrual”), as
adjusted pursuant to Section 3.1(b), if applicable, Section 3.2, and
Section 6.3(d) if applicable, below.
          (b) Within 90 days of the Closing Date, Arch shall calculate the
amount of

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incentive compensation that would have been payable (the “Incentive Compensation
Amount”) under the Arch annual incentive compensation plan, based upon the
performance parameters approved by the Board of Directors of Arch for the 2005
plan year. In the event the Incentive Compensation Amount is in excess of
$680,000, Arch shall pay such excess amount to the Company and the Purchase
Price shall be decreased accordingly. Any such excess amount shall be paid in
immediately available funds within five (5) business days of the determination
of the Incentive Compensation Amount.
     3.2 Working Capital Adjustment.
          (a) Within 60 calendar days after the Closing, Arch shall prepare and
deliver to the Company (i) an audited balance sheet as of the Effective Time
(the “Closing Date Balance Sheet”), (ii) a calculation of Closing Working
Capital as of the Effective Time (the “Actual Closing Working Capital
Statement”), and (iii) a calculation of the Closing Working Capital as reflected
in the Actual Working Capital Statement, adjusted in accordance with
Section 3.2(b) (the “Adjusted Closing Working Capital Statement”). The Adjusted
Closing Working Capital Statement shall reflect the Closing Working Capital as
adjusted in accordance with Section 3.2(b) (the “Adjusted Closing Working
Capital”). The Closing Date Balance Sheet and the Actual Closing Working Capital
Statement shall be prepared in accordance with GAAP in a manner consistent with
the Accounting Policies and shall be calculated using the same line items as
those set forth in the Form Statement. To the extent GAAP or the provisions of
Section 3.2(a) or Section 3.2(b) permit alternate treatments of any item, the
particular treatment used for purposes of this Section 3.2 shall be that used in
the preparation of the unaudited balance sheet prepared by Ernst & Young LLP in
connection with the financial statements titled “Arch Coal, Inc. Contributed
Properties Financial Statements dated June 30, 2005” (including the Accounting
Policies).
          (b) The Adjusted Working Capital shall mean the Closing Working
Capital reflected on the Actual Closing Working Capital Statement, adjusted as
follows: increased by (i) all amounts paid by Arch on or prior to the Closing
Date as advance royalties due in January 2006 and payable to Dingess Rum, ACIN
or Kelly Hatfield, (ii) all current medical and other benefits claims that are
incurred but not recorded, and (iii) all accrued incentive compensation amounts,
and decreased by net pension assets. For clarification, the Cash Balance
provided for in Section 6.2(d)(j) shall not be factored into the calculation of
Adjusted Working Capital in any way.
          (c) The Company shall have access to and the right to copy such books
and records, including Arch’s accountants work papers and files, as the Company
deems reasonably necessary to confirm the Closing Date Balance Sheet, and the
calculation of the Adjusted Closing Working Capital (collectively such books and
records referred to as the “Accounting Records”).
          (d) If the Company disputes any amounts reflected on the Closing Date
Balance Sheet, the Closing Working Capital Statement or the Adjusted Closing
Working Capital Statement as delivered by Arch, the Company shall so notify Arch
in writing (“Notice of Dispute”) not more than 60 calendar days after the date
which is the later of the date that the Company receives the Closing Date
Balance Sheet, the Closing Working Capital Statement, the

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Adjusted Closing Working Capital Statement and/or the Accounting Records,
specifying in reasonable detail any points of disagreement. If the Company fails
to deliver a Notice of Dispute within such 60-day period, the Company shall be
deemed to have accepted the Closing Working Capital Statement and the Adjusted
Closing Working Capital Statement. Upon receipt of the Notice of Dispute, Arch
shall promptly consult with the Company with respect to such points of
disagreement in an effort to resolve the dispute. If any such dispute cannot be
resolved by Arch and the Company within 30 calendar days after Arch receives the
Notice of Dispute, they shall refer the dispute to PricewaterhouseCoopers LLP
(“Accountant”) as an arbitrator to finally determine, as soon as practical, and
in any event within 30 calendar days after such reference, all points of
disagreement with respect to the Closing Working Capital Statement and the
Adjusted Closing Working Capital Statement. For purposes of such arbitration,
each of Arch and the Company shall submit a proposed Closing Working Capital
Statement and Adjusted Closing Working Capital Statement. The Accountant shall
apply the accounting and other principles set forth in this Section 3.2 and
shall otherwise conduct the arbitration under such procedures as Arch and the
Company may agree or, failing such agreement, under the Commercial Rules of the
American Arbitration Association then prevailing. The fees and expenses of the
Accountant pursuant to this Section 3.2(c) shall be borne 50% by Arch and 50% by
the Company. Each Party shall be solely responsible for any fees and
disbursements of its independent auditors and attorneys in connection with this
Section 3.2. All determinations by the Accountant shall be final, conclusive and
binding with respect to the Closing Working Capital Statement and Adjusted
Closing Working Capital Statement.
          (d) Based on the Adjusted Closing Working Capital Statement as finally
determined under this Section 3.2, if the Adjusted Closing Working Capital is
greater than $10,465,000, the Purchase Price shall be increased on a dollar for
dollar basis and the amount of the difference shall be paid by the Company to
Arch and/or the Arch Holding Companies, as designated by Arch, by wire transfer
within two (2) business days of the final determination of the Closing Working
Capital. In the event the Adjusted Closing Working Capital as finally determined
under this Section 3.2 is less than $10,465,000 the Purchase Price shall be
decreased on a dollar for dollar basis and the amount of the difference shall be
paid by Arch to the Company by wire transfer within two (2) business days of the
final determination of the Closing Working Capital.
ARTICLE IV
Representations and Warranties; Limitations
     4.1 Company Representations.
          The Company represents and warrants to Arch:
     (a) The Company is a corporation duly organized, validly existing and in
good standing under the Law of the State of Delaware. The Company has full power
and authority to execute and deliver this Agreement and any Ancillary Documents
to which it is a party, to perform its obligations hereunder and thereunder, as
applicable and to consummate the transactions contemplated hereby and thereby,
as applicable. The Company is duly qualified to do business as a foreign
corporation and is in good standing

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in each jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified could not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
     (b) The execution and delivery by the Company of this Agreement and any
Ancillary Documents to which it is a party, and the performance by the Company
of its obligations hereunder and thereunder, as applicable, have been duly and
validly authorized and no other action on the part of the Company is necessary.
     (c) Each of this Agreement and each of the Ancillary Documents to which it
is a party, has been duly and validly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms (subject to applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws affecting
creditors’ rights generally and subject, as to enforceability, to equitable
principles of general application (regardless of whether enforcement is sought
in a proceeding in equity or at law)).
     (d) Except as set forth in Schedule 4.1(d), no consent, approval or action
of, filing with or notice to any Governmental or Regulatory Authority or any
other Person on the part of the Company is required in connection with the
execution, delivery and performance of this Agreement or any Ancillary Documents
to which it is a party or the consummation of the transactions contemplated
hereby or thereby.
     (e) The execution and delivery by the Company of this Agreement and any
Ancillary Documents to which it is a party do not, and the performance by it of
its obligations under this Agreement and any Ancillary Documents to which it is
a party and the consummation of the transactions contemplated hereby and
thereby, as applicable, will not:
     (i) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or bylaws of the
Company;
     (ii) conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to it or its Assets and Properties to
the extent that such conflict, violation or breach would reasonably be expected,
individually or in the aggregate, to result in a Company Material Adverse
Effect; or
     (iii) (A) conflict with or result in a violation or breach of,
(B) constitute (with or without notice or lapse of time or both) a default
under, (C) require the Company to obtain any consent, approval or action of,
make any filing with or give any notice to any Person as a result or under the
terms of, (D) result in or give to any Person any right of termination,
cancellation, acceleration or modification in or with respect to, (E) result in
or give to any Person any additional rights or entitlement to increased,
additional, accelerated or guaranteed payments under, or (F) result in the
creation or imposition of any Lien upon the

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Company or any of its Assets and Properties under, any Contract or License to
which the Company is a party or by which any of its Assets and Properties is
bound, that in the case of clauses (A), (B) and (C) would reasonably be
expected, individually or in the aggregate, to result in a Company Material
Adverse Effect.
     4.2 Arch Representations.
          Arch represents and warrants to the Company:
     Capacity; Organization

  4.2.1   (a) Arch is a corporation duly incorporated, validly existing and in
good standing under the Law of the State of Delaware. Arch has the requisite
corporate power and authority to execute and deliver this Agreement and each of
the Ancillary Documents to which it is or will be a party, and (a) on the
Execution Date, to perform its obligations hereunder and to consummate the
transactions contemplated hereby other than those contemplated to occur on the
Closing Date and (b) on the Closing Date, to perform its obligations hereunder
and under each of the Ancillary Documents to which it is or will be a party and
to consummate the transactions contemplated hereby and thereby contemplated to
occur on or prior to the Closing Date.

(b) On the Closing Date, each of the Arch Companies will be a limited liability
company duly formed, validly existing and in good standing under the Laws of its
jurisdiction of organization.
(c) Except as set forth on Schedule 4.2.1(c), each of the Arch Companies is duly
qualified to do business as a foreign limited liability company, as applicable,
and is in good standing in each jurisdiction where such qualification is
necessary, except for those jurisdictions where failure to be so qualified could
not, individually or in the aggregate, have an Arch Material Adverse Effect.
(i) On or prior to the Execution Date, Arch has delivered to the Company true
and complete copies of the certificate of incorporation and bylaws of Apogee,
Hobet and Catenary as in effect on the date of execution of this Agreement and
(ii) on or prior to the Closing Date, Arch will have delivered the certificate
of formation and limited liability company agreement or similar agreement of
each Arch Company as in effect on the Closing Date.
     Authority

  4.2.2   (a) The execution and delivery by Arch of this Agreement and each of
the Ancillary Documents to which it is or will be a party, and the performance
by Arch of its obligations hereunder and thereunder, have been duly and validly
authorized and no other action on the part of it is necessary.

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(b) This Agreement has been, and at Closing, each of the Ancillary Documents to
which it will be a party will have been, duly and validly executed and delivered
by Arch, and upon the execution and delivery by Arch of each, this Agreement,
and each of the Ancillary Documents to which it will be a party will constitute,
a legal, valid and binding obligation of Arch, enforceable against Arch in
accordance with its terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors’ rights generally and
subject, as to enforceability, to equitable principles of general application
(regardless of whether enforcement is sought in a proceeding in equity or at
law)).
     Membership Interests

  4.2.3   The membership interests of each Arch Company is or at the time of the
Closing will be duly authorized, validly issued and outstanding. Arch or the
Arch Holding Companies owns or at the time of the Closing will own all right,
title and interest in the membership interests in the Arch Companies, in each
case beneficially and of record, free and clear of all Liens. Upon the delivery
to the Company in the State of New York of a certificate or certificates at the
Closing representing the membership interests comprising the Arch Equity
Interests, such certificate or certificates either (a) indorsed to the Company
or in blank by an effective indorsement or (b) registered in the name of the
Company, Arch will transfer or cause to be transferred to the Company good and
valid title thereto, free and clear of all Liens and, assuming the Company has
no notice of any adverse claim with respect to the certificate or certificates,
the Company will acquire such certificate or certificates (and the membership
interests represented thereby) free of any adverse claims under Section 8-303 of
the Uniform Commercial Code as in effect on the date thereof in the State of New
York.

     Coal Mining Interests and Real Property

  4.2.4   (a) At the time of Closing, one or more of the Arch Companies will
have sole right, title and interest in leases or subleases or good and
marketable title to fee simple ownership rights in all of the Apogee Properties,
Catenary Properties and Hobet Properties to the extent identified on the maps
referred to in the definitions of Apogee Properties, Catenary Properties and
Hobet Properties, respectively, in each case free from any Liens, other than
Permitted Liens, and other than Assets and Properties that are disposed of in
compliance with Section 6.2(d)(ix). Attached hereto as Exhibits A, D and E are
true and complete copies of the maps for each of the Apogee Properties, Catenary
Properties and Hobet Properties. Schedule 4.2.4(a) contains a true and complete
list of (i) each parcel of real property shown on such maps that will be owned
by an Arch Company as of Closing, (ii) each parcel of real property shown on
such maps that will be leased or subleased by one of the Arch Companies (as

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      lessor or lessee or sublessor or sublessee) at the time of Closing,
including the names of the relevant lessor and lessee or sublessor or sublessee,
and the date of the lease or sublease and (iii) all Liens other than (A)
Permitted Liens relating to or affecting any parcel of real property referred to
in clause (i) or (ii) and (B) any leases or subleases listed under subsection
(ii) of Schedule 4.2.4(a). Except for the real property leased to others
referred to in clause (ii), at the time of Closing each Arch Company will be in
possession of each parcel of real property that will be owned, leased or
subleased by it, together with all buildings, structures, facilities, fixtures
and other improvements thereon. At the time of Closing, each Arch Company will
have adequate rights of ingress and egress with respect to each such parcel and
all buildings, structures, facilities, fixtures and other improvements thereon.

(b) Except as set forth in Schedule 4.2.4(b), at the time of Closing the
ownership or leasehold rights described in paragraph (a) above will afford the
Arch Companies the right to extract and sell coal from the Arch Mine Properties
(with respect to leased or subleased property, as to coal covered by such leases
or subleases) in a manner consistent with how the Arch Mine Properties are
currently being operated and as they were operated during the period covered by
the Arch Unaudited Financial Statements. As of Closing, the real property
described in Schedule 4.2.4(a) includes all real estate ownership and leasehold
rights necessary to fully pursue all mining and reclamation activities
authorized under the Licenses currently held by the Arch Companies.
(c) Each lease or sublease referred to in clause (ii) of paragraph (a) above is
a legal, valid and binding agreement, enforceable in accordance with its terms,
of an Arch Company and, to the Knowledge of Arch, of each other Person that is a
party thereto (subject to applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors’ rights generally and subject, as
to enforceability, to equitable principles of general application (regardless of
whether enforcement is sought in a proceeding in equity or at law)), and except
as set forth in Schedule 4.2.4(c)(1), there is no, and none of Arch, any Arch
Company or any of the Specified Arch Affiliates has received notice of any,
default (or any condition or event which, after notice or lapse of time or both,
would constitute a default) or termination thereunder or in respect thereof. No
Arch Company owes any brokerage commissions with respect to any such leased
space. The amounts of prepaid royalties and rentals available for recoupment as
of November 30, 2005 are listed by lease on Schedule 4.2.4(c)(2).
(d) Arch has delivered or made available to the Company prior to the execution
of this Agreement true and complete copies in all material respects of (i) all
deeds and similar documents, and all amendments thereof, with respect to the
real property shown on Schedule 4.2.4(a)(i),

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and (ii) all leases and subleases (including any amendments and renewal letters)
and, to the extent reasonably available, all other documents referred to in
clause (i) of this paragraph (d) with respect to the real property shown on
Schedule 4.2.4(a)(ii).
(e) Except as disclosed in Schedule 4.2.4(e), no tenant or other party in
possession of any of the real properties owned by the Arch Companies, has any
right to purchase, or holds any right of first refusal to purchase, such
properties.
(f) Except with respect to the real property leased to others set forth in
subsection (ii) of Schedule 4.2.4(a), and except as disclosed in Schedule
4.2.4(f), the improvements on the real property identified in subsections
(i) and (ii) of Schedule 4.2.4(a) are in good operating condition and in a state
of good maintenance and repair, ordinary wear and tear excepted, are adequate
and suitable for the purposes for which they are presently being used and there
are no condemnation or appropriation proceedings pending or, to the Knowledge of
Arch, threatened against any of such real property or the improvements thereon.
     No Conflicts

  4.2.5   The execution and delivery by Arch of this Agreement do not, and the
performance by Arch of its obligations under this Agreement and the consummation
of the transactions contemplated hereby, will not:

(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or bylaws of Arch
or any of the Arch Holding Companies;
(b) subject to obtaining the consents, approvals and actions, making the filings
and giving the notices disclosed in Schedule 4.2.5(b), conflict with or result
in a violation or breach of any term or provision of any Law or Order applicable
to Arch or any Arch Company or any of their respective Assets and Properties to
the extent that such conflict, violation or breach would reasonably be expected,
individually or in the aggregate, to result in an Arch Material Adverse Effect;
or
(c) except as set forth on Schedule 4.2.5(c), (i) conflict with or result in a
violation or breach of, (ii) constitute (with or without notice or lapse of time
or both) a default under, (iii) require Arch or any Arch Company to obtain any
consent, approval or action of, make any filing with or give any notice to any
Person as a result or under the terms of, (iv) result in or give to any Person
any right of termination, cancellation, acceleration or modification in or with
respect to, (v) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments under,
or (vi) result in the creation or imposition of

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any Lien upon any Arch Company or any of its Assets and Properties under, any
material Contract to which an Arch Company is a party or by which any of their
respective material Assets and Properties are bound, that in the case of clauses
(i), (ii) and (iii) would reasonably be expected, individually or in the
aggregate, to result in an Arch Material Adverse Effect.
     Governmental Approvals and Filings

  4.2.6   Except as disclosed in Schedule 4.2.6, no consent, approval,
authorization, order or action of, filing or registration with or notice under
Law or with to any Governmental or Regulatory Authority or any other Person on
the part of Arch or any Arch Company is required in connection with the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.

     Books and Records

  4.2.7   (a) The Books and Records relating to the Arch Companies are complete
and correct in all material respects and have been maintained in accordance with
Law, sound business practices and applicable accounting rules.

(b) On the Closing Date, no Arch Company will have any of its Material Books and
Records recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of
access thereto and therefrom) are not under the exclusive ownership and direct
control of such Arch Company.
     Financial Statements

  4.2.8   Prior to the execution of this Agreement, Arch has delivered to the
Company complete copies of the following financial statements:

(a) the actual audited financial statements titled “Arch Coal Inc. Contributed
Properties Financial Statements” for each of the fiscal years ended December 31,
2002, December 31, 2003 and December 31, 2004, together with a true and complete
copy of the report on such audited information by Ernst & Young LLP, and
(b) the actual unaudited financial statements titled “Arch Coal, Inc.
Contributed Properties Combined Financial Statements” for the nine month period
ended (i) September 30, 2004 and (ii) September 30, 2005 (such financial
statements in clause (ii) shall be referred to as the “Arch Unaudited Financial
Statements”) prepared by Ernst & Young LLP; and

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(c) the financial statements referenced in subsections (a) and (b) above
(i) were prepared in accordance with GAAP, consistently applied (except as
clearly set forth in the notes thereto); and (ii) fairly present, in all
material respects, the financial condition, results of operations and cash
flows, and changes in financial position of the Arch Companies as of the dates
indicated and for the periods then ended (except, in the case of the unaudited
financial statements, for normal year-end adjustments consistent with past
practice and which are not, in the aggregate, material).
     Absence of Changes

  4.2.9   Since the date of the Audited Financial Statement Date there has not
been any Arch Material Adverse Effect. Without limiting the foregoing, except as
disclosed in Schedule 4.2.9 and except for the execution and delivery of this
Agreement and the Arch Reorganization Transactions, there has not occurred
between the Unaudited Financial Statement Date and the Execution Date:

(a) (i) any increase of more than $5,000,000 (calculated on an annualized basis)
in the aggregate salaries, wages or other compensation of officers, employees or
consultants of the Arch Companies; (ii) any adoption, entering into or becoming
bound by any Plan, employment-related Contract or collective bargaining
agreement, or amendment, modification or termination (partial or complete) of
any Plan, employment-related Contract or collective bargaining agreement, except
to the extent required by applicable Law; or (iii) any entering into an
agreement or making of a representation to employees of the Arch Companies or
any request or demand by employees of the Arch Companies to provide future
increases in benefit levels (or create new benefits) with respect to any Plan,
under circumstances which make it reasonable to expect that such increases would
be granted or such benefits created;
(b) any declaration, setting aside or payment of any dividend or other
distribution in respect of the equity interests of any Arch Company, or any
direct or indirect redemption, purchase or other acquisition by any Arch Company
of any such equity interests or of any Option with respect to any Arch Company;
(c) any authorization, issuance, sale or other disposition by any Arch Company
of any equity interests of or Option with respect to any Arch Company, or any
modification or amendment of any right of any holder of any outstanding equity
interests of or Option with respect to any Arch Company;
(d) (i) any incurrence by the Arch Companies of Indebtedness in an aggregate
amount exceeding $8,000,000 (net of any amounts discharged

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during such period), or (ii) any voluntary purchase, cancellation, prepayment or
complete or partial discharge in advance of a scheduled payment date with
respect to, or waiver of any right of any Arch Company under, any Indebtedness
of or owing to any Arch Company;
(e) any physical damage, destruction or other casualty loss (whether or not
covered by insurance) affecting any of the plant, real or personal property or
equipment of any Arch Company in an aggregate amount exceeding $5,000,000;
(f) any material change in (i) any pricing, investment, accounting, financial
reporting, inventory, credit, allowance or Tax practice or policy of any Arch
Company, (ii) any method of calculating any bad debt, contingency or other
reserve of any Arch Company for accounting, financial reporting or Tax purposes,
or any change in the fiscal year of any Arch Company;
(g) any write-off or write-down of or any determination to write off or write
down any of the Assets and Properties of any Arch Company in an aggregate amount
exceeding $5,000,000 other than depreciation in the ordinary course of business
of such Arch Company);
(h) any acquisition or disposition of, or incurrence of a Lien (other than a
Permitted Lien) on, any Assets and Properties of any Arch Company, other than in
the ordinary course of business consistent with past practice;
(i) any (i) amendment of the operating agreement of any Arch Company, (ii)
recapitalization, reorganization, liquidation or dissolution of any Arch Company
or (iii) merger or other business combination involving any Arch Company and any
other Person;
(j) other than in the ordinary course of business consistent with past practice,
any entering into, amendment, modification, termination (partial or complete) or
granting of a waiver under or giving any consent with respect to (i) any
Contract that is required to be disclosed in the Schedule 4.2.18(a) or (ii) any
License held by any Arch Company;
(k) capital expenditures or commitments for additions to property, plant or
equipment of the Arch Companies constituting capital assets in an aggregate
amount exceeding $10,000,000;
(l) any commencement or termination by any Arch Company of any line of business;
(m) any transaction by any Arch Company with Arch, and officer, director or
Affiliate (other than any Arch Company) of Arch (i) outside the

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ordinary course of business consistent with past practice or (ii) other than on
an arm’s length basis;
(n) any transaction by any Arch Company involving (i) the sale, lease, transfer
or other disposal of any of its Assets and Properties, except for inventory sold
in the ordinary course of business, or (ii) the waiver or release of any right
of substantial value;
(o) any change in the relations with any Arch Company’s employees, agents,
customers or suppliers or with any Governmental or Regulatory Authority or any
self-regulatory organizations that would be reasonably likely, individually or
in the aggregate, to result in an Arch Material Adverse Effect;
(p) any institution, settlement or agreement to settle any Action or Proceeding
involving any Arch Company or any of their respective Assets and Properties,
business or operations outside of the ordinary course of business consistent
with past practice;
(q) (i) any failure by any Arch Company to replenish its respective inventories
and supplies in a normal and customary manner consistent with its prior practice
and prudent business practices prevailing in the industry, (ii) any purchase
commitment in excess of the normal, ordinary and usual requirements of its
business or at any price in excess of the current market price or on terms more
onerous than those usual and customary in the industry, or (iii) any change in
its selling, pricing, advertising or personnel practices inconsistent with its
prior practice and prudent business practices prevailing in the industry;
(r) any change in the banking or safe deposit arrangements of any Arch Company;
(s) any labor union organizing activity, any actual or threatened employee
strikes, work stoppages, slow-downs or lock-outs, or any material change in any
Arch Company’s relations with such Arch Company’s employees, customers, agents
or suppliers or with any Governmental or Regulatory Authority;
(t) any transfer or granting of rights under, or entering into any settlement
regarding the breach or infringement of any License or Intellectual Property
rights or modified any existing rights with respect thereto;
(u) additional contingent liabilities in an aggregate of $5,000,000 or more;
(v) additional bonding obligations in the aggregate of $5,000,000;

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(w) any entering into of a Contract to do or engage in any of the foregoing
after the Execution Date;
(x) any other transaction involving or development affecting any Arch Company
outside the ordinary course of business consistent with past practice;
(y) any material change in the working capital balance of the Arch Companies in
the aggregate; or
(z) any notice from Ernst & Young of (A) any material deficiencies in the design
or operation of internal controls that could materially adversely affect the
ability of Arch to record, process, summarize and report financial data, or any
material weaknesses in internal controls or (B) any fraud, whether or not
material, that involves management or other employees who have a significant
role in the internal controls of Arch.
     No Undisclosed Liabilities

  4.2.10   To Arch’s Knowledge, except as reflected or reserved against in
either the balance sheet included in the audited financial statements or the
Arch Unaudited Financial Statements or in the notes thereto or as disclosed in
Schedule 4.2.10, there are no Liabilities of any Arch Company required by GAAP
to be reflected on its balance sheet, other than Liabilities (a) incurred in the
ordinary course of business consistent with past practice and (b) which, in the
aggregate, would not reasonably be expected to have an Arch Material Adverse
Effect. As of the Closing, the Arch Companies will have been fully released from
any and all Liabilities of any kind under or in respect of the Arch Credit
Agreement, and none of the Assets and Properties of the Arch Companies will be
subject to any Liens securing the Liabilities under the Arch Credit Agreement.

     Taxes

  4.2.11   Except as disclosed in Schedule 4.2.11 (with paragraph references
corresponding to those set forth below):

(a) Each Arch Company has filed all Tax Returns required to be filed by it, and
it duly paid in full all Taxes owed by it (whether or not shown on such Tax
Returns). All such Tax Returns were complete and correct in all material
respects.
(b) Each Arch Company has complied in all material respects with all applicable
Laws relating to the withholding of Taxes (including withholding of Taxes
pursuant to Sections 1441, 1442, 1446, 3121 and 3406 of the Code or similar
provisions under any state or foreign laws), has withheld and timely and
properly paid over to the relevant Governmental or Regulatory Authority all
amounts required to be

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withheld under such laws, and has timely filed all Tax Returns with respect to
such withholding.
(c) No election has been filed by or on behalf of any Arch Company to be treated
as an association taxable as a corporation for federal income tax purposes (or
any similar state, local or foreign tax purposes).
(d) No Arch Company is a party to or bound by, or has any obligation under, any
Tax sharing agreement, Tax indemnification agreement or similar contract or
arrangement, or has any liability or obligation to any Person as a result of, or
pursuant to, any such agreement, contract or arrangement.
(e) There are no outstanding requests, agreements, consents or waivers to extend
the statute of limitations applicable to the assessment of any Taxes or
deficiencies against any Arch Company or against any consolidated, combined or
unitary tax group of which it is or has been a member.
(f) There are no Liens for Taxes (other than Permitted Liens) with respect to
any of the Assets or Properties of any Arch Company.
     Legal Proceedings

  4.2.12   (a) There are no Actions or Proceedings pending or, to the Knowledge
of Arch, threatened against, or which directly involves, Arch or any Arch
Company or any of their respective Assets and Properties, business or operations
that (i) could reasonably be expected to result in the issuance of an Order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement,
(ii) except as disclosed in Schedule 4.2.12, otherwise result in a diminution of
$5,000,000 or more in the individual or aggregate value of the Assets and
Properties of the Arch Companies, or (iii) if determined adversely to Arch or
any Arch Company, could reasonably be expected to result in (A) any injunction
or other equitable relief against any Arch Company that would interfere in any
material respect with such Arch Company’s business or operations or (B) except
as disclosed in Schedule 4.2.12, Losses by any Arch Company, individually or in
the aggregate with Losses in respect of such Actions or Proceedings, exceeding
$5,000,000.

(b) Except as set forth in Section 4.2.12(b), there are no Orders to which any
Arch Company or any of the Assets or Properties owned or used by any Arch
Company, is subject.
     Compliance With Laws

  4.2.13   Except as disclosed in Schedule 4.2.13:

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(a) each Arch Company is, and at all times since December 31, 2001 has been, in
compliance with all existing Laws and Orders now or hereafter applicable to
their Assets and Properties, business or operations in all material respects and
none of Arch, any Arch Company or any of the Specified Arch Affiliates is or has
at any time within the last four years been, or has received any notice that it
is or has at any time within the last four years been, in violation of or in
default under, in any material respect, any Law or Order applicable to any Arch
Company or any of their respective Assets and Properties, business or
operations;
(b) neither the ownership nor use of each Arch Company’s Assets and Properties
nor the conduct of its business conflicts with any material right of any other
Person or violates, or without the giving of notice or the passage of time, or
both, will violate, conflict with, or result in a default under any Lien,
License, Contract, Law or Order to which such Arch Company is a party or by
which it may be bound or affected, except to the extent that such conflict or
violation could not reasonably be expected, individually or in the aggregate
with other conflicts or violations, to result in an Arch Material Adverse
Effect, or any terms or provisions of such Arch Company’s limited liability
company agreement or certificate of incorporation and bylaws, as the case may
be, as presently in effect.
     Benefit Plans; ERISA

  4.2.14   (a) Except for the Plans identified in Schedules 4.2.14(a)(i) and
4.2.14(a)(ii) (such plans being set forth on both schedules, hereafter referred
to collectively as the “Arch Benefit Plans”), neither the Arch Companies, their
predecessors nor their respective ERISA Affiliates (collectively, the “Arch
ERISA Entities”) (i) currently sponsor, maintain or contribute to any Plan, and
(ii) have at any time within four years prior to the Execution Date, sponsored,
maintained or contributed to any employee pension benefit plan as defined in
ERISA Section 3(2). Schedule 4.2.14(a)(i) sets forth those Plans that are
currently sponsored, maintained or contributed to by Arch as well as those
employee pension benefit plans (as defined in ERISA Section 3(2)) that have been
sponsored, maintained or contributed to by Arch within the four years prior to
the Execution Date (the “Arch Plans”). Schedule 4.2.14(a)(ii) sets forth those
Plans that are currently sponsored, maintained, contributed to by or associated
with one of the Arch Companies as well as those employee pension benefit plans
(as defined in ERISA Section 3(2)) that have been sponsored, maintained or
contributed to by one of the Arch Companies within the four years prior to the
Execution Date (the “Arch Companies Plans”). The Arch Companies Plans cover only
(i) the Covered Employees, (ii) the Benefits Covered Employees, and
(iii) retired employees who retired from Hobet, Apogee or Catenary or one of
their predecessor or parent entities (those persons included in subsections
(i) through (iii) are collectively referred to herein as the “Arch Companies

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      Plans Employees”). Schedule 4.2.14(a)(iii) sets forth all Plans sponsored
by one of the Arch Companies that provide any bonus payment to any Covered
Employees.

(b) Arch has previously disclosed to the Company in writing a true and complete
list of all employees and retirees of the Arch Companies or any of their
predecessor entities who are receiving benefits under the Arch Benefit Plans as
of July 27, 2005. Except as disclosed in Schedule 4.2.14(b) with regard to each
of the Arch Benefit Plans other than Multiemployer Plans, insofar as any of the
following may adversely affect the Arch Companies or the Company, (i) the Arch
ERISA Entities have in all respects performed all obligations, whether arising
by operation of law or by contract, required to be performed by them in
connection with the Arch Benefit Plans and Arch has no Knowledge of any default
or violation by any of the parties to the Arch Benefit Plans; (ii) all reports
and disclosures relating to the Arch Benefit Plans required to be filed with or
furnished to governmental agencies, Arch Benefit Plan participants or Arch
Benefit Plan beneficiaries have been filed or furnished in accordance with the
applicable legal requirements in a timely manner and each Arch Benefit Plan has
been administered in accordance with its governing document; (iii) each of the
Arch Benefit Plans which is intended to be qualified under Section 401 of the
Code is identified as such on Schedule 4.2.14(a) and each Arch Benefit Plan
which is so identified satisfies the requirements of Section 401 of the Code,
has received a favorable determination letter from the Internal Revenue Service
regarding such qualified status (or a request for such a determination has been
timely filed with the Internal Revenue Service) and has not, since receiving the
most recent favorable determination letter, been amended or, to the Knowledge of
Arch, operated in a way which would adversely affect such qualified status;
(iv) there are no actions, suits or claims pending (other than routine claims
for benefits) or, to the Knowledge of Arch, threatened against any of the Arch
Benefit Plans; (v) all contributions required to be made to the Arch Benefit
Plans pursuant to their terms and provisions have been made; (vi) each of the
Arch Benefit Plans which is subject to Title IV of ERISA is identified as such
in Schedule 4.2.14(a) and with respect to each such Arch Benefit Plan, there has
been no event or condition which represents the material risk of Arch Benefit
Plan termination, no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, no reportable event within the meaning of Section 4043 of ERISA has
occurred, no notice of intent to terminate such plan has been given under
Section 4041 of ERISA, the PBGC has not instituted any proceeding under
Section 4042 of ERISA to terminate such Arch Benefit Plans, there has been no
termination or partial termination of such plan within the meaning of
Section 411(d)(3) of the Code and no liability to the PBGC has been incurred
(and to the extent this clause (vi) applies to Sections 4064, 4069 or 4204 of
Title IV of ERISA, it is expressly made not only with respect to

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the Arch Benefit Plans currently maintained but also with respect to any
employee benefit plan, program, agreement or arrangement subject to Title IV of
ERISA to which contributions were made (or were required to be made) during the
preceding four-year period); (vii) none of the Arch Benefit Plans nor any trust
created thereunder or with respect thereto has engaged in any “prohibited
transaction” or “party in interest transaction” as such terms are defined in
Section 4975 of the Code and Section 406 of ERISA which could subject the Arch
Companies or the Company to a tax or penalty on prohibited transaction or party
in interest transactions pursuant to Section 4975 of the Code or Section 502(i)
of ERISA; (viii) none of the Arch Companies or the Specified Arch Affiliates
have received any written notice of any matter pending (other than routine
qualification determination filings) with respect to any of the Arch Benefit
Plans before the Internal Revenue Service, the Department of Labor or the PBGC.
(c) The only Multiemployer Plans to which the Arch ERISA Entities contribute to
or have contributed to during the last four calendar years (or is or have been
obligated to contribute to) are: United Mine Workers of America 1974 Pension
Plan; United Mine Workers of America 1950 Pension Plan; United Mine Workers of
America 1993 Benefit Plan and Trust; United Mine Workers of America Combined
Benefit Fund; and the United Mine Workers of America 1992 Benefit Plan. With
respect to each such Multiemployer Plan: (i) no event has occurred that would
give rise to any withdrawal liability on the part of the Arch ERISA Entities;
(ii) none of Arch ERISA Entities (or their predecessors) has received any
written notice that such Multiemployer Plan is in “reorganization” (within the
meaning of Section 4241 of ERISA), that increased contributions may be required
to avoid a reduction in plan benefits or the imposition of an excise tax, or
that the Multiemployer Plan is or may become “insolvent” (within the meaning of
Section 4241 of ERISA); (iii) none of the Arch ERISA Entities (or their
predecessors) has received any written notice that a Multiemployer Plan is a
party to any pending merger or asset or liability transfer under Part 2 of
Subtitle E of Title IV of ERISA and (iv) none of the Arch ERISA Entitles (or
their predecessors) has received any written notice that the PBGC has instituted
proceedings against the Multiemployer Plan.
(d) None of the Arch ERISA Entities has been notified of the assessment of, nor
have the Arch ERISA Entities incurred, withdrawal liability under Subtitle E of
Title IV of ERISA or termination liability under Subtitle D of Title IV of
ERISA.
(e) The Arch ERISA Entities have complied in all material respects with the
applicable requirements of Section 4980B of the Code, Sections 601-609 of ERISA,
or any local Law of similar effect.

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(f) None of the Arch Companies, their predecessors, or any related person to
either within the meaning of Section 9701(c) of the Code has any current or past
unpaid liability under Section 9704 or Section 9712 of the Code.
(g) Except as set forth in Schedule 4.2.14(g), neither the Arch Companies, their
predecessors nor any related person to the Arch Companies or their predecessors
within the meaning of Section 9701(c) of the Code currently have any liability
for premiums or benefits under either Sections 9704, 9711 or 9712 of the Code.
(h) Except as set forth in Schedule 4.2.14(h), each of the Arch Benefit Plans
is, and its administration and operation is and has been since inception, in all
material respects in compliance with, and no Arch ERISA Entity has received any
claim or notice that any such Arch Benefit Plan is not in compliance with, all
applicable Laws or Orders and prohibited transactions exemptions, including the
requirements of ERISA, the Code, the Age Discrimination in Employment Act, the
Equal Pay Act and Title VII of the Civil Rights Act of 1964, and the terms of
such Arch Benefit Plan or any related trust agreement, insurance contract or
other funding instrument. No event has occurred, and there exists no condition
or set of circumstances in connection with any Arch Benefit Plan, under which
the Company or any Arch Company, directly or indirectly (through any
indemnification agreement or otherwise), could reasonably be expected to be
subject to any risk of material liability under Section 409 of ERISA.
(i) Each Arch Benefit Plan that is intended to afford any benefit related to
Taxes to any Arch Company or any other Person complies with the requirements of
the applicable provisions of the Code or other Laws required in order to provide
such Tax benefit to such Arch Company or such Person. (A) As of the Execution
Date, all contributions and other payments required to be made by Arch ERISA
Entity or any other Person to any Arch Benefit Plan with respect to any period
ending before or at or including the Execution Date have been made or reserves
adequate for such contributions or other payments have been or will be set aside
therefor in accordance with GAAP; and (B) as of the Closing Date, all
contributions and other payments required to be made by Arch ERISA Entity or any
other Person to any Arch Benefit Plan with respect to any period ending before
or at or including the Closing Date will have been made or reserves adequate for
such contributions or other payments have been or will be set aside therefor in
accordance with GAAP. There are no material outstanding liabilities of any Arch
Benefit Plan other than liabilities for benefits to be paid, in the ordinary
course, to participants of such Arch Benefit Plan and their beneficiaries in
accordance with the terms of such Arch Benefit Plan.

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(j) Neither the execution of this Agreement nor the completion of the
transaction contemplated by this Agreement will (i) except as set forth in
Schedule 4.2.14(j), result in or cause the establishment, payment, acceleration,
vesting, an increase in or funding of a benefit under any Arch Benefit Plan,
(ii) result in a violation of the fiduciary duties of Section 404 of ERISA, the
prohibited transaction rules of Section 406 of ERISA or Section 4975 of the
Code, or (iii) result in a payment that will be nondeductible to the Company or
any Arch Company or subject to Tax under Code Section 280G or 4999.
(k) Except as set forth in Schedule 4.2.14(k) or for the Arch Benefit Plans
required to be maintained pursuant to the NBCWA, the Coal Act or the memorandum
of understanding between the United Mine Workers of America and Apogee covering
the Guyan mine, each Arch Company has the right to modify or terminate
non-pension benefits to employees, former employees, directors or other Persons
(other than benefits required to be provided under Section 601 et seq. of ERISA)
under any Arch Benefit Plan without incurring any additional benefit cost.
(l) Complete and correct copies of the following documents have been furnished
to the Company prior to the execution of this Agreement:

  (i)   the Arch Benefit Plans and any related trust (or other third party
funding vehicle) agreements, including, all amendments thereto;     (ii)  
current summary plan descriptions of each Arch Benefit Plan subject to ERISA,
and any similar descriptions of all other Arch Benefit Plans;     (iii)   the
most recent Form 5500 and Schedules thereto for each Arch Benefit Plan subject
to ERISA reporting requirements (excluding multiemployer plans):     (iv)   the
most recent actuarial report, if required under ERISA or the Code, with respect
to each Arch Benefit Plan; and     (v)   the most recent determination letter
received from the Internal Revenue Service with respect to each Arch Benefit
Plan that is intended to be qualified under Section 401(a) of the Code.

(m) Except as set forth in Schedule 4.2.14(m), no “leased employees,” as that
term is defined in Section 414(n) of the Code, perform services for the Arch
ERISA Entities. None of the Arch ERISA Entities has used the services of such
leased employees or independent contractors in such a way that they may have
become eligible to participate in the Arch Benefit Plans or to an extent that
would reasonably be expected to result in the

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disqualification of any Arch Benefit Plan or the imposition of penalties or
excise taxes with respect to the Arch Benefit Plans by the Internal Revenue
Service, the Department of Labor, the PBGC or any other Governmental or
Regulatory Authority.
(n) Except as set forth on Schedule 4.2.14(n), none of the Arch ERISA Entities
has any formal plan or commitment, whether legally binding or not, to create any
additional benefit plan or modify or change any existing Arch Benefit Plan that
would affect any current or former employee of the Arch Companies (or their
predecessors).
(o) Except as set forth in Schedule 4.2.14(o), no Arch Benefit Plan provides
benefits, including without limitation death or medical benefits (whether or not
insured), with respect to current or former employees of the Arch Companies (or
their predecessors) beyond their retirement or other termination of service,
other than (i) coverage mandated solely by applicable Law, (ii) death benefits
or retirement benefits under any “employee pension benefit plan” as defined in
Section 3(2) of ERISA, (iii) deferred compensation benefits accrued as
liabilities on the books of the Arch Companies, or (iv) benefits the full costs
of which are borne by the current or former employee or his or her beneficiary.
(p) Except with respect to changes required by applicable Law, there has been no
adoption of, amendment to, written interpretation or announcement (whether or
not written) relating to, or change in employee participation or coverage under,
any Arch Benefit Plan that would increase materially the expense of maintaining
such Arch Benefit Plan above the level of the expense incurred in respect
thereof shown on the actual audited Arch Companies Financial Statements for the
fiscal year ended December 31, 2004.
(q) To the Knowledge of Arch, no representations or communications, oral or
written, with respect to the participation, eligibility for benefits, vesting,
benefit accrual or coverage under any Arch Benefit Plan have been made that are
not in accordance with the terms and conditions of the Arch Benefit Plans.
(r) As of the Closing Date, Arch will have provided to the Company duly executed
copies of the trust documents and any amendments thereto relating to the Hobet
VEBA and the Apogee VEBA.
(s) (i) The Arch Companies Plans do not sponsor, maintain or contribute to any
long term disability Plan or otherwise provide long term disability benefits to
any Arch Companies Plans Employees as of the Closing Date. (ii) Except for those
individuals, a list of whom has previously been disclosed to the Company (the
“LTD Individuals”), Arch and the Arch Plans will retain the obligation to
provide long term disability

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benefits to individuals receiving such benefits as of the Closing Date and no
liabilities with respect thereto shall pass to the Arch Companies.
(t) The Arch Coal, Inc. Retirement Account Plan (“Retirement Account Plan”)
provides an annual cash balance credit (as defined in the plan) to the notional
account under the Retirement Account Plan for each participant who is credited
with a year of service for the plan year. Therefore, for the 2005 plan year, a
Covered Employee will receive an annual cash balance credit if he or she is
credited with at least 1,000 hours of service under the Retirement Account Plan
and is otherwise an eligible participant under the terms of the plan. Interest
credits (as defined in the plan) are credited to each notional account under the
Retirement Account Plan as of the last day of each month (prior to the crediting
of any annual or transition credits). For a vested participant, interest credits
continue each month until he or she receives a distribution of his or her
account. For a nonvested participant, interest credits stop when he or she
terminates employment.
     Reserved

  4.2.15   [Intentionally Omitted.]

     Tangible Personal Property; Investment Assets

  4.2.16   (a) At the time of Closing, each Arch Company will be in possession
of and, except for such spare parts as are held on consignment and such
equipment as is leased by such Arch Company (in each case as set forth in
Schedule 4.2.16(a)(1), will own and have good title to all tangible personal
property primarily used in or reasonably necessary for the conduct of its
business as being operated and as was operated during the period covered by the
Arch Unaudited Financial Statements for such Arch Company (including all surplus
equipment has been customarily used as spare parts or for maintenance purposes
by such Arch Company), including all tangible personal property reflected on the
balance sheet included in the Arch Unaudited Financial Statements and tangible
personal property acquired since the Unaudited Financial Statement Date other
than property disposed of since such date in the ordinary course of business
consistent with past practice. All such tangible personal property will be free
and clear of all Liens, other than Permitted Liens and Liens disclosed on
Schedule 4.2.16(a)(2) at the time of Closing, and is in good working order and
condition, ordinary wear and tear excepted. Except as set forth in
Schedule 4.2.16(a)(3), no material tangible personal property, whether owned,
leased, held on consignment or otherwise, located on the real property site
(whether owned, leased or subleased) of any of the Arch Companies on the date on
which the Company or its representatives visited such real property site in
connection with their due diligence in connection with the transactions
contemplated by this Agreement, has

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      been relocated or moved off of the property of the Arch Companies, it
being understood that relocation or movement of such personal property to any
real property site (whether owned, leased or subleased) of any Arch Company
(even if not the real property site upon which such personal property was
originally located) shall not constitute a breach of this representation.

(b) No Arch Company owns any Investment Assets.
     Intellectual Property Rights

  4.2.17   The Arch Companies do not own any material Intellectual Property.

     Contracts

  4.2.18   (a) Schedule 4.2.18(a) (with paragraph references corresponding to
those set forth below), contains a true and complete list of each of the
following Contracts (copies, true and complete in all material respects, or, if
none, reasonably complete and accurate written descriptions of which, together
with all amendments and supplements thereto and all waivers of any terms
thereof, have been delivered to the Company prior to the execution of this
Agreement), which are currently in force and to which any Arch Company is a
party or by which any of their respective Assets and Properties is bound:

(i) (A) all Contracts (excluding Arch Benefit Plans) providing for a commitment
of employment or consultation services for a specified or unspecified term or
otherwise relating to employment or the termination of employment, the name,
position and rate of compensation of each Person party to such a Contract and
the expiration date of each such Contract; and (B) any written representations,
commitments, promises, communications or courses of conduct (excluding Arch
Benefit Plans and any such Contracts referred to in clause (A)) involving an
obligation of any Arch Company to make payments in any year, other than with
respect to salary or incentive compensation payments in the ordinary course of
business, to any employee exceeding $100,000 or any group of employees exceeding
$5,000,000 in the aggregate;
(ii) all Contracts with any Person containing any provision or covenant
prohibiting or limiting the ability of any Arch Company to engage in any
business activity or compete with any Person or prohibiting or limiting the
ability of any Person to compete with any Arch Company;
(iii) all partnership, joint venture, shareholders’ or other similar Contracts
with any Person;

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(iv) all Contracts relating to Indebtedness of any Arch Company in excess of
$5,000,000;
(v) all Contracts with distributors, service providers, dealers, manufacturer’s
representatives, sales agencies or franchisees that involve aggregate annual
payments in excess of $5,000,000;
(vi) all Contracts relating to (A) the future disposition or acquisition of any
Assets and Properties, other than dispositions or acquisitions in the ordinary
course of business consistent with past practice or in connection with the Arch
Reorganization Transactions, and (B) any merger or other business combination
other than the Arch Reorganization Transactions;
(vii) all Contracts between or among any Arch Company, on the one hand, and Arch
or any officer, director or Affiliate (other than any Arch Company) of Arch on
the other hand;
(viii) all collective bargaining or similar labor Contracts;
(ix) all Contracts that (A) limit or contain restrictions on the ability of any
Arch Company to declare or pay dividends on, to make any other distribution in
respect of or to issue or purchase, redeem or otherwise acquire its membership
interests, to incur Indebtedness, to incur or suffer to exist any Lien, to
purchase or sell any Assets and Properties, to change the lines of business in
which it participates or engages or to engage in any business combination or
(B) require any Arch Company to maintain specified financial ratios or levels of
net worth or other indicia of financial condition;
(x) as of the Execution Date, all coal sales and transportation agreements that
will be assigned to TC Sales or will be subject to the Master Coal Sales and
Services Agreement; and
(xi) all other Contracts (other than Arch Benefit Plans, leases listed on
subsection (ii) of Schedule 4.2.4(a) and the items set forth on
Schedule 4.2.16(a)(1) and insurance policies listed in Schedule 4.2.20) that
(A) involve the payment or potential payment, pursuant to the terms of any such
Contract, by or to any Arch Company of more than $5,000,000 annually and
(B) cannot be terminated within 90 days after giving notice of termination
without resulting in any material cost or penalty to any Arch Company.
(b) Each Contract required to be disclosed in Schedule 4.2.18(a) is in full
force and effect and constitutes a legal, valid and binding agreement of such
Arch Company, enforceable in accordance with its terms enforceable against each
in accordance with its terms, (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar

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laws affecting creditors’ rights generally and subject, as to enforceability, to
equitable principles of general application (regardless of whether enforcement
is sought in a proceeding in equity or at law)), and to the Knowledge of Arch,
constitutes a legal, valid and binding agreement, enforceable in accordance with
its terms of each other party thereto; and except as disclosed in
Schedule 4.2.18(b), none of Arch, any Arch Company, any of the Specified Arch
Affiliates or, to the Knowledge of Arch, no other party to such Contract is, or
has received notice that it is, in violation or breach of or default under any
such Contract (or with notice or lapse of time or both, would be in violation or
breach of or default under any such Contract) in any material respect.
     Licenses

  4.2.19   Schedule 4.2.19(1) contains a true and complete, in all material
respects, list of all Licenses used in and material to the business or
operations of any Arch Company (and all pending applications for any such
Licenses), setting forth the grantor, the grantee, the function and the
expiration and renewal date of, and the amount of bond posted with respect to,
each. Prior to the execution of this Agreement, Arch has made available to the
Company for review true and complete, in all material respects, copies of all
such Licenses. Except as disclosed in Schedule 4.2.19(2):

(a) each License required to be obtained for the current stage of development of
the Arch Mine Properties has been duly obtained and validly issued, is in full
force and effect, is final and not subject to appeal and held in the name of an
Arch Company and is free from conditions or requirements the compliance with
which would, individually or in the aggregate, reasonably be expected to have an
Arch Material Adverse Effect;
(b) each License relating to the Arch Mine Properties will be issued in the name
of or assigned to an Arch Company on the Closing Date;
(c) each applicable Arch Company is in compliance with each such License, except
to the extent that noncompliance could not be reasonably likely, individually or
in the aggregate, to have an Arch Material Adverse Effect;
(d) none of Arch, any of the Arch Companies, or any of the Specified Arch
Affiliates has received any notice that it is, in default (or with the giving of
notice or lapse of time or both, would be in default) under any such License;
(e) (i) Arch has no actual knowledge of any specific reason that any Licenses
that have been applied for but not obtained by the Execution Date, and are
required to be obtained within next six months will not be

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obtained in due course (for purposes of this clause (e), “actual knowledge”
means the actual knowledge of those individuals included in the definition of
Knowledge); and
(f) none of the Arch Companies or, to the Knowledge of Arch, any of the
Specified Arch Affiliates, or any corporation, partnership, limited liability
company or other entity “owned or controlled” by any of them, has been notified
by the Federal Office of Surface Mining or the agency of any state administering
the Surface Mining Control and Reclamation Act of 1977, as amended (or any
comparable state statute) that it is (a) ineligible to receive additional
surface mining permits or other Licenses or (b) under investigation to determine
whether its eligibility to receive such permits or other Licenses should be
revoked, i.e., “permit blocked.” As used in this Section 4.2.19, “owned or
controlled” shall be defined as set forth in 30 C.F.R Section 773.5 (2000).
     Insurance

  4.2.20   Arch has previously provided to the Company a true and complete (in
all material respects) list (including the names and addresses of the insurers,
the names of the Persons to whom such policies have been issued, the expiration
dates thereof, whether it is a “claims made” or an “occurrence” policy and the
type of insurance) of all liability, property, workers’ compensation and other
insurance policies currently in effect that insure the business, operations or
employees of any Arch Company and that (i) have been issued to Arch, any Arch
Company or any Specified Arch Affiliate or (ii) to the Knowledge of Arch, have
been issued to any other Person for the benefit of any Arch Company. Each such
policy is valid and binding and in full force and effect, no premiums due
thereunder have not been paid and neither Arch, nor to the Knowledge of Arch,
any other Person to whom such policy has been issued, has received any notice of
cancellation or termination in respect of any such policy or is in default
thereunder. Schedule 4.2.20(1) describes all claims made in the last five years
in respect of general liability, automobile, mandolidis and property insurance
described above.

     Affiliate Transactions

  4.2.21   Except as disclosed in Schedule 4.2.21(1): (i) there are no
intercompany Liabilities between any Arch Company, on the one hand, and Arch or
any officer, director or Affiliate (other than any Arch Company) of Arch or any
other Arch Company, on the other, (ii) none of Arch nor any officer, director or
Affiliate of Arch provides or causes to be provided any assets, services or
facilities to any Arch Company, (iii) no Arch Company provides or causes to be
provided any assets, services or facilities to Arch or any such officer,
director or Affiliate thereof and (iv) no Arch Company beneficially owns,
directly or indirectly, any Investment Assets issued by

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      Arch or any such officer, director or Affiliate. Except as disclosed in
Schedule 4.2.21(2), each of the Liabilities and transactions listed in
Schedule 4.2.21(1) was incurred or engaged in, as the case may be, on an
arm’s-length basis. Except as disclosed in Schedule 4.2.21(3), since the date of
the audited balance sheet provided pursuant to Section 4.2.8, all settlements of
intercompany Liabilities between any Arch Company, on the one hand, and Arch or
any such officer, director or Affiliate thereof, on the other, have been made,
and all allocations of intercompany expenses have been applied, in the ordinary
course of business consistent with past practice.

Employees; Labor Relations

  4.2.22   (a) Except for the hourly employees of Hobet and Apogee, who are
represented by the United Mine Workers of America and subject to the NBCWA of
2002 or the memorandum of understanding between the United Mine Workers of
America and Apogee covering the Guyan mine, no employee of any Arch Company is
presently a member of a collective bargaining unit and, to the Knowledge of
Arch, there are no threatened or contemplated attempts to organize for
collective bargaining purposes any of the employees of any Arch Company. Except
as set forth on Schedule 4.2.22(a), during the last 12 months, (i) no unfair
labor practice complaint or sex, age, race or other discrimination claim has
been brought against any Arch Company before the National Labor Relations Board,
the Equal Employment Opportunity Commission or any other Governmental or
Regulatory Authority and (ii) there has been no work stoppage, strike or other
concerted action by employees of any Arch Company.

(b) No Person who is not treated as an employee of any Arch Company but who
provides or performs services to or on behalf of any Arch Company is (i) a
leased employee within the meaning of Section 414(n) of the Code, (ii) employed
by a professional employer organization or employee leasing organization, or
(iii) required to be treated as a common law employee of any Arch Company under
the Code, ERISA or any other applicable Law.
Environmental Matters

  4.2.23   To Arch’s Knowledge, except as set forth in Schedule 4.2.23, each
Arch Company currently holds or at the time of the Closing will hold all
Licenses that are necessary under applicable Environmental Laws for the current
use, occupancy, or operations of such Arch Company as such operations are
currently conducted, except where the failure to have any License could not
reasonably be expected to result in an Arch Material Adverse Effect. To Arch’s
Knowledge, each Arch Company is in compliance, in all material respects, with
the terms and conditions of all such Licenses.

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In addition, except as set forth in Schedule 4.2.23 (with paragraph references
corresponding to those set forth below) and except for such matters as could
not, individually or in the aggregate, be reasonably likely to result in an Arch
Material Adverse Effect, to Arch’s Knowledge:
(a) Within the past four years, (i) no Order has been issued, (ii) no
Environmental Claim has been filed, (iii) no penalty has been assessed, (iv) to
the Knowledge of Arch, no investigation or review is pending or threatened by
any Governmental or Regulatory Authority with respect to any alleged failure by
any Arch Company to have any License required under applicable Environmental
Laws in connection with the conduct of the business or operations of any Arch
Company or with respect to any generation, treatment, storage, recycling,
transportation, discharge, disposal or Release of any Hazardous Material
generated by any Arch Company, (v) none of Arch, any Arch Company or any
Specified Arch Affiliate has received written notice of any such investigation
or review, and (vi) to the Knowledge of Arch, there are no facts or
circumstances in existence which could reasonably be expected to form the basis
for any such Order, Environmental Claim, penalty or investigation.
(b) Except as set forth on Schedule 4.2.23(b), no Arch Company currently owns,
operates or leases a treatment, storage or disposal facility requiring a permit
under the Resource Conservation and Recovery Act, as amended, or under any other
comparable state or local Law; and, without limiting the foregoing, (i) no Arch
Company is aware of the existence of, or currently uses, any underground storage
tanks located on any property owned, leased or used by an Arch Company; and
(ii) in the past four years, there have been no Releases of Hazardous Materials
in a reportable quantity under, or in violation of, any Environmental Law into
the environment or under any real property now owned, leased or used by any Arch
Company which would be reasonably likely individually or in the aggregate to
result in an Arch Material Adverse Effect.
(c) No Arch Company currently transports or arranges for the transportation of
any Hazardous Material to any location that any Arch Company has Knowledge is
(i) listed on the NPL under CERCLA, (ii) listed for possible inclusion on the
NPL by the Environmental Protection Agency in CERCLIS or on any similar state or
local list or (iii) the subject of enforcement actions by federal, state or
local Governmental or Regulatory Authorities that may lead to Environmental
Claims against any Arch Company.
(d) No site or facility currently owned, operated or leased by any Arch Company
is listed or to the Knowledge of Arch, proposed for listing on the NPL, CERCLIS
or any similar state or local list of sites requiring investigation or clean-up.

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(f) No Liens have arisen under or pursuant to any Environmental Law on any site
or facility currently owned, operated or leased by any Arch Company, and no
federal, state or local Governmental or Regulatory Authority action has been
taken in the past four years or, to the Knowledge of Arch, is in process that
could subject any such site or facility to such Liens, and no Arch Company would
be required to place any notice or restriction relating to the presence of
Hazardous Materials at any site or facility owned by it in any deed to the real
property on which such site or facility is located.
(g) There have been no environmental investigations, studies, audits, tests,
reviews or other analyses conducted outside the ordinary course of business
consistent with past practice in the past four years that are in the possession
of, any Arch Company in relation to any site or facility now or previously
owned, operated or leased by any Arch Company which have not been delivered to
the Company prior to the execution of this Agreement.
(h) Each of the Arch Companies (i) has carried out all reclamation with respect
to their coal mining and processing operations required to date by law and
(ii) in the past four years, has received no notice asserting or claiming the
existence of seepage, leaks, breakthroughs or other events that could result in
harm to health, safety or the environment with respect to any surface
impoundment or sealed deep mine.
Substantial Customers; Material Suppliers

  4.2.24   (a) Schedule 4.2.24(a) lists the five largest customers of each of
the Arch Companies, on the basis of revenues for goods sold or services provided
for the most recently completed fiscal year. No such customer has ceased or
materially reduced its purchases from or use of the services of the Arch
Companies since the Unaudited Financial Statement Date, or to the Knowledge of
Arch, has threatened to cease or materially reduce such purchases or use after
the Execution Date. To the Knowledge of Arch, no such customer is currently in,
or threatened with, bankruptcy or insolvency.

(b) Schedule 4.2.24(b)(1) lists the material suppliers of tires, explosives and
diesel. Such items are supplied to Arch, which then supplies them to the Arch
Companies. Except as disclosed in Schedule 4.2.24(b)(2), no such supplier has
ceased or materially reduced its supplies to Arch since the Unaudited Financial
Statement Date, or to the Knowledge of Arch, has threatened to cease or
materially reduce such supply after the Execution Date. Except as disclosed in
Schedule 4.2.24(b)(3), to the Knowledge of Arch, no such supplier is currently
in, or threatened with, bankruptcy or insolvency.

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Bank and Brokerage Accounts

  4.2.25   Schedule 4.2.25 sets forth a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which any Arch Company has an account or safe deposit box or
maintains a banking, custodial, trading or other similar relationship. Arch has
heretofore delivered to the Company a true and complete list and description of
each such account, box and relationship, indicating in each case the account
number and the names of the respective officers, employees, agents or other
similar representatives of any Arch Company having signatory power with respect
thereto.

Directors and Officers; No Powers of Attorney

  4.2.26   Schedule 4.2.26(1) lists all members of the management committee,
managing members and/or executive officers and directors of each Arch Company.
As of Closing, except as set forth in Schedule 4.2.26(2), no Arch Company has
any powers of attorney or comparable delegations of authority outstanding,
except such powers-of-attorney as are granted pursuant to real property leases,
equipment leases, mortgages or deeds of trust, in each case in the ordinary
course of business and on customary terms.

Accounts Receivable

  4.2.27   Except as set forth in Schedule 4.2.27, the accounts and notes
receivable of the Arch Companies reflected on the balance sheet included in the
Arch Unaudited Financial Statements, and all accounts and notes receivable
arising subsequent to the Unaudited Financial Statement Date, (i) arose from
bona fide sales transactions in the ordinary course of business and are payable
on ordinary trade terms, (ii) to the Knowledge of Arch, are legal, valid and
binding obligations of the respective debtors enforceable in accordance with
their terms (subject to applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors’ rights generally and subject, as
to enforceability, to equitable principles of general application (regardless of
whether enforcement is sought in a proceeding in equity or at law)) and
(iii) are not the subject of any Actions or Proceedings brought by or on behalf
of any Arch Company.

Inventory

  4.2.28   All inventory of the Arch Companies reflected on the balance sheet
included in the Arch Unaudited Financial Statements consisted, and all such
inventory acquired since the Unaudited Financial Statement Date consists, of a
quality and quantity usable and salable in the ordinary course of business
consistent with past practice, subject to normal and customary allowances in the
industry for damage and outdated items. Except as

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      disclosed in the notes to the Arch Unaudited Financial Statements and as
to such items that are held on consignment (which are set forth in Schedule
4.2.16(a)(1)), all items included in the inventory of the Arch Companies are the
property of the Arch Companies, free and clear of any Lien other than Permitted
Liens, have not been pledged as collateral, are not held by any Arch Company on
consignment from others and conform in all material respects to all standards
applicable to such inventory or its use or sale imposed by Governmental or
Regulatory Authorities.

Brokers

  4.2.29   All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by Arch directly with the Company and
the Company without the intervention of any Person on behalf of Arch in such
manner as to give rise to any valid claim by any Person against the Company or
any Arch Company for a finder’s fee, brokerage commission or similar payment.

Disclosure

  4.2.30   There is no fact or circumstance known to Arch that has not been
disclosed to the Company, the existence of which would, individually or in the
aggregate with other such facts or circumstances, have an Arch Material Adverse
Effect. No representation or warranty made by Arch in this Agreement or the
Ancillary Documents, no statement contained in the Schedules or in any
certificate furnished to the Company pursuant to any provision of this Agreement
or any Ancillary Document by or on behalf of Arch or any Arch Company contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the statements made
herein or therein, in the light of the circumstances in which they were made,
not misleading. The information provided by or on behalf of Arch to Weir in
connection with Weir’s independent evaluation of the reserves at the Arch Mine
Properties and Weir’s independent environmental audit did not contain any untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made herein or
therein, in the light of the circumstances in which they were made, not
misleading.

Reclamation Bonds

  4.2.31   Schedule 4.2.31(1) contains an accurate and complete list of all
Reclamation Bonds pursuant to, in connection with or as a condition of the
Licenses listed in Schedule 4.2.19(1). Other than the Reclamation Bonds listed
on Schedule 4.2.31(2), no other bonds are currently required under applicable
law to be posted in connection with the Licenses.

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Absence of Certain Business Practices

  4.2.32   Neither any Arch Company, nor any officer, employee or agent of any
Arch Company, nor any other Person acting on behalf of any Arch Company, has,
directly or indirectly, within the past four years given or agreed to give any
gift or similar benefit to any customer, supplier, governmental employee or
other Person who is or may be in a position to help or hinder the respective
business of such Arch Company (or assist such Arch Company in connection with
any actual or proposed transaction) which (a) might subject any Arch Company to
any damage or penalty in any Action or Proceeding, (b) if not given in the past
might have an adverse effect on the Assets and Properties, business or
operations of any Arch Company as reflected in the financial statements
delivered pursuant to this Agreement or (c) if not continued in the future,
might adversely affect the respective Assets and Properties, business,
operations or prospects of any Arch Company or which might subject any Arch
Company to suit or penalty in any Action or Proceeding.

Sufficiency of Assets

  4.2.33   Except as set forth on Schedule 4.2.33, the Assets and Properties of
the Arch Companies, include all of the assets and properties primarily used or
held for use in the business and operations of the Arch Companies and together
with all rights of the Arch Companies are sufficient to permit the Arch
Companies to extract and process coal from the Arch Mine Properties (with
respect to leased or subleased property, as to coal covered by such leases or
subleases) owned, leased or subleased by any of the Arch Companies in a manner
consistent with how such Arch Mine Properties are being operated and were
operated during the period covered by the Arch Unaudited Financial Statements.

No Other Representations

  4.2.34   The Company acknowledges that none of Arch or any of its respective
Affiliates, directors, officers, managers, members, employees, consultants,
agents or advisors makes or has made any representation or warranty to the
Company or its Affiliates regarding Arch, the Arch Companies or any of their
respective businesses or Assets and Properties, except for the representations
and warranties of Arch expressly set forth in this Agreement, the Ancillary
Documents or any certificate delivered pursuant to this Agreement or the
Ancillary Documents.

4.3 Waiver of Known Breaches.
     (a) If prior to the Closing either party (the “Waiving Party”) has actual
knowledge of any breach (“Breach”) by the other party of any representation,
warranty or covenant contained in this Agreement or any Ancillary Document,

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and the effect of such breach is a failure of any condition to the Waiving
Party’s obligations set forth in Article V and the Waiving Party proceeds with
the Closing, the Parties shall discuss such circumstances and, unless the
Parties otherwise agree in writing, the Waiving Party shall be deemed to have
waived such breach and the Waiving Party and its successors, assigns and
Affiliates shall not be entitled to be indemnified pursuant to Section 10.3, to
sue for damages or to assert any other right or remedy for any losses arising
from any matters relating to such condition or breach, notwithstanding anything
to the contrary contained herein or in any certificate delivered pursuant
hereto.
     (b) Each of Arch and the Company shall promptly notify the other Party of,
and furnish each of them with any information that Party may reasonably request
with respect to, the occurrence, to such Party’s actual knowledge, of any event
or condition or the existence of any fact that would cause any of the conditions
to such Party’s obligation to consummate the transactions contemplated by this
Agreement not to be fulfilled, including any breach by any party of any
representation, warranty or covenant contained in this Agreement or any
Ancillary Document.
ARTICLE V
Closing Conditions
     5.1 Closing.
          (a) The closing (the “Closing”) of the purchase and sale of the Arch
Equity Interests shall take place on December 31, 2005, after satisfaction of
the conditions set forth in this Article V, or at such other time as Arch and
the Company shall mutually agree, and it will be effective as of the Effective
Time.
          (b) The Parties shall have a pre-closing (the “Pre-Closing”) on
December 30, 2005, or at such other time as the parties shall mutually agree, at
the offices of Bryan Cave LLP, St. Louis, Missouri, at which the Parties shall
exchange all documents and other items required to be delivered at the Closing
(collectively, the “Closing Deliveries”). Bryan Cave LLP shall hold any Closing
Deliveries delivered by or on behalf of the Company in escrow on behalf of the
Company and Freshfields, Bruckhaus and Deringer LLP shall hold any Closing
Deliveries delivered by or on behalf of Arch in escrow on behalf of Arch. Once
the Pre-Closing has taken place and the Closing Deliveries have been exchanged
into escrow, the Closing shall be deemed to have occurred as soon as it is
11:59 p.m. EST on December 31, 2005. At such time, the Closing Deliveries shall
be deemed to be released out of escrow without any further action by any party.
          (c) In connection with the Closing, on the first business day
following the Closing (and as soon as reasonably possible on such date), the
Company shall pay the Initial Cash Payment, and Arch shall pay the Closing VEBA
Contribution, to PNC Bank, N.A., each in immediately available funds, and such
funds shall be applied as follows: $7,500,000 to fund the Hobet VEBA and the
remaining $7,500,000 to fund the Apogee VEBA as satisfaction in full of Arch’s
obligation pursuant to Section 2.2.

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     5.2 General Conditions.
          The obligation of the parties hereto to consummate the transactions
contemplated by this Agreement is subject to the fulfillment of each of the
following conditions:
     (a) There shall not be in effect on the Closing Date any Order or Law
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or which
could reasonably be expected to otherwise result in a material diminution of the
benefits of the transactions contemplated by this Agreement to the parties
hereto, and there shall not be pending or threatened on the Closing Date any
action or proceeding in, before or by any Governmental or Regulatory Authority
which could reasonably be expected to result in the issuance of any such order
or the enactment, promulgation or deemed applicability to any law.
     (b) All consents, approvals and actions of, filings with and notices to any
Governmental or Regulatory Authority necessary to permit the parties hereto to
perform their respective obligations under this Agreement and to consummate the
transactions contemplated hereby and thereby (i) shall have been duly obtained,
made or given, (ii) shall not be subject to the satisfaction of any condition
that has not been satisfied or waived and (iii) shall be in full force and
effect, and all terminations or expirations of waiting periods imposed by any
Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement, including under the HSR Act, shall
have occurred.
     (c) Such executive officers and directors of the Arch Companies as are
designated by the Company shall have tendered, effective at the Closing Date,
their resignations as such officers and directors.
     (d) The Arch Companies shall have assumed all obligations and liabilities
under the Arch Companies Plans and all obligations of Arch and/or its Affiliates
thereunder, except as expressly provided for herein.
     (e) The Company shall have received a consent, in a form reasonably
acceptable to the Company, from Shonk permitting future changes of control with
respect to certain leases of the Company or its Subsidiaries.
     5.3 Conditions of Obligations of Company.
          In addition to the conditions set forth in Section 5.2, the obligation
of the Company to consummate the transactions contemplated by this Agreement is
subject to the fulfillment of each of the following further conditions:
     (a) Arch shall deliver to Company such duly executed Conveying Documents as
the parties and their respective counsel shall deem reasonably necessary or
appropriate to vest in the Company all right, title and interest in, to and
under the Arch Equity Interests.

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     (b) The representations and warranties of Arch in this Agreement and the
Ancillary Documents (i) that are qualified as to materiality (or with the term
“Arch Material Adverse Effect”) shall be true and complete and (ii) that are not
so qualified shall be true and complete in all material respects, as of the
Closing Date as though made on the Closing Date, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties qualified as to materiality (or with
the term “Arch Material Adverse Effect”) shall be true and complete, and those
not so qualified shall be true and complete in all material respects, on and as
of such earlier date), and the Company shall have received a certificate to that
effect, dated the Closing Date, from an Executive Officer of Arch.
     (c) Except as provided in Section 5.1(c), Arch shall have performed or
complied in all material respects with all obligations and covenants required by
this Agreement to be performed or complied with by it by the time of the
Closing, and the Company shall have received a certificate to that effect, dated
the Closing Date, from an Executive Officer of Arch.
     (d) All consents (or in lieu thereof waivers) listed on Schedule 5.3
(a) shall have been obtained, (b) shall not be subject to the satisfaction of
any condition that has not been satisfied or waived and (c) shall be in full
force and effect.
     (e) The Company shall have received a legal opinion in form and substance
reasonably satisfactory to the Company.
     (f) Each of the Arch Reorganization Transactions shall have occurred.
     (g) Arch shall have delivered to the Company a recently-dated, long-form
certificate of the Secretary of State of the State of Delaware with respect to
the good standing of Apogee Coal Company and Catenary Coal Company and a
recently-dated certificate of existence from the Secretary of State of the State
of West Virginia with respect to Hobet Mining, Inc.
     (h) Arch shall have delivered to the Company a copy of the Certificate of
Formation certified by the Delaware Secretary of State for each of TC Sales and
Robin Land, as well as the limited liability company agreement of each of TC
Sales and Robin Land.
     (i) Arch shall have converted each of Apogee Coal Company, Catenary Coal
Company and Hobet Mining, Inc. into a limited liability company in accordance
with applicable Laws and shall have delivered a copy of the limited liability
agreement of each of them to the Company.
     (j) There shall not be threatened, instituted or pending any action or
proceeding by any Person before any court or Governmental or Regulatory
Authority, domestic or foreign, (i) seeking to restrain, prohibit or otherwise
interfere with the ownership or operation by the Company or any of its
Affiliates

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of all or any material portion of the Arch Equity Interests, the Underlying
Assets or the business or assets of the Company or any of its Affiliates or to
compel Company or any of its Affiliates to dispose of all or any material
portion of the Arch Equity Interests, the Underlying Assets or of the Company or
any of its Affiliates or (ii) seeking to require divestiture by the Company or
any of its Affiliates of any Arch Equity Interests or the Underlying Assets or
the business or assets of the Company or any of its Affiliates.
     (k) Since the Execution Date, nothing shall have occurred that has had or
could reasonably be expected to have an Arch Material Adverse Effect.
     (l) The Company shall have received such other certificates, instruments
and documents both in confirmation of the representations and warranties of Arch
and in furtherance of the transactions contemplated by this Agreement and the
Ancillary Documents as the Company or its counsel may reasonably request.
     (m) Arch shall have delivered to the Company evidence that the Arch
Companies have been fully released (or arrangements therefor satisfactory to the
Company shall have been made) from any and all Liabilities of any kind under or
in respect of the Arch Credit Agreement, and none of the Assets and Properties
of the Arch Companies are subject to any Liens securing the Liabilities under
the Arch Credit Agreement (or arrangements therefor satisfactory to the Company
shall have been made).
     (n) Each of the Blue Creek Lease and the Master Coal Sales and Services
Agreement shall have been duly executed by the parties thereto and the Company
shall have received a copy thereof.
     (o) The Company shall have received a copy of each of the Coal Sales
Agreements, duly executed by Arch Coal Sales Company, Inc.
     (p) The Company shall have received the Transition Services Agreement, duly
executed by Arch.
     5.4 Conditions of Obligations of Arch.
          In addition to the conditions set forth in Section 5.3, the obligation
of Arch to consummate the transactions contemplated by this Agreement is subject
to the fulfillment of each of the following further conditions:
     (a) The representations and warranties of the Company in this Agreement and
the Ancillary Documents (i) that are qualified as to materiality (or with the
term “Company Material Adverse Effect”) shall be true and complete and (ii) that
are not so qualified shall be true and complete in all material respects as of
the Closing Date as though made on the Closing Date, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties qualified as to materiality (or with
the

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term “Company Material Adverse Effect”) shall be true and complete, and those
not so qualified shall be true and complete in all material respects, on and as
of such earlier date), and Arch shall have received a certificate to that
effect, dated the Closing Date and executed by an Executive Officer of the
Company.
     (b) The Company shall have performed or complied in all material respects
with all obligations and covenants required by this Agreement to be performed or
complied with by the Company by such time, and Arch shall have received a
certificate to that effect, dated the Closing Date and executed by an Executive
Officer of the Company.
     (c) Arch shall have received a legal opinion in form and substance
reasonably satisfactory to Arch.
     (d) The Company shall have delivered to Arch a certificate of an Executive
Officer of the Company attaching a long-form certificate of the Secretary of
State of Delaware with respect to the good standing of the Company. Arch shall
have received all documents it may reasonably request relating to the existence
and authority of the Company, all in form and substance reasonably satisfactory
to Arch.
     (e) There shall not be threatened, instituted or pending any action or
proceeding by any Person before any court or Governmental or Regulatory
Authority or agency, domestic or foreign, (i) seeking to restrain, prohibit or
otherwise interfere with the ownership or operation by the Company or any of its
Affiliates of all or any material portion of the business or assets of the
Company or any of its Affiliates or to compel Company or any of its Affiliates
to dispose of all or any material portion of assets or equity of the Company or
any of its Affiliates or (ii) seeking to require divestiture by the Company or
any of its Affiliates of the business or assets of the Company or any of its
Affiliates.
     (f) Arch shall have received such other certificates, instruments and
documents both in confirmation of the representations and warranties of the
Company and in furtherance of the transactions contemplated by this Agreement
and the Ancillary Documents as Arch or its counsel may reasonably request.
     (g) Without prejudice to Section 4.2.2, the board of directors of the
Company shall have approved the terms of the transactions contemplated by this
Agreement and the Ancillary Documents.
     (h) The Company shall have assumed all obligations of Arch or its
Affiliates, as applicable, under the Retention Agreements.
     (i) Arch shall have received the Transition Services Agreement and the Arch
Coal Sales and Purchase Agreement, each duly executed by the Company.

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     (j) Arch shall have received the Coal Sales Agreements, each duly executed
by Infinity Coal Sales, LLC as agent for the Company.
ARTICLE VI
Covenants
     6.1 Covenants of All Parties.
     (a) Subject to the terms and conditions of this Agreement, the Company and
Arch will use their commercially reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things reasonably
necessary or desirable (including, executing and delivering such other
documents, certificates, agreements and other writings) under applicable Laws to
consummate the transactions contemplated by this Agreement and the Ancillary
Documents.
     (b) The Company and Arch shall cooperate with one another (i) in
determining whether any action by or in respect of, or filing with, any
Governmental or Regulatory Authority, agency, official or authority is required,
or any actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (ii) in taking such actions or
making any such filings and furnishing information required in connection
therewith and seeking timely to obtain any such actions, consents, approvals or
waivers, and shall, subject to applicable legal requirements, permit the other
parties to review in advance any written communication to any Government or
Regulatory Authority, and furnish to the other parties copies of all material
correspondence, filings, and communications between them and their respective
representatives on the one hand, and any Governmental or Regulatory Authority or
their respective staffs on the other hand, in connection with the transactions
contemplated by this Agreement (including, without limitation, taking all
commercially reasonable actions necessary or appropriate to cause the prompt
expiration or termination of any applicable waiting period under the HSR Act in
respect of the transactions contemplated hereby, including, without limitation,
complying as promptly as practicable with any requests for additional
information).
     (c) At the Closing or as soon as reasonably possible thereafter, (i) Arch
shall assign or cause the assignment of all rights in and to, and the Company
shall assume all obligations under, all Permits listed on Schedule 4.2.19(1)
that are not listed as owned by one of the Arch Companies, in each case,
pursuant to a Permit Assignment and Assumption Agreement, and (ii) the Company
shall cause the Arch Companies, as applicable, to assign, all rights in and to,
and Arch shall assume all obligations under, all Permits owned by the Arch
Companies which are not listed on Schedule 4.2.19(1) which are permits utilized
in connection with Dal-Tex, Hobet 07 and Arch of Illinois operations, in each
case, pursuant to a Permit Assignment and Assumption Agreement.

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     6.2 Covenants of Arch.
     (a) From the Execution Date until the Closing, subject to applicable Law,
Arch will (i) give the Company, and its counsel, financial advisors, auditors
and other authorized representatives full access to the offices, properties,
books and records (as applicable) of Arch relating to the Arch Equity Interests
and Underlying Assets, (ii) furnish to the Company and its counsel, financial
advisors, auditors and other authorized representatives such financial and
operating data and other information relating to the Arch Equity Interests and
the Underlying Assets as such Persons may reasonably request and (iii) instruct
the employees, counsel and financial advisors of Arch to cooperate with the
Company in its investigation of the Arch Equity Interests and the Underlying
Assets. The Parties agree to comply with the information sharing restrictions of
the Confidentiality Agreement, including the restriction that all information
sharing relate solely to the transactions contemplated by this Agreement and the
Ancillary Documents. Any investigation pursuant to this Section shall be
conducted in such manner as not to interfere unreasonably with the conduct of
the business of Arch and its Subsidiaries. Notwithstanding the foregoing and
subject to applicable Law, the Company shall not have access to personnel
records of Arch relating to individual performance or evaluation records,
medical histories or other information which in Arch’s good faith opinion is
sensitive or the disclosure of which could subject Arch to risk of liability
until after the Effective Time.
     (b) From the Execution Date until the Closing, Arch shall promptly notify
the Company of:
(i) any notice or other communication from any Person alleging that the consent
of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(ii) any notice or other communication from any Governmental or Regulatory
Authority in connection with the transactions contemplated by this Agreement;
(iii) any Actions that are commenced or, to its Knowledge are threatened
against, relating to or involving or otherwise affecting Arch or the Arch Equity
Interests or the Underlying Assets conveyed (directly or indirectly) by it that,
if pending on the date of the execution of this Agreement, would have been
required to have been disclosed pursuant to Section 4.2.12 or that relate to the
consummation of the transactions contemplated by this Agreement; and
(iv) the damage or destruction by fire or other casualty of any part of the
Underlying Assets held by the Arch Companies or in the event that any such or
part thereof becomes the subject of any proceeding or, to the Knowledge of Arch,
threatened proceeding for the taking thereof or any

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part thereof or of any right relating thereto by condemnation, eminent domain or
other similar governmental action.
     (c) From the Execution Date until the Closing, except for the Arch
Reorganization Transactions, Arch shall conduct the business of the Arch Equity
Interests and the Underlying Assets in the ordinary course consistent with past
practice and shall use commercially reasonable efforts to preserve intact the
business organizations and relationships with third parties and to keep
available the services of the present employees of the business of the
applicable Arch Equity Interests and Underlying Assets. Without limiting the
generality of the foregoing, from the Execution Date until the Closing Date,
except for the Arch Reorganization Transactions, Arch will not:
(i) with respect to the business of the Arch Equity Interests or the Underlying
Assets acquire a material amount of assets from any other Person, other than the
purchase of inventory and equipment in the ordinary course of business;
(ii) sell, lease, license, otherwise dispose of, or create any Liens on, any
(A) Arch Equity Interests or (B) Underlying Assets other than, with respect to
the Underlying Assets (1) the sale of inventory in the ordinary course of
business, (2) the sale, transfer or discarding of obsolete or worn-out equipment
no longer required in connection with the business of such Person or (3) Assets
and Properties that are replaced by other Assets and Properties of like utility
in such Person’s business;
(iii) agree or commit to do any of the foregoing; or
(iv) take or agree or commit to take any action that would make any
representation or warranty of Arch hereunder inaccurate in any respect at, or as
of any time prior to, the Closing Date or (ii) omit or agree or commit to omit
to take any action necessary to prevent any such representation or warranty from
being inaccurate in any respect at any such time.
     (d) From the Execution Date until the Closing, Arch shall ensure that none
of the Arch Companies do or suffer to exist (and, in the case of paragraph
(iv) below, Arch shall not do or suffer to exist), any of the following without
the prior consent of the Company, except to the extent contemplated in the Arch
Reorganization Transaction:
(i) amend or otherwise modify in any respect its charter, by-laws or other
equivalent organizational documents;
(ii) declare, set aside, make or pay any dividend or other distribution, payable
in cash, stock, property or otherwise, with respect to any of its outstanding
equity or debt securities (other than cash dividends or distributions made prior
to the Closing);

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(iii) reclassify, combine, split, subdivide or otherwise amend the terms of, or
redeem, repurchase or otherwise acquire, directly or indirectly, any of its
outstanding equity or debt securities (or securities convertible into, or
exercisable or exchangeable for equity or debt securities);
(iv) either (I) issue, sell, pledge, grant, transfer or otherwise dispose of (or
authorize the issuance, sale, pledge, grant, transfer or other disposition), or
(II) create, permit, allow or suffer to exist any Lien in respect of (A) any
ownership interests of any Arch Company or any other securities convertible into
or exchangeable or exercisable for any such ownership interests (or derivative
securities thereof), or (B) any options, warrants or other rights of any kind to
acquire any ownership interests (including, without limitation, any phantom
interest), of any Arch Company;
(v) grant any increase in compensation or benefits, or otherwise increase the
compensation or benefits payable, or to become payable, to any director, officer
or employee of, or any consultant to, any Arch Company or grant any rights to
retention, severance or termination pay to, or enter into any new (or amend any
existing) employment, retention, severance or other Contract with, any such
Person other than any such increase in compensation or benefits made in the
ordinary course of business and consistent with past practices;
(vi) adopt any new or amend any existing Arch Companies Plan (or any plan,
arrangement or other Contract that would be an Arch Companies Plan of any Arch
Company if so adopted or amended), including, without limitation, (A) amending
or modifying the period (from that currently provided for) of exercisability of
options granted under any Arch Companies or (B) authorizing cash payments in
exchange for any options to acquire equity interests granted thereunder;
(vii) enter into, adopt, extend, renew or amend any collective bargaining
agreement or other contract with any labor organization, union or association,
except in each case as required by applicable Law (and following written notice
to the Company);
(viii) incur or assume any liabilities, obligations or indebtedness for borrowed
money or guarantee any such liabilities, obligations or indebtedness (other than
indebtedness with respect to working capital in the ordinary course and in
amounts consistent with past practice), or issue any other debt securities, or
assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any Person, or otherwise make any loans or
advances material to the business of any Arch Company;

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(ix) sell, transfer, lease, license or otherwise dispose of any real or personal
property or other assets thereof that are material to the business of any Arch
Company, other than (i) the sale of inventory in the ordinary course of
business, (ii) the sale, transfer or discarding of obsolete or worn-out
equipment no longer required in connection with the business of such Person or
(iii) Assets and Properties that are replaced by other Assets and Properties of
like utility in such Person’s business;
(x) enter into, modify, amend, terminate, permit the lapse of or renew any lease
of real property, except any renewals of existing leases in the ordinary course
of the Business and consistent with past practice, with respect to which the
other Contributors and the Company shall be provided prior written notice;
(xi) modify, amend, terminate or permit the lapse of any lease of, or reciprocal
easement agreement, operating agreement or other material agreement relating to,
real property, except any renewals of existing leases or agreements pursuant to
their terms or terminations or lapses of existing leases or agreements pursuant
to the expiration of the then current term, in each case in the ordinary course
of business and consistent with past practice;
(xii) create, permit, allow or suffer to exist any Lien that would have been
required to be disclosed on Schedule 4.2.4(a)(iii) or 4.2.16(a)(2), if existing
as of the Execution Date;
(xiii) cancel, pay, discharge or satisfy any claims, indebtedness, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) or waive any rights of material value, other than the payment,
discharge or satisfaction of claims, indebtedness, liabilities or obligations in
the ordinary course of business;
(xiv) make any payment other than in the ordinary course of business consistent
with past practice or transfer any assets to, or enter into any Contract with,
Arch or any Affiliate of Arch in each case on terms that are less favorable to
the Arch Company than could be obtained on an arm’s-length basis from unrelated
third parties;
(xv) make any change with respect to the Arch Companies’ accounting practices,
policies, principles, methods or procedures, including, without limitation,
revenue recognition policies, other than as required by GAAP (which
GAAP-required changes will be provided to the other parties in writing);
(xvi) make any Tax election or settle or compromise any material Tax liability
except as noted in Section 11.2(b);

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(xvii) acquire (including, without limitation, by merger, consolidation, or
acquisition of stock or assets) any interest in any corporation, partnership,
other business organization or Person or any division thereof, other than the
purchase of inventory in the ordinary course of business consistent with past
practice;
(xviii) make or authorize any capital expenditure, other than capital
expenditures in the ordinary course of the business consistent with past
practice;
(xix) (A) amend, modify, terminate, cancel or request any modification or
amendment to, or agree to any of the foregoing in respect of this Agreement or
any Ancillary Document or contract to which an Arch Company is a party, or
(B) enter into any additional contract or agreement other than in the ordinary
course of business; or
(xx) authorize or enter into any formal or informal agreement (whether or not in
writing) or otherwise make any commitment to do any of the foregoing, or to take
any action which would make any of the representations or warranties contained
in this Agreement untrue or incorrect or prevent Arch and the Company from
performing or cause Arch and the Company not to perform its obligations
hereunder, or result in any of the conditions to the transactions contemplated
hereby not being satisfied.
     (e) Following the Closing, Arch shall deliver to the Company, promptly upon
the reasonable request of the Company from time to time (i) all Books and
Records solely related to the business and operations of the Arch Companies
(other than the Material Books and Records, which shall have been delivered to
the Company pursuant to Section 4.2) and (ii) in the case of Books and Records
that relate to the business and operations of the Arch Companies but do not
relate solely thereto, the information contained in such Books and Records that
relates to the business and operations of the Arch Companies.
     (f) If any Arch Company is required to make any payments, refunds or
credits to the UMWA funds in connection with any claims that the UMWA funds have
against any Arch Company as of the Closing arising under the A.T. Massey Coal
Company Case, Arch shall pay the amount of such payment, refund or credit to the
Company within 10 business days of receipt of notice from the Company thereof.
     (g) The Company shall deliver to Arch promptly after receipt by it from the
UMWA funds the assessment of monthly payments for the then upcoming calendar
year due by the Company in respect of Coal Act Benefits. Within ten calendar
days before each monthly payment is due, Arch shall pay the relevant monthly
payment amount to the Company. Arch shall cooperate in good

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faith with the Company to arrange for direct payment by Arch of all Coal Act
Benefits to the UMWA funds.
     (h) Arch will cooperate in good faith with the Company to obtain any
governmental approvals necessary as a result of a change in ownership of the
Arch Companies.
     (i) Prior to the Closing, Arch, and following the Closing, Arch and the
Company, shall take appropriate actions to seek recognition by the Internal
Revenue Service of the exempt status of the Hobet VEBA and the Apogee VEBA under
Section 501(c)(9) of the Code.
     (j) As of the Closing, Hobet and Apogee, together, shall have an aggregate
cash balance (the “Cash Balance”) of $4,576,000 for the purpose of providing
benefits to the Benefits Covered Employees under the Black Lung Benefits Reform
Act of 1977, as amended in 1981 (“Black Lung Benefits”); provided, however, the
Cash Balance shall not be considered in the calculation of working capital
pursuant to Section 3.2.
     (k) Arch (I) shall pay all claims made by any Covered Employee prior to the
Effective Time under any Arch Benefit Plan and (II) shall remain responsible for
and shall make any payments required by and fulfill its obligations associated
with the Arch Plans. For purposes of this Section 6.2(k), a claim shall be
deemed made on the date the service is provided.
     (l) On or prior to the Closing, Arch shall adopt amendments to the Arch
Plans necessary to ensure that the Covered Employees cease to accrue benefits
under the Arch Plans after the Effective Date.
     (m) Within 60 days following the Closing, Arch shall prepare, or cause to
be prepared, and deliver to the Company audited financial statements titled,
“Arch Coal, Inc. Contributed Properties Combined Financial Statements” for the
fiscal year ended December 31, 2005 (the “2005 Audited Financial Statements”).
Such 2005 Audited Financial Statements shall be prepared in accordance with the
standards set forth in Section 4.2.8(c) above.
     (n) Except as otherwise provided for herein, following the Closing, in the
event Arch or one of its Subsidiaries, collects any receivables which are
related to the Arch Companies or the business conducted thereby, Arch shall pay
or cause its Subsidiaries to pay, as applicable, any such amounts to the Company
promptly upon receipt thereof.
     (o) For each of the five (5) years following the Closing, Arch shall pay to
the Company $1.25 per ton of coal sold by the Company for a particular calendar
month, up to a maximum of $8,500,000 per year, to be paid monthly within 20 days
of the end of each month.

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     (p) Arch shall sell to the Company, at the applicable contract price, any
coal required to be supplied under any of the coal sales agreements set forth on
Schedule 4.2.18(a)(x)(A) which was scheduled to be shipped in 2005 and is set
forth on Schedule 6.2(p). The actual scheduling of the shipments shall be
mutually agreed upon in a reasonable manner by Arch and the Company.
     (q) Prior to the Closing, Arch or one of its Affiliates shall take all
actions necessary, if any, to transfer sponsorship of the Arch Companies Plans
to the Arch Companies as of the Closing. After the Closing, neither Arch nor any
of its Affiliates shall have any responsibility for the administration (unless
pursuant to the Transition Services Agreement) or liability for benefits under
such plans except as otherwise expressly provided in this Agreement. After the
Closing, the Company, the Arch Companies or one of their Affiliates shall have
the sole liability to provide the benefits thereunder (except as otherwise
expressly provided in this Agreement) and to otherwise administer such plans
(unless provided otherwise pursuant to the Transition Services Agreement).
     (r) Provided the Closing Date occurs before January 6, 2006, prior to the
Closing Date, neither Arch nor an Arch Company will terminate the retiree
medical coverage of a Benefits Covered Employee due to such individual’s failure
to enroll in prescription drug coverage available to Medicare beneficiaries
under Part D of Medicare.
     (s) Arch shall cooperate with, and provide such assistance to the Company
that is reasonably necessary to accomplish the provisions contained in Section
6.3(a)(iv), including, but not limited to, the deposit of funds, pursuant to the
Company’s direction, into the Arch 401(k) Plan representing the Covered
Employees’ repayment of any outstanding plan loans from the Closing Date until
such time that the transfer of assets from the Arch 401(k) Plan to the Company’s
401(k) Plan is completed.
     (t) Because the Arch Companies have not been fully released at or before
Closing from any and all Liabilities of any kind under or in respect of the Arch
Credit Agreement, or any of the Assets and Properties of the Arch Companies are
subject to any Liens securing the Liabilities under the Arch Credit Agreement,
pursuant to Section 5.2(m), the parties have agreed on an arrangement pursuant
to which the parties shall cooperate and use their best efforts to take such
actions, make such filings and obtain such executed documents as is necessary to
cause (i) the Arch Companies to be fully released from any and all Liabilities
of any kind under or in respect of the Arch Credit Agreement and (ii) none of
the Assets or Properties of the Arch Companies to be subject to any Liens
securing the Liabilities under the Arch Credit Agreement, in each case, as soon
as reasonably possible, and in any event within 30 days following the Closing
Date (collectively, the Releases”). If all of the Releases are not completed
within 30 days of the Closing Date, then Arch shall pay to the Company (without
limiting the Company’s right to indemnity under Section 10.3(l)), $25,000 per
day

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(increasing by $10,000 per day each 10 days thereafter) until the Releases are
completed.
     6.3 Covenants of the Company.
     (a) The Company covenants as follows with respect to the employees of each
Arch Company (together, the “Covered Employees”):
     (i) Equivalent Compensation. From the Closing Date until six months
following the Closing Date, the Company will maintain or will cause to be
maintained base salary, wages, and compensation levels for the benefit of the
Covered Employees, and such Covered Employees will be eligible to participate in
the Company’s benefit plans and programs, which, in the aggregate, are
reasonably equivalent in value to, the wages, compensation levels, and core
benefit plans provided to the Covered Employees on the Execution Date. In
addition, and notwithstanding the previous sentence, for the 12 months following
the Closing Date, the Company will maintain as to each Covered Employee a
severance plan that is substantially equivalent to the severance plan to which
such Covered Employee was entitled prior to the Closing Date.
     (ii) Service Credit. The Company shall provide each Covered Employee with
credit for all service with the Arch Companies and their respective Affiliates,
including any service with predecessors of such entities, for vesting and
eligibility purposes only under each employee benefit plan, program, or
arrangement of the Company or its Affiliates in which such employee is eligible
to participate, except to the extent that such service credit would result in a
duplication of benefits with respect to the same period of service and in
accordance with the eligibility and vesting requirements contained under such
plans. With respect to each group health plan or welfare plan provided by the
Company or its Affiliates as of the Closing Date in which the Covered Employees
are eligible to participate after the Closing Date, the Company shall waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Covered
Employees, provided that if such plan is provided under an insured arrangement,
such waiver will occur only to the extent otherwise permitted under the
applicable insurance contract or agreement, provided, further, that the Company
shall use its best efforts to procure such waivers.
     (iii) Notwithstanding any other provision of this Agreement, the Company
(i) shall not be required to maintain a “defined benefit” plan, provided it
maintains a “defined contribution” pension plan; (ii) shall not be required to
maintain any form of nonqualified deferred compensation plan (as defined in
Section 409(A) of the Code) except a plan which complies with the provisions of
Section 409(A) of the Code; and (iii) may establish plans (including pension
plans and 401(k) plans) within a reasonable time after the Closing (rather than
having such plans in place at the Effective Time) with retroactive effect or
other reasonable accommodation to Covered Employees, to the extent permitted by
Laws.
     (iv) As of the Closing Date, Arch shall cease all contributions in respect
of each Covered Employee in Arch’s 401(k) Plan. As soon as reasonably
practicable after

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the Closing Date, the Company or one of its Affiliates shall have in effect one
or more defined contribution plans that includes a qualified cash or deferred
arrangement within the meaning of Code Section 401(k) (“Company’s 401(k) Plan”).
Each Covered Employee who was a participant in Arch’s 401(k) Plan on the Closing
Date shall be immediately eligible to participate in Company’s 401(k) Plan. As
soon as practicable following the Closing Date, Arch shall cause to be
transferred to Company’s 401(k) Plan cash or other assets (meaning notes
evidencing loans to Covered Employees from their account balances) equal to the
aggregate value of the account balances in Arch’s 401(k) Plan as of the date of
transfer for Covered Employees, including any qualified domestic relations
orders, as defined in Code Section 414(p), applicable to the account balances of
Covered Employees. Following such transfer of assets, Company’s 401(k) Plan
shall assume all obligations with respect to the transferred account balances
and Arch and its Affiliates shall have no further liability to the Company or
any Covered Employee under Arch’s 401(k) Plan with respect to such transferred
amounts. The Company’s 401(k) Plan shall comply with Code Section 411(d)(6) with
respect to the account balances transferred to Company’s 401(k) Plan from Arch’s
401(k) Plan, and the Company and its Affiliates shall indemnify and hold Arch
and its Affiliates harmless from and against any losses arising from any failure
to comply with such Code provision. The Company’s 401(k) Plan shall comply with
Code Section 411(d)(6).
     (v) The Company or one of its Affiliates shall make sufficient funds
available to Arch or its designee to allow Arch or its designee to administer
the Company’s flexible benefits plans in accordance with the terms of the
Transition Services Agreement. Neither Arch nor any of its Affiliates shall be
liable to make funds available to pay benefits claims under the Company’s
flexible benefits plan. Failure of the Company or one of its Affiliates to make
sufficient funds available to process claims under the Company’s flexible
benefits plan shall be the sole liability of the Company.
     (vi) The Company or an Affiliate of the Company, shall as soon as
reasonably possible following the Closing, adopt a plan substantially similar to
the Ashland Coal, Inc. Long-Term Disability Plan to provide long-term disability
benefits to the LTD Individuals who are currently receiving benefits under the
Ashland Coal, Inc. Long-Term Disability Plan due to their former employment with
Hobet Mining.
     (b) If any Arch Company is entitled to any payments, refunds or credits in
connection with any claims of any Arch Company relating to the A.T. Massey Coal
Company Case, and any such amounts are paid to the Company or any Arch Company,
or the Company or any Arch Company receives any credit or refund in connection
therewith following the Closing, the Company shall pay the amount of such
payment, credit or refund to Arch within 10 business days of receipt thereof.
     (c) After the Closing, the Company shall pay or cause the Arch Companies to
pay all liabilities of Arch or the Arch Companies with respect to the Arch
Companies Plans Employees under the Federal Mine Safety and Health Act of 1977,
as amended, and applicable Federal and state laws for claims for disability or
death due to “black lung” or pneumoconiosis, whenever created.

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     (d) Within 90 days following the Closing, the Company shall pay the
Incentive Compensation Accrual to certain employees of the Arch Companies who
were eligible under the annual incentive compensation plan of Arch prior to the
Closing (a list of whom has been previously provided to the Company), determined
in the Company’s discretion. In the event the Company does not pay all or any
portion of the Incentive Compensation Accrual to such employees within such
time, the Company shall pay to Arch any amount of the Incentive Compensation
Accrual not paid to such employees and such amount shall be deemed to be an
increase to the Purchase Price.
ARTICLE VII
Non-solicitation of Employees
          (a) The Company agrees that it will not, and none of its Affiliates
will, either for its own account or in connection with or on behalf of any
Person at any time from the Execution Date until the date that is six months
after the Closing Date (the “Restricted Period”), directly or indirectly, either
for itself or any other Person, (i) induce, solicit or entice or attempt to
induce, solicit or entice any employee at such time of Arch or any of its
Subsidiaries at such time to leave the employ thereof, or (ii) in any way
interfere with the relationship between Arch or any of its Subsidiaries at such
time and any of its employees at such time, it being understood that upon
consummation of the sale contemplated in Article II, such restrictions are not
applicable to the Arch Companies given that they will be Subsidiaries of the
Company.
          (b) Arch agrees that it will not, and none of its Affiliates will,
either for his or its own account or in connection with or on behalf of any
Person during the Restricted Period, directly or indirectly, either for itself
or any other Person, (i) induce, solicit or entice or attempt to induce, solicit
or entice any employee at such time of the Company or its Subsidiaries at such
time to leave the employ of thereof, or (ii) in any way interfere with the
relationship between the Company or any of its Subsidiaries at such time and any
of its employees at such time.
          (c) In the event of a breach of any covenant set forth in this
Article VII of this Agreement, the term of such covenant will be extended by the
period of the duration of such breach. If any provision contained in this
Article shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Section, but this Section shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein. It
is the intention of the parties that if any of the restrictions or covenants
contained herein is in any way construed to be too broad or to any extent
invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
applicable Law, a court of competent jurisdiction shall construe and interpret
or reform this Section to provide for a covenant having the maximum enforceable
provisions (not greater than those contained herein) as shall be valid and
enforceable under such applicable Law. Each party acknowledges that the other
parties would be irreparably harmed by any breach of this Section and that there
would be no adequate remedy at law or in damages to compensate such other
parties for any such breach. The parties agree that other parties shall be
entitled to injunctive relief requiring specific performance by such party of
this Section.

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ARTICLE VIII
Arch Guarantees
     8.1 Arch Guarantees.
          (a) The Company agrees with Arch to use commercially reasonable
efforts after the Closing Date to facilitate the release of Arch from its
obligations under any guarantees (the “Arch Guarantees”) provided by it with
respect to payments under (i) any of the coal mining leases held by any of the
Arch Companies or any of the coal sales agreements set forth on
Schedule 4.2.18(a)(x)(A), (ii) the Reclamation Bonds, and (iii) any of the
bonds, letters of credit or guarantees set forth on Schedule 8.1(a) (the
“Miscellaneous Bonds”). Arch agrees to cooperate fully with the Company in
connection with the Company’s efforts to seek the releases described in this
Section 8.1.
          (b) Notwithstanding the foregoing, if the Company fails to obtain the
release of Arch from the guarantees related to the Reclamation Bonds by the date
that is two years after the Closing Date, the Company will arrange for a letter
of credit to be posted in favor of Arch in the amount of the portion of the
Reclamation Bonds reflected as liabilities on Books and Records of the Company,
which may be drawn upon in the event that Arch is required to make any payments
in respect of such guarantees.
          (c) In the event the Company fails to obtain the release of Arch from
any guarantees related to the Miscellaneous Bonds within 360 days following the
Closing Date, the Company shall post an irrevocable letter of credit for the
aggregate bond or guarantee amounts outstanding under the Miscellaneous Bonds;
provided, however, if at any time, ArcLight Energy Partners Fund L, L.P. owns
(beneficially or of record) less than five percent (5%) of the outstanding
equity of the Company, calculated on a fully diluted basis, the Company shall be
required to obtain the release of Arch from any such guarantees related to the
Miscellaneous Bonds within 30 days of such date.
ARTICLE IX
Costs and Expenses
     9.1 Costs and Expenses.
               (a) The Company shall pay all sales, use and similar taxes
arising out of the contributions, conveyances and deliveries to be made
hereunder, and shall pay all documentary, filing, recording, transfer, deed, and
conveyance taxes and fees required in connection therewith in connection with
the transactions contemplated by this Agreement and the Ancillary Documents. In
addition, the Company shall be responsible for all costs, liabilities and
expenses (including court costs and reasonable attorneys’ fees) incurred by the
Company in connection with the satisfaction or waiver of any restriction
pursuant to Section 11.1.
               (b) Each of the Parties shall pay all costs and expenses incurred
on its behalf in connection with the negotiation, preparation and execution of
this Agreement and the consummation of the transactions contemplated hereby,
including, without limitation, the fees and expenses of its attorneys,
accountants, advisors and other representatives.

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ARTICLE X
Further Assurances; Termination; Indemnification
     10.1 Further Assurances.
               (a) From time to time, as and when requested by any party, each
Party shall execute and deliver, or cause to be executed and delivered, all such
documents and instruments and shall take, or cause to be taken, all such further
or other actions, as such other Party may reasonably deem necessary or desirable
to consummate the transactions contemplated by this Agreement, including, such
assignments, deeds, bills of sale, consents and other instruments as any Party
or its counsel may reasonably request as necessary or desirable for such
purpose.
               (b) Arch agrees to furnish to the Company, upon request, as
promptly as practicable, such information and assistance relating to the Arch
Equity Interests and the Underlying Assets (including, without limitation,
access to Books and Records and employees thereof) as is reasonably necessary
for the preparation of financial statements, the performance of any financial
audits, the filing of all Tax Returns, the making of any election relating to
Taxes, the preparation for any audit by any taxing authority, the prosecution or
defense of any claim, suit or proceeding relating to any Tax and the defense of
the Arch Companies Litigation or the prosecution or defense of any other
litigation by or against any Person (other than any litigation by Arch or the
Company against the other Party); provided, however, in any case, the Company
agrees to furnish to Arch upon reasonable request copies of those Books and
Records that were delivered by Arch to the Company in connection with the
consummation of the transactions contemplated hereby. Each Party shall retain
all Books and Records with respect to Taxes and the matters in dispute in the
Arch Companies Litigation pertaining to the Arch Equity Interests and the
Underlying Assets for a period of at least six years following the Closing Date.
At the end of such period, each Party shall provide the other with at least ten
days prior written notice before destroying any such Books and Records, during
which period the Party receiving such notice can elect to take possession, at
its own expense, of such Books and Records. The Parties shall cooperate with
each other in the conduct of any audit or other proceeding relating to Taxes or
the Arch Companies Litigation involving the Arch Equity Interests, the
Underlying Assets or the business thereof.
               (c) If at any time prior to the second anniversary of the Closing
Date, a Person challenges (whether or not through a legal proceeding) the title
of any of the Arch Companies to the real property purported to be owned, leased
or subleased by it, Arch shall, as and when reasonably requested by the Company,
execute and deliver, or cause to be executed and delivered, all such documents
and instruments and shall take, or cause to be taken, all such further or other
actions, as the Company and Arch may reasonably deem necessary or desirable to
defend the title of the relevant Arch Company thereto; provided that Arch shall
not be required to expend any money in connection with compliance with this
paragraph (c) to the extent that such expenditure does not exceed the threshold
set forth in the proviso contained in Section 10.3(a).
     10.2 Termination
               (a) This Agreement may be terminated at any time prior to the
Closing:

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(i) by mutual agreement of the Company and Arch;
(ii) by either Arch or the Company if the Closing shall not have been
consummated before January 1, 2006;
(iii) by the Company if an Arch Material Adverse Effect has occurred which has
not been cured (if such Arch Material Adverse Effect is capable of being cured)
by Arch on or before December 30, 2005;
(iv) by Arch if a Company Material Adverse Effect has occurred which has not
been cured (if such Company Material Adverse Effect is capable of being cured)
by the Company on or before December 30, 2005;
(v) by Arch, if Arch shall not have received an approval from its board of
directors approving the terms of the transactions contemplated by this Agreement
and the Ancillary Documents; or
(vi) by the Company if it shall not have received an approval from its board of
directors approving the terms of the transactions contemplated by this Agreement
and the Ancillary Documents.
The party desiring to terminate this Agreement pursuant to the clauses above
shall give notice of such termination to the other party or parties.
10.3 Indemnification.
     (a) Notwithstanding anything to the contrary in this Agreement, Arch hereby
indemnifies the Company and its Affiliates, directors, officers, employees and
agents against and agrees to hold each of them harmless from 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 action, suit or proceeding whether involving a third party claim or a claim
solely between the parties hereto) (“Damages”) incurred or suffered by the
recipient of such indemnity or any of its Affiliates, directors, officers,
employees and agents arising out of any breach of a representation or warranty
(each such breach of a representation or warranty a “Warranty Breach”) by Arch
or breach of covenant or agreement made or to be performed by Arch pursuant to
this Agreement, but in the case of a breach of covenant except to the extent
caused by the Company or any of its Affiliates (other than Arch and its
Affiliates); provided that with respect to an indemnification by Arch for any
Warranty Breach under any of Section 4.2 (A) Arch shall not be liable unless the
aggregate amount of Damages with respect to any Warranty Breaches exceeds
$7,500,000 (the “Basket”) and then for the full amount of such Damages and
(B) Arch’s maximum liability for all such Warranty Breaches shall not exceed
$75,000,000 (the “Cap”).
     (b) Notwithstanding anything to the contrary in this Agreement, Arch hereby
indemnifies the Company and its Affiliates, directors, officers, employees

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and agents from and against and agrees to hold each of them harmless from any
and all Damages incurred or suffered by any of them arising out of or in
connection with all currently pending litigation or arbitration proceedings
(including any existing orders or judgments related to completed proceedings)
involving any Arch Company or any of the Assets and Properties, business or
operations of any Arch Company (the “Arch Companies Litigation”), including
without limitation, the litigation or arbitral proceedings set forth on
Schedule 10.3(b). Arch shall assume the defense of the Arch Companies Litigation
and the Parties shall make available to each other all relevant information in
their possession relating to any Arch Companies Litigation, subject to
protection of attorney client and attorney work product privileges, and shall
cooperate in the defense thereof. In furtherance of Arch’s right to assume such
defense, the Company shall cause each relevant Arch Company to issue a
power-of-attorney in favor of Arch, in form and substance mutually acceptable to
Arch and the Company.
     (c) Notwithstanding anything to the contrary in this Agreement, the Company
hereby indemnifies Arch and its Affiliates, directors, officers, employees and
agents, from and against, and agrees to reimburse Arch in respect of, (i) any
and all payments made by it under the Arch Guarantees and (ii) any and all
reasonable and customary costs and/or expenses paid or incurred by Arch in
connection with the Reclamation Bonds and/or the Miscellaneous Bonds, including
without limitation, the cost of maintenance of the Reclamation Bonds and/or the
Miscellaneous Bonds.
     (d) Notwithstanding anything to the contrary in this Agreement, the Company
hereby indemnifies and holds harmless Arch and its Affiliates, directors,
officers, employees and agents from any and all Damages incurred or suffered by
any of them arising from liabilities or obligations of the Arch Companies,
except to the extent of any Damages arising out of any Warranty Breach by Arch
or for which Arch would otherwise be obligated to indemnify the Company pursuant
to this Section 10.3 or otherwise pay pursuant to any covenant contained in this
Agreement.
     (e) Notwithstanding anything to the contrary in this Agreement, the Company
hereby indemnifies and holds harmless Arch and its Affiliates, directors,
officers, employees and agents from any and all Damages incurred or suffered by
any of them arising out of, relating to or in connection with (i) the Arch
Companies Plans, or (ii) any claims made by one or more of the LTD Individuals
for benefits related to long term disability, except to the extent of any
Damages arising out of any Warranty Breach by Arch or for which Arch would
otherwise be obligated to indemnify the Company pursuant to this Section 10.3 or
otherwise pay pursuant to any covenant contained in this Agreement.
     (f) Notwithstanding anything to the contrary in this Agreement, the Company
hereby indemnifies Arch and its Affiliates against and agrees to hold each of
them harmless from any and all Damages incurred or suffered by the

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recipient of such indemnity or any of its Affiliates arising out of any Warranty
Breach by the Company or breach of covenant or agreement made or to be performed
by the Company pursuant to this Agreement; provided that with respect to
indemnification by the Company for any Warranty Breaches under any of
Section 4.1 (A) the Company shall not be liable unless the aggregate amount of
Damages with respect to any Warranty Breach exceeds the Basket and then for the
full amount of such Damages and (B) the Company’s maximum liability for all such
Warranty Breaches shall not exceed the Cap.
     (g) Notwithstanding anything to the contrary in this Agreement, the Company
hereby indemnifies and holds harmless Arch and its Affiliates, directors,
officers, employees and agents (i) against any and all Losses under the Worker
Adjustment and Retraining Notification Act, the continuation coverage
requirements contained in Section 4980B(f) of the Internal Revenue Code of 1986
and Section 601 et seq. of ERISA or any similar laws relating to any Covered
Employee arising out of or relating to this Agreement, and (ii) in respect of
(A) any claims made against any of them with respect to a Retention Agreement or
(B) a liability under the Coal Act Benefits with respect to which Arch has
theretofore paid the Company in full pursuant to Section 6.2(g), in each case,
except to the extent of any Damages arising out of any Warranty Breach by Arch
or for which Arch would otherwise be obligated to indemnify the Company pursuant
to this Section 10.3 or otherwise pay pursuant to any covenant contained in this
Agreement.
     (h) Notwithstanding anything to the contrary in this Agreement, Arch hereby
indemnifies and holds harmless the Company, its Affiliates, directors, officers,
employees and agents from and against and agrees to hold each of them harmless
from any and all liabilities of incurred or suffered by any of them for workers’
compensation benefits paid to the Benefits Covered Employees (“Workers’
Compensation Benefits”).
     (i) Notwithstanding anything to the contrary in this Agreement, Arch hereby
indemnifies and holds harmless the Company, its Affiliates, directors, officers,
employees and agents from and against any and all Damages incurred or suffered
by any of them arising out of, relating to or in connection with the Arch Plans,
except as expressly provided for herein.
     (j) Notwithstanding anything to the contrary in this Agreement, Arch hereby
indemnifies and holds harmless the Company, its Affiliates, directors, officers,
employees and agents from and against, any and all Damages incurred or suffered
by any of them arising out of, relating to or in connection with the Company or
one of the Arch Companies under any one or more of the Arch Companies Plans
(i) as they relate to any person who is not an Arch Companies Plans Employee, or
(ii) relating to long term disability obligations existing prior to the
Effective Time other than any long term disability obligations owed to the LTD
Individuals and being provided pursuant to Section 6.3(a)(vi).

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     (k) Notwithstanding anything to the contrary in this Agreement, Arch hereby
indemnifies and holds harmless the Company, its Affiliates, directors, officers,
employees and agents from and against, any and all Damages incurred or suffered
by any of them arising out of, relating to or in connection with (i) a judgment
lien filed by David Anthony Warren in Boone County, West Virginia on January 3,
2000 with respect to a judgment amount equal to $854,722.59, and (ii) a state
tax lien filed on October 16, 2000 by the State of West Virginia in the amount
of $8,635.12.
     (l) Notwithstanding anything to the contrary in this Agreement, Arch hereby
indemnifies and holds harmless the Company, its Affiliates, directors, officers,
employees and agents from and against, any and all Damages incurred or suffered
by any of them arising out of, relating to or in connection with Liabilities
under the Arch Credit Agreement or any Liens securing the Liabilities under the
Arch Credit Agreement.
     (m) The party seeking indemnification under this Section (the “Indemnified
Party”) agrees to give prompt notice to the party against whom indemnity is
sought (the “Indemnifying Party”) of the assertion of any claim, or the
commencement of any suit, action or proceeding in respect of which indemnity may
be sought under such Section; provided that the failure to so notify shall not
affect the obligations of the Indemnifying Party except to the extent such
failure to notify actually prejudices the Indemnifying Party. The Indemnifying
Party may at the request of the Indemnified Party participate in and control the
defense of any such suit, action or proceeding at its own expense. The
Indemnifying Party shall not be liable under this Section for any settlement
effected without its consent of any claim, litigation or proceeding in respect
of which indemnity may be sought hereunder.
     (n) Except in the case of Fraud by a Party, the remedies provided in this
Section 10.3 shall be the exclusive remedies of the Parties after the Closing in
connection with the transactions contemplated by this Agreement, including
without limitation any breach or non-performance of any representation,
warranty, covenant or agreement contained herein. Except in the event of Fraud,
no party may commence any suit, action or proceeding against any other party
with respect to the subject matter of this Agreement or the transactions
contemplated hereby, whether in contract, tort or otherwise, except to enforce
such Party’s rights under this Section 10.3, or equitable and specific
performance remedies with respect to Article VII. As used herein, “Fraud” means
knowing misrepresentation made with the intention of causing material harm to
the other party. Any Party alleging Fraud shall bear the burden of proving the
existence of Fraud.
     (o) Notwithstanding anything to the contrary in this Agreement, Arch shall
not be liable to the Company or any of its Affiliates in any way with respect to
License and/or the Land Management System.

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     (p) For clarification purposes, the Basket and the Cap shall only apply to
Sections 10.3(a) and 10.3(f), and to the extent that indemnity may be available
under either Section 10.3(a) or 10.3(f) in addition to other provisions of
Section 10.3, indemnification shall be made under such other provision.
     10.4 Survival.
               The representations and warranties, covenants and other
agreements of the parties hereto (and the corresponding indemnities under
Section 10.3) contained in this Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith shall survive (a) in the
case of representations (and the corresponding indemnities under Section 10.3)
until the date that is 12 months after the Closing Date and (b) in the case of
covenants, indemnities and other agreements, indefinitely unless otherwise
specified; provided that (i) each representation and warranty (and the
corresponding indemnity) in Section 4.2.3, paragraphs (a), (b), (c) and (e) of
Section 4.2.4, Section 4.2.14, Section 4.2.23 shall survive until the earlier of
(A) expiration of the statute of limitations applicable to the matter covered
thereby (giving effect to any waiver, mitigation or extension thereof) and
(B) three years from the Closing Date, and (ii) each representation, warranty
and covenant (and the corresponding indemnity) in Section 4.2.11 and
Section 11.2 shall survive until the earlier of (A) expiration of the statute of
limitations applicable to tax matters and (B) three years from the Closing Date.
Notwithstanding the preceding sentence, any representation or warranty or
covenant in respect of which indemnity may be sought under this Agreement shall
survive the time at which it would otherwise terminate pursuant to the preceding
sentence, if written notice of the inaccuracy thereof giving rise to such right
of indemnity shall have been given to the party against whom such indemnity may
be sought prior to such time.
ARTICLE XI
Miscellaneous
     11.1 Consents; Restriction on Assignment.
               Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign any Arch Equity Interest,
any Underlying Asset or any claim or right or any benefit arising thereunder or
resulting therefrom if such assignment, without the consent of a third party
thereto, would constitute a breach or other contravention of such Arch Equity
Interest or Underlying Asset or in any way adversely affect the rights of Arch
and the Company thereunder. Arch will use its commercially reasonable efforts to
obtain the consent of the other parties to any such Arch Equity Interest or
Underlying Asset or any claim or right or any benefit arising thereunder for the
assignment thereof to the Company, if required, as the Company may request. If
such consent is not obtained, or if an attempted assignment thereof would be
ineffective or would adversely affect the rights of Arch thereunder so that the
Company would not in fact receive all such rights, Arch and the Company will
cooperate in a mutually agreeable arrangement under which the Company would
obtain the benefits and assume the obligations thereunder in accordance with
this Agreement, including sub-contracting, sub-licensing, or sub-leasing to the
Company which Arch would enforce for the benefit of the Company, with the
Company assuming Arch’s obligations, any and all rights of Arch against a third
party thereto. Arch will promptly pay to the Company when received all monies
received

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by Arch under any Arch Equity Interest, Underlying Asset or any claim or right
or any benefit arising thereunder. In such event, Arch and the Company shall, to
the extent the benefits therefrom and obligations thereunder have not been
provided by alternate arrangements satisfactory to the Company and Arch,
negotiate in good faith an adjustment in the consideration paid by the Company
for the Arch Equity Interests.
     11.2 Tax Matters.
          (a) As between Arch and the Company, all real estate and personal
property taxes relating to the assets of the Arch Companies (herein collectively
referred to as the “Arch Taxes”) shall be borne by Arch for the period of time
prior to the Closing Date and by the Company for the period of time from and
after the Closing Date. The Company shall pay the Arch Taxes for the tax period
that includes the Closing Date and shall submit to Arch proof of payment of such
Arch Taxes within a reasonable time of such payment for reimbursement by Arch
under the terms of such leases. Arch shall fully reimburse the Company for any
unpaid amounts of the Arch Taxes relating to the period of time prior to the
Closing Date.
          (b) The Company agrees that in the event any amounts are collected or
received by any of the Arch Companies from and after the Closing with respect to
any tax claims which related to a period ending on or prior to the Closing,
including but not limited to those claims set forth in Schedule 11.2(b), filed
by Arch relating to the Arch Companies, the Company as soon as practically
possible shall pay over all such amounts to Arch (net of expenses). The Company
agrees to permit Arch to control the prosecution of any such outstanding tax
claims to which Arch or its Affiliates is entitled under this Section 11.2, and
upon Arch’s reasonable request in writing, the Company will, or will cause its
relevant Affiliates to, authorize by appropriate powers of attorney such Persons
as Arch designates to represent such Affiliates with respect to such claims.
Arch shall indemnify the Company for any costs or expenses it incurs that are
directly related to, or arise out of, Arch’s prosecution of such outstanding tax
claims
          (c) From and after the Closing Date, Arch shall be liable for, and
shall indemnify the Company and each of its officers, directors, employees,
stockholders, agents and representatives against and hold them harmless from:

  (i)   all liability for Income Taxes (as a result of Treasury Regulation
§1.1502-6(a) or similar provision under applicable foreign, state or local Law)
for Taxes of Arch or any other corporation which is or has been a member of the
affiliated group, within the meaning of section 1504 of the Code, of which Arch
is the common parent; and     (ii)   all liability for reasonable legal fees and
expenses for any item attributable to any item in clause (i) above.

          (d) The Company agrees that in the event (i) Arch is unable to fully
deduct for federal and state income taxes VEBA Contributions and (ii) the
Company

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receives a Tax Benefit (as defined below) with respect to such Arch VEBA
Contributions then the Company shall pay the Tax Benefit attributable to such
Arch VEBA Contribution to Arch (net of any reasonable expenses directly
attributable thereto). For purposes of this Section the Tax Benefit shall equal
the actual amount of any reduction in federal or state income taxes when and to
the extent received as a result of any deduction to the Company under
Sections 162 and 419 attributable to the Arch VEBA Contribution (a “Tax
Benefit”). The Company shall advise Arch on an annual basis of the amount of Tax
Benefit, if any, attributable to the Arch VEBA Contribution and provide a
calculation of such Tax Benefit. In the event Arch disagrees with the
calculation of such Tax Benefit the parties shall negotiate in good faith to
determine such Tax Benefit and absent reaching agreement as to the amount of
such Tax Benefit the parties shall jointly retain a mutually acceptable
nationally recognized accounting firm to resolve the dispute. The costs, fees
and expenses of the accounting firm shall be borne by the non-prevailing party.
11.3 Grant of License.
     (a) Subject to and effective upon (i) the Closing and (ii) the payment of
$100,000 in immediately available funds by the Company to Arch, the Company and
its Affiliates shall have a non-exclusive, perpetual, non-transferable,
non-sub-licensable right to use the Land Management Software to process
transactions for any properties owned or leased by the Company or any of its
Affiliates (the “License”); provided, however, such License shall terminate
immediately in the event of a Change in Control of the Company. For purposes of
this Section 11.3 only, a “Change in Control” shall mean any one of the
following: (i) a transaction or series of related transactions that results in
the sale or other disposition of all or substantially all of the Company’s
assets; or (ii) a Person becoming a beneficial owner of 30% or more of the
outstanding voting securities of the Company by any one Person who is either
(a) operational in the coal industry, or (b) not reasonably acceptable to Arch;
provided, however, transfers to Affiliates of the Company which would otherwise
result in a Change in Control under subsection (ii) above shall not be deemed to
be a Change in Control.
     (b) ARCH IS GRANTING THE LICENSE ON AN “AS-IS, WHERE-IS” BASIS, AND MAKES
NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WRITTEN OR ORAL, AND TO
THE MAXIMUM EXTENT PERMITTED BY LAW HEREBY DISCLAIMS ANY SUCH REPRESENTATIONS OR
WARRANTIES (INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY,
NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE), WHETHER BY ARCH OR ANY OF
ITS AFFILIATES, INCLUDING WITHOUT LIMITATION, ANY OF THE ARCH COMPANIES, THEIR
AFFILIATES, OR ANY OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, MEMBERS OR
REPRESENTATIVES OR ANY OTHER PERSON, WITH RESPECT TO THE LICENSE OR THE LAND
MANAGEMENT SYSTEM, NOTWITHSTANDING THE DELIVERY OF OR DISCLOSURE TO THE COMPANY,
ANY AFFILIATE OF THE COMPANY OR ANY OF THEIR OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS OR REPRESENTATIVES

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OR ANY OTHER PERSON OF ANY DOCUMENTATION OR OTHER INFORMATION BY ARCH OR ANY OF
ITS AFFILIATES, OR ANY OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, MEMBERS OR
REPRESENTATIVES OR ANY OTHER PERSON WITH RESPECT TO ANY ONE OR MORE OF THE
FOREGOING.
               (c) Further, following the Closing, except as set forth in the
Transition Services Agreement, Arch shall have no obligation to maintain,
support, fix, update or enhance the data, source code and/or object code
comprising the Land Management System or to provide any assistance to the
Company or its Affiliates, including without limitation, the Arch Companies,
relating to the use of the Land Management System.
     11.4 Assignment; Successors and Assigns.
               This Agreement and the rights and obligations hereunder shall not
be assignable or transferable by either Party (including by operation of law in
connection with a merger or consolidation of such Party) without the prior
consent of the other Party hereto. Any attempted assignment in violation of this
Section 11.4 shall be null and void and of no effect. The Agreement shall be
binding upon and inure to the benefit of the Parties signatory hereto and their
respective successors and assigns.
     11.5 No Third Party Rights.
               This Agreement is for the sole and exclusive benefit of the
Parties hereto and their successors and permitted assigns, and nothing herein
expressed or implied shall give, or be construe to give, to any Person, other
than the Parties hereto and such successors and permitted assigns, any legal or
equitable right, remedies or claims under or with respect to this Agreement or
any provisions hereof.
     11.6 Counterparts.
               This Agreement may be executed in any number of 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 each of the
Parties and delivered to the other Party. Any such counterpart may be delivered
to a Party by facsimile.
     11.7 Governing Law.
               This Agreement shall be construed in accordance with, and this
Agreement and all matters arising out of or relating in any way whatsoever
(whether in contract, tort or otherwise) to this Agreement shall be governed by,
the law of the State of New York, except to the extent that it is mandatory that
the law of some other jurisdiction, wherein the Arch Equity Interests or
Underlying Assets are located, shall apply.
     11.8 Submission to Jurisdiction.
               Each Party irrevocably submits to the exclusive jurisdiction of
(a) the Supreme Court of the State of New York, New York County, and (b) the
United States District Court for

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the Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement, any Ancillary Agreement or any
transaction contemplated hereby or thereby. Each Party agrees to commence any
such action, suit or proceeding either in the United States District Court for
the Southern District of New York or if such suit, action or other proceeding
may not be brought in such court for jurisdictional reasons, in the Supreme
Court of the State of New York, New York County. Each Party further agrees that
service of any process, summons, notice or document by U.S. registered mail to
such Party’s respective address set forth above shall be effective service of
process for any action, suit or proceeding in New York with respect to any
matters to which it has submitted to jurisdiction in this Section 11.8. Each
Party irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement, any
Ancillary Document or the transactions contemplated hereby and thereby in
(i) the Supreme Court of the State of New York, New York County, or (ii) the
United States District Court for the Southern District of New York, and hereby
and thereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
     11.9 Waiver of Jury Trial.
               EACH PARTY HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT, ANY TRANSACTION OR ANY TRANSACTION CONTEMPLATED HEREBY OR
THEREBY. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE TRANSACTION DOCUMENTS, AS APPLICABLE, BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.9.
     11.10 Severability.
               If any of the provisions of this Agreement are held by any court
of competent jurisdiction to contravene, or to be invalid under, the Laws of any
political body having jurisdiction over the subject matter hereof, such
contravention or invalidity shall not invalidate the entire Agreement. Instead,
this Agreement shall be construed as if it did not contain the particular
provision or provisions held to be invalid, and an equitable adjustment shall be
made and necessary provision added so as to give effect to the intention of the
Parties as expressed in this Agreement at the time of execution of this
Agreement.
     11.11 Amendment or Modification.
               This Agreement may be amended or modified from time to time only
by the written agreement of the Parties hereto and affected thereby.

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     11.12 Integration.
               This Agreement and the Ancillary Documents (and any schedules,
exhibits or annexes thereto), contain the entire agreement and understanding
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings relating to such subject matter. Neither
Party shall be liable or bound to the other Party in any manner by any
representations, warranties or covenants relating to such subject matter except
as specifically set forth herein or therein.
     11.13 Notices.
               All notices, requests and other communications hereunder must be
in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the Parties at the following addresses or facsimile numbers:

         
 
  (a)   in the case of Arch and the Arch Companies to:
 
       
 
      Arch Coal, Inc.
 
      One City Place Drive, Suite 300
 
      St. Louis, MO 63141
 
      Facsimile: (314) 994-2878
 
      Attention: David Peugh
 
       
 
      with copies to:
 
       
 
      Arch Coal, Inc.
 
      One CityPlace Drive, Suite 300
 
      St. Louis, MO 63141
 
      Facsimile: (314) 994-2878
 
      Attention: Robert Jones
 
       
 
      Bryan Cave LLP
 
      One Metropolitan Square, Suite 3600
 
      St. Louis, MO 63102
 
      Facsimile: (314) 259-2020
 
      Attention: Patricia Brandt
 
       
 
  (b)   in the case of the Company:
 
       
 
      Magnum Coal Company
 
      106 Lockheed Drive
 
      Beaver, WV 25813
 
      Facsimile: (304) 255-9455

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  Attention: Paul H. Vining
 
   
 
  with a copy to:
 
   
 
  ArcLight Energy Partners Fund I, L.P.
 
  200 Clarendon Street, 55th Floor
 
  Boston, MA 02117
 
  Facsimile: (617) 531-6300
 
  Attention: Christine Miller, Esq.

               All such notices, requests and other communications will (i) if
delivered personally to the address as provided in this Section, be deemed given
upon delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided in this Section, be deemed given upon receipt, and (iii) if
delivered by mail in the manner described above to the address as provided in
this Section, be deemed given upon receipt (in each case regardless of whether
such notice, request or other communication is received by any other Person to
whom a copy of such notice, request or other communication is to be delivered
pursuant to this Section). Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that party
by giving notice specifying such change to the other parties hereto.
     11.14 No Consequential Damages.
               No Party hereunder shall be liable for any special, indirect,
consequential or punitive damages (whether or not the claim therefor is based on
contract, tort or duty imposed by law), in connection with, arising out of or in
any way related to the transactions contemplated by this Agreement or the
Ancillary Documents or any act or omission or event occurring in connection
therewith; and each Party hereto hereby waives, releases and agrees not to sue
upon any such claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in its favor.
     11.15 Payments.
               All payments under this Agreement shall be made in immediately
available funds, without deduction, setoff or counterclaim.

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          IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.

                  Arch Coal, Inc.    
 
           
 
  By:        /s/ David B. Peugh
 
   
 
      Name: David B. Peugh    
 
      Title: Vice President    
 
                Magnum Coal Company    
 
           
 
  By:        /s/ Paul H. Vining    
 
     
 
Name: Paul Vining    
 
      Title: President and Chief Executive Officer    

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