exv10w16






Exhibit 10.16




 


ACQUISITION AGREEMENT


 





by and among



Oxford Mining Company, LLC

(as the Buyer),



Phoenix Coal Inc.

(as a Seller),



Phoenix Coal Corporation

(as a Seller),



and



Phoenix Newco, LLC

(as the Acquired Company)



Signed: August 14, 2009

Closed: September 30, 2009



 









 





ACQUISITION AGREEMENT




by and among



Oxford Mining Company, LLC

(as the Buyer),



Phoenix Coal Inc.

(as a Seller),



Phoenix Coal Corporation

(as a Seller),



and



Phoenix Newco, LLC

(as the Acquired Company)



Dated: August 14, 2009 



 









 





TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	TABLE OF CONTENTS	 	 	 	 
	1.
	 	DEFINITIONS	 	 	1	 
	 
	 	 	 	 	 	 
	2.
	 	PRE-CLOSING REORGANIZATION; ACQUISITION TRANSACTION; TRANSACTION CONSIDERATION	 	 	15	 
	 
	 	2.1 Pre-Closing Reorganization	 	 	15	 
	 
	 	2.2 Acquisition Transaction	 	 	19	 
	 
	 	2.3 Transaction Consideration	 	 	19	 
	 
	 	2.4 Allocation of Transaction Consideration	 	 	20	 
	 
	 	2.5 Working Capital Adjustment	 	 	20	 
	 
	 	 	 	 	 	 
	3.
	 	CLOSING	 	 	23	 
	 
	 	3.1 Closing	 	 	23	 
	 
	 	3.2 Closing Deliveries	 	 	23	 
	 
	 	 	 	 	 	 
	4.
	 	REPRESENTATIONS AND WARRANTIES OF SELLERS	 	 	24	 
	 
	 	4.1 Organization and Good Standing; Power	 	 	24	 
	 
	 	4.2 Authority; No Conflicts; Consents	 	 	25	 
	 
	 	4.3 Ownership	 	 	26	 
	 
	 	4.4 Subsidiaries	 	 	26	 
	 
	 	4.5 Financial Statements	 	 	26	 
	 
	 	4.6 Books and Records	 	 	27	 
	 
	 	4.7 Properties	 	 	27	 
	 
	 	4.8 Condition and Sufficiency of Certain Assets	 	 	30	 
	 
	 	4.9 Liabilities	 	 	30	 
	 
	 	4.10 Taxes	 	 	30	 
	 
	 	4.11 Inventory	 	 	32	 
	 
	 	4.12 Coal Interests	 	 	32	 
	 
	 	4.13 Absence of Certain Changes and Events	 	 	33	 
	 
	 	4.14 Contracts; Defaults	 	 	33	 
	 
	 	4.15 Environmental, Health and Safety Matters	 	 	34	 
	 
	 	4.16 Intellectual Property	 	 	36	 
	 
	 	4.17 Employees	 	 	36	 
	 
	 	4.18 Labor Relations; Compliance	 	 	36	 
	 
	 	4.19 Employee Benefits	 	 	37	 
	 
	 	4.20 Compliance with Legal Requirements; Governmental Authorizations	 	 	38	 
	 
	 	4.21 Legal Proceedings; Orders	 	 	42	 
	 
	 	4.22 Insurance	 	 	43	 
	 
	 	4.23 Solvency	 	 	44	 
	 
	 	4.24 Relationships with Related Persons	 	 	44	 
	 
	 	4.25 No Brokers or Finders	 	 	45	 
	 
	 	4.26 Certain Payments; Grants and Allowances	 	 	45	 
	 
	 	4.27 Customers and Suppliers	 	 	46	 






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TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	4.28 Disclosure	 	 	46	 
	 
	 	4.29 Scope of Representations, Warranties and Covenants	 	 	46	 
	 
	 	 	 	 	 	 
	5.
	 	REPRESENTATIONS AND WARRANTIES OF BUYER	 	 	47	 
	 
	 	5.1 Organization and Good Standing	 	 	47	 
	 
	 	5.2 Authority; No Conflicts	 	 	47	 
	 
	 	5.3 Certain Proceedings	 	 	47	 
	 
	 	5.4 No Brokers or Finders	 	 	48	 
	 
	 	5.5 Scope of Representations, Warranties and Covenants	 	 	48	 
	 
	 	 	 	 	 	 
	6.
	 	COVENANTS OF SELLERS	 	 	48	 
	 
	 	6.1 Operation of Business	 	 	48	 
	 
	 	6.2 Access and Investigation	 	 	49	 
	 
	 	6.3 No Negotiation	 	 	49	 
	 
	 	6.4 Destruction of Confidential Information	 	 	50	 
	 
	 	6.5 Required Approvals of Governmental Bodies	 	 	50	 
	 
	 	6.6 Commercially Reasonable Efforts	 	 	50	 
	 
	 	6.7 Restrictive Covenants	 	 	50	 
	 
	 	6.8 Employee Matters	 	 	52	 
	 
	 	6.9 Liabilities of Phoenix Group Entities	 	 	52	 
	 
	 	6.10 APE Financial Statements	 	 	52	 
	 
	 	6.11 Rose France Reserves	 	 	53	 
	 
	 	 	 	 	 	 
	7.
	 	COVENANTS OF BUYER	 	 	53	 
	 
	 	7.1 Required Approvals of Governmental Bodies	 	 	53	 
	 
	 	7.2 Commercially Reasonable Efforts	 	 	54	 
	 
	 	7.3 Release of Reclamation Obligations Collateral	 	 	54	 
	 
	 	7.4 Employee Matters	 	 	54	 
	 
	 	7.5 AT Liabilities	 	 	54	 
	 
	 	 	 	 	 	 
	8.
	 	MUTUAL COVENANTS OF PARTIES	 	 	54	 
	 
	 	8.1 Further Actions	 	 	54	 
	 
	 	8.2 Public Announcements	 	 	55	 
	 
	 	8.3 Tax Matters	 	 	55	 
	 
	 	8.4 Consideration of Alternative to Escrow	 	 	56	 
	 
	 	 	 	 	 	 
	9.
	 	CONDITIONS PRECEDENT TO OBLIGATION OF BUYER TO CLOSE	 	 	56	 
	 
	 	9.1 Accuracy of Representations and Warranties	 	 	56	 
	 
	 	9.2 Performance by Phoenix AA Parties	 	 	56	 
	 
	 	9.3 Consents	 	 	57	 
	 
	 	9.4 Additional Documents	 	 	57	 
	 
	 	9.5 No Proceedings	 	 	58	 
	 
	 	9.6 No Prohibition	 	 	58	 
	 
	 	9.7 Business Conduct and No Material Adverse Effect	 	 	58	 
	 
	 	9.8 Employee Matters	 	 	58	 






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TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	9.9 Recoverable Tons of Coal	 	 	58	 
	 
	 	9.10 AT Reclamation Obligations	 	 	58	 
	 
	 	9.11 AT Coal Reserves Quality	 	 	59	 
	 
	 	9.12 Mining Permit Approval	 	 	59	 
	 
	 	9.13 Abatement of Violations	 	 	59	 
	 
	 	 	 	 	 	 
	10.
	 	CONDITIONS PRECEDENT TO OBLIGATION OF SELLERS TO CLOSE	 	 	59	 
	 
	 	10.1 Accuracy of Representations and Warranties	 	 	59	 
	 
	 	10.2 Performance by Buyer	 	 	59	 
	 
	 	10.3 Initiation of Action to Obtain Release of Reclamation Obligations Collateral	 	 	59	 
	 
	 	10.4 Additional Documents	 	 	60	 
	 
	 	10.5 No Proceedings	 	 	60	 
	 
	 	10.6 No Prohibition	 	 	60	 
	 
	 	 	 	 	 	 
	11.
	 	TERMINATION	 	 	60	 
	 
	 	11.1 Termination Events	 	 	60	 
	 
	 	11.2 Termination Effect Generally	 	 	61	 
	 
	 	11.3 Termination Fee	 	 	62	 
	 
	 	 	 	 	 	 
	12.
	 	INDEMNIFICATION; REMEDIES	 	 	62	 
	 
	 	12.1 Survival; Right to Indemnification not Affected by Knowledge	 	 	62	 
	 
	 	12.2 Indemnification and Payment of Damages by Sellers	 	 	62	 
	 
	 	12.3 Indemnification and Payment of Damages by Buyer	 	 	62	 
	 
	 	12.4 Time Limitations	 	 	63	 
	 
	 	12.5 Limitations on Amount - Sellers	 	 	63	 
	 
	 	12.6 Limitations on Amount - Buyer	 	 	64	 
	 
	 	12.7 Excluded Damages	 	 	64	 
	 
	 	12.8 Procedure for Indemnification - Third Party Claims	 	 	64	 
	 
	 	12.9 Procedure for Indemnification - Other Claims	 	 	65	 
	 
	 	12.10 Recovery of Indemnification Amounts	 	 	66	 
	 
	 	12.11 Exclusive Remedy	 	 	66	 
	 
	 	 	 	 	 	 
	13.
	 	GENERAL PROVISIONS	 	 	66	 
	 
	 	13.1 Expenses	 	 	66	 
	 
	 	13.2 Confidentiality	 	 	66	 
	 
	 	13.3 Notices	 	 	67	 
	 
	 	13.4 Further Assurances	 	 	68	 
	 
	 	13.5 Waiver	 	 	68	 
	 
	 	13.6 Entire Agreement and Modification	 	 	68	 
	 
	 	13.7 Schedules	 	 	68	 
	 
	 	13.8 Assignments, Successors and Limited Third-Party Rights	 	 	69	 
	 
	 	13.9 Severability	 	 	69	 
	 
	 	13.10 Headings; Construction	 	 	69	 
	 
	 	13.11 Time of Essence	 	 	69	 






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TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	13.12 Governing Law	 	 	69	 
	 
	 	13.13 Dispute Resolution	 	 	69	 
	 
	 	13.14 Counterparts	 	 	70	 
	 
	 	 	 	 	 	 
	SIGNATURES	 	 	71	 











iv









 








ACQUISITION AGREEMENT




     This Acquisition Agreement (this “Agreement”) is entered into as of August 14, 2009 by and
among Oxford Mining Company, LLC, an Ohio (U.S.A.) limited liability company (the “Buyer”), Phoenix
Coal Inc., an Ontario (Canada) corporation (“PCI”), Phoenix Coal Corporation, a Delaware (U.S.A.)
corporation (“PCC”, and collectively with PCI the “Sellers”), and Phoenix Newco, LLC, a Kentucky
(U.S.A.) limited liability company (the “Acquired Company”).



Recital




     The Buyer desires to acquire, and the Sellers desire to sell, in the acquisition transaction
described in Section 2, all of the membership interests in the Acquired Company, for the
consideration and on the other terms and conditions set forth in this Agreement.



Agreement




     The parties, intending to be legally bound, agree as follows:



1. DEFINITIONS




     For purposes of this Agreement, the following terms have the meanings specified or referred to
in this Section 1:



     “AAA” has the meaning set forth in Section 13.13.



     “Acceptable
RFR Lease” has the meaning set forth in Section 6.11.



     “Accounting Referee” has the meaning set forth in Section 2.5(d)(ii)(A).



     “Accrued Coal Leases Liabilities” means all liabilities of the Phoenix Entities under AT Coal
Leases accruing prior to and on the Closing Date, including without limitation liabilities for
royalties for coal mined by the Phoenix Entities through the Closing Date, all determined in
accordance with GAAP (U.S.).



     “Acquired Company” has the meaning set forth in the first paragraph of this Agreement.



     “Acquired Company AT Assets/AT Liabilities” has the meaning set forth in Section 2.1(d)(iii).



     “Acquired Company Membership Interests” means all of the membership interests in the Acquired
Company.



     “Acquired Phoenix Entities” means together the Acquired Company and all of its Subsidiaries as
of the Closing.



     “Acquisition
Proposal” means any unsolicited proposal or offer with respect to any of the
following (other than the transactions contemplated in this Agreement): (a) any merger,
consolidation, stock purchase, membership interest purchase, share exchange, business combination,
extraordinary transaction or other similar transaction involving the Phoenix Entities;













 




(b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more
of the Phoenix Entities’ consolidated assets outside of the Ordinary Course of Business in a single
transaction or series of related transactions; (c) any tender offer or exchange offer for 25% or
more of the outstanding shares of PCI or the filing of a registration statement under the
applicable Canadian law in connection therewith; or (d) any agreement to engage in any of the
foregoing.




     “Acquisition Transaction” means the transaction described in Section 2.2 and includes without
limitation the Pre-Closing Reorganization described in Section 2.1.



     “Actual Working Capital” has the meaning set forth in Section 2.5(c).



     “Actual Working Capital Statement” has the meaning set forth in Section 2.5(c).



     “Adjustment Objection” has the meaning set forth in Section 2.5(d).



     “Affiliates” has the meaning set forth in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act of 1934, as amended.



     “Agreement” has the meaning set forth in the first paragraph of this Agreement.



     “Ancillary Documents” means, collectively, the Transaction Documents and any other
certificates, instruments, agreements or other documents contemplated by this Agreement. This
definition shall also include any other ancillary documents reasonably requested by the Buyer and
acceptable to the Sellers or reasonably requested by the Sellers and acceptable to the Buyer.



     “APE Employees” has the meaning set forth in Section 4.17(a).



     “APE Financial Statements” means the consolidated balance sheet as of the relevant date, and
the related statement of direct revenues and expenses for the relevant period ending as of the
relevant date, of the Acquired Phoenix Entities (and as if the Pre-Closing Reorganization had been
effected prior to the commencement of the relevant period), prepared in accordance with GAAP
(Canada) and with a reconciliation to GAAP (U.S.).



     “AT Assets” has the meaning set forth in Section 2.1(b).



     “AT Coal Leases” has the meaning set forth in Section 2.1(b)(ii).



     “AT Coal Purchase Agreements” has the meaning set forth in Section 2.1(b)(vi).



     “AT Coal Reserves” has the meaning set forth in Section 2.1(b)(iii).



     “AT Coal Sales Agreements” has the meaning set forth in Section 2.1(b)(v).



     “AT Contracts” has the meaning set forth in Section 2.1(c)(ii).



     “AT
Current Assets” has the meaning set forth in Section 2.1(b)(xi).



     “AT
Current Liabilities” has the meaning set forth in Section 2.1(c)(v).



2









 





     “AT Fixed Assets” has the meaning set forth in Section 2.1(b)(i).



     “AT Fixed Assets Debt” has the meaning set forth in Section 2.1(c)(i).



     “AT Governmental Authorizations” has the meaning set forth in Section 2.1(b)(viii).



     “AT Inventory” has the meaning set forth in Section 2.1(b)(ix).



     “AT Leased Coal Reserves” has the meaning set forth in Section 2.1(b)(ii).



     “AT Liabilities” has the meaning set forth in Section 2.1(c).



     “AT Optional Health Plan Obligations” has the meaning set forth in Section 2.1(c)(iv).



     “AT Other Contracts” has the meaning set forth in Section 2.1(b)(vii).



     “AT Other Leases” has the meaning set forth in Section 2.1(b)(iv).



     “AT Reclamation Obligations” has the meaning set forth in Section 2.1(c)(iii).



     “AT Technology Assets” has the meaning set forth in Section 2.1(b)(x).



     “Audited Financial Statements” has the meaning set forth in Section 4.5.



     “Basket Amount” has the meaning set forth in Section 12.5.



     “Benchmark Working Capital” means zero dollars ($0.00).



     “Breach” means a violation or infraction of, or failure to comply with, a representation,
warranty, agreement, obligation or other provision of this Agreement or any instrument delivered
pursuant to this Agreement, and shall be deemed to have occurred if there is or has been any
inaccuracy in or breach of, or any failure to perform or comply with, such representation,
warranty, agreement, obligation or other provision.



     “Buyer” has the meaning set forth in the first paragraph of this Agreement.



     “Buyer Ancillary Documents” means the Ancillary Documents to which the Buyer is a party.



     “Buyer Indemnified Persons” has the meaning set forth in Section 12.2.



     “Buyer PRE Notice” has the meaning set forth in Section 2.1(d)(i).



     “Buyer’s Advisors” has the meaning set forth in Section 6.2.



     “Cap Amount” has the meaning set forth in Section 12.5.



     “CERCLA” means the United States Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et seq., as amended.



3









 





     “Claims” means any written or oral claims, causes of action, demands, lawsuits, suits,
proceedings, governmental investigations or audits and administrative orders.



     “Closing” has the meaning set forth in Section 3.1.



     “Closing Date” means the date as of which the Closing actually takes place.



     “Coal Act” means the Coal Industry Retiree Health Benefit Act of 1992, as it may be amended
from time to time (codified at Subtitle J of the IRC).



     “Company Other Benefit Obligations” means Other Benefit Obligations owed, adopted or followed
by the Phoenix Group Entities or an ERISA Affiliate of the Phoenix Group Entities or with respect
to which the Phoenix Group Entities or an ERISA Affiliate of the Phoenix Group Entities
participates, sponsors or is a party.



     “Company Plans” means all Plans with respect to which the Phoenix Group Entities or an ERISA
Affiliate of the Phoenix Group Entities is or was a Plan Sponsor, or to which the Phoenix Group
Entities or an ERISA Affiliate of the Phoenix Group Entities otherwise contributes or has
contributed, or is or has been required to contribute, or in which the Phoenix Group Entities or an
ERISA Affiliate of the Phoenix Group Entities otherwise participates or has participated.



     “Company Surety Bonds” has the meaning set forth in Section 4.20(e).



     “Company VEBA” means a VEBA whose members include employees of the Phoenix Entities or an
ERISA Affiliate of the Seller.



     “Competing Business” has the meaning set forth in Section 6.7(a).



     “Confidentiality Agreement” has the meaning set forth in Section 6.2.



     “Consent” means any approval, consent, ratification, waiver or other authorization (including
any Governmental Authorization).



     “Contract” means any agreement, contract, obligation, promise or undertaking (whether written
or oral and whether express or implied) that is legally binding.



     “Cormark” means Cormark Securities Inc.



     “Damages” means all debts, liabilities, obligations, losses, including diminution of value,
damages, loss of profits, costs and expenses, whether actual, consequential or punitive, interest
(including without limitation prejudgment interest), penalties, fines, reasonable legal fees,
disbursements and costs of investigations, deficiencies, levies, duties and imposts.



     “Disputes” means controversies (oral or in writing) which are material to the subject matter,
asset or right to which the term “Disputes” relates.



     “Employee Matters” has the meaning set forth in Section 6.8.



4









 





     “Encumbrance” means any charge, Claim, marital or community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first refusal or other
restriction of any kind, including any restriction on use, voting, transfer, receipt of income or
exercise of any other attribute of ownership.



     “Environment” means soil, land surface or subsurface strata, surface waters (including
navigable waters, ocean waters, streams, ponds, drainage basins and wetlands), groundwaters,
drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life,
and any other environmental medium or natural resource.



     “Environmental, Health and Safety Liabilities” means any cost, Damages, expense, liability,
obligation or other responsibility arising from or under an Environmental Law or an Occupational
Safety and Health Law and consisting of or relating to, without limitation:



          (a) any environmental, health or safety matters or conditions (including on-site or off-site
contamination, occupational safety and health, and regulation of chemical substances or products);




          (b) fines, penalties, judgments, awards, settlements, legal or administrative proceedings,
Damages, losses, Claims, demands and response, investigative, remedial, removal, response,
reclamation or inspection costs and expenses arising under any Environmental Law or Occupational
Safety and Health Law;




          (c) financial responsibility under any Environmental Law or Occupational Safety and Health Law
for cleanup costs, corrective action or reclamation, including any investigation, cleanup, removal,
containment or other remediation, response or reclamation actions (“cleanup”) required by
applicable Environmental Law or Occupational Safety and Health Law (whether or not such cleanup has
been required or requested by any Governmental Body or any other Person) and for any natural
resource Damages; or




          (d) any other compliance, corrective, investigative or remedial, removal, response or
reclamation measures required under any Environmental Law or Occupational Safety and Health Law.



The terms “removal,” “remedial” and “response action” include the types of activities covered by
CERCLA. The term “reclamation” includes the types of activities covered by SMCRA.




     “Environmental Law” means all applicable Legal Requirements in effect as of the date of this
Agreement (as amended) relating to the protection of the Environment, to human health and safety,
to Hazardous Materials or to any Hazardous Activity, including without limitation all requirements
pertaining to reporting, licensing, permitting, investigation or remediation of Releases of
Hazardous Materials into the air, surface water, groundwater or land.



     “ERISA” means the Employee Retirement Income Security Act of 1974 as amended or any successor
law, and the regulations and rules issued pursuant to that Act as amended or any successor law.



5









 





     “ERISA Affiliate” means, with respect to any of the Phoenix Entities, any other Person that,
together with any of such Phoenix Entities, would be treated as a single employer under IRC Section
414 or ERISA Section 4001.



     “Escrow Agent” means the Person designated by the Buyer and approved by the Sellers (which
approval shall not be unreasonably delayed or withheld), which Person shall serve as the escrow
agent under the Escrow Agreement.



     “Escrow Agreement” means the Escrow Agreement among the Buyer, the Sellers and the Escrow
Agent in a mutually agreed form pursuant to which the Sellers are escrowing as of the Closing Date,
subject to the Scheduled Escrow Releases, the Escrow Deposit Amount to be available for
indemnification (if any) of the Buyer Indemnified Persons under Section 12.2.



     “Escrow Deposit Amount” means the sum of Two Million Three Hundred Thousand Dollars
($2,300,000.00) deposited by the Sellers at the Closing in escrow under the Escrow Agreement.



     “Estimated Closing Balance Sheet” has the meaning set forth in Section 2.5(b).



     “Estimated Working Capital” has the meaning set forth in Section 2.5(b).



     “Estimated Working Capital Adjustment” has the meaning set forth in Section 2.5(b)(ii).



     “Excluded
Governmental Authorizations” has the meaning set forth in Section 2.1(c)(iii).



     “Excluded Reclamation Obligations” has the meaning set forth in Section 2.1(c)(iii).



     “Excluded Reclamation Obligations Value” means the sum of Five Million Seven Hundred Thousand
Dollars ($5,700,000.00).



     “Excluded Subsidiaries” means PACT and Gryphon.



     “Excluded Subsidiaries Surface Mining” means the mining by the Excluded Subsidiaries by
surface mining methods of that certain coal in the Illinois Coal Basin to which the Excluded
Subsidiaries presently hold rights pursuant to outstanding leases which principally relate to the
underground mining of coal.



     “Facilities” means any real property, leaseholds or other interests currently or formerly
owned or operated by the Phoenix Entities including any buildings, plants or structures currently
or formerly owned or operated by the Phoenix Entities.



     “Final Working Capital Adjustment” has the meaning set forth in Section 2.5(c)(ii).



     “Financial Statements” has the meaning set forth in Section 4.5.



     “GAAP (Canada)” means generally accepted accounting principles in Canada, applied on a
consistent basis.



6









 





     “GAAP (U.S.)” means generally accepted accounting principles in the United States of America,
applied on a consistent basis.



     “Governmental Authorization” means any approval, consent, license, permit, waiver or other
authorization issued, granted, given or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement, including without limitation Mining
Authorizations.



     “Governmental Body” means any (a) nation, state, county, city, town, village, district or
other jurisdiction of any nature, (b) federal, state, local, municipal, foreign or other
government, (c) governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official or entity and any court or other tribunal), (d)
multi-national organization or body or (e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory or taxing authority or power
of any nature.



     “Group
Health Plan” has the meaning set forth in IRC Section 4980B(g)(2).



     “Gryphon”
means Gryphon Mining Co., LLC, a Delaware limited liability company.



     “Hazardous Activity” means the distribution, generation, handling, importing, management,
manufacturing, processing, production, refinement, Release, storage, transfer, transportation,
treatment or use (including any withdrawal or other use of groundwater) of Hazardous Materials in,
on, under, about or from the Facilities or any part thereof into the Environment, and any other
act, business, operation or thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm to persons or property on or off the Facilities, or that may affect the
value of the Facilities, the AT Assets or the Surface Mining Business.



     “Hazardous Materials” means any waste or other substance that is listed, defined, designated
or classified as, or otherwise determined to be, hazardous, radioactive or toxic or a pollutant or
a contaminant under or pursuant to any Environmental Law, including any admixture or solution
thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.



     “Hilco Report” means a Forced Liquidation Value, Orderly Liquidation Value, and Fair Market
Value appraisal of the AT Fixed Assets by Hilco Appraisal Services, LLC.



     “Illinois Coal Basin” means the Illinois Basin coal field.



     “Interim Financial Statements” has the meaning set forth in Section 4.5.



     “IRC” means the Internal Revenue Code of 1986 or any successor law, and regulations issued
pursuant to the Internal Revenue Code or any successor law.



     “IRS” means the Internal Revenue Service.



     “JT Boyd Report” means a report issued by John T. Boyd Company with respect to the AT Coal
Reserves establishing the amount of the recoverable reserves included in the AT Coal Reserves.



7









 





     “June 30 Balance Sheet” has the meaning set forth in Section 2.5(a).



     “June 30 Working Capital” has the meaning set forth in Section 2.5(a).



     “Key Phoenix Entities Persons” means all of the following Persons who are Related Persons with
respect to the Phoenix Entities: David A. Wiley and Dustin K. Angelo.



     “Knowledge” means, with respect to an individual, that such individual is actually aware of
such fact or other matter, and in the case of a Person other than an individual, that Person will
be deemed to have “Knowledge” of a particular fact or other matter if any individual who is serving
as a director, manager, shareholder (except for shareholders of PCI), member, executive officer,
executor or trustee of such Person has Knowledge of such fact or other matter.



     “Leased Fixtures and Improvements” has the meaning set forth in Section 4.7(d)(vi).



     “Leased Real Property” has the meaning set forth in Section 4.7(d).



     “Legal Requirement” means any federal, state, local, municipal, foreign, international,
multinational or other administrative order, constitution, law, ordinance, principle of common law,
regulation, statute or treaty.



     “made available,” when used in connection with the provision of documents or other information
by the Sellers to the Buyer, means provision by posting not less than five (5) days prior to the
date hereof such documents or other information on the datasite of the Sellers to which the Buyer
and its Representatives have been given access or by delivering the same to the Buyer or its
Representatives.



     “manager” means a manager of a limited liability company.



     “Material Adverse Effect” means a material adverse effect on the AT Assets, the results of
operations or financial condition of the Surface Mining Business or the ability of the Sellers to
consummate the Acquisition Transaction; provided, however, that in determining whether a Material
Adverse Effect has occurred there shall be excluded any effect the primary cause of which is (a)
any change in laws, rules or regulations of general applicability or interpretations thereof by
courts or Governmental Bodies, (b) acts of terrorism or war, or general changes in the global or
United States economies or in the global or United States financial markets, (c) the result of the
negotiation, announcement or pendency of the Acquisition Transaction and (d) any action or omission
of the Sellers required by or permitted under this Agreement or taken with the prior written
consent of the Buyer.



     “member” means a member of a limited liability company.



     “Membership Interests Assignment” means an Assignment of Membership Interests executed by the
Sellers in a mutually agreed form pursuant to which the Sellers assign and transfer the Acquired
Company Membership Interests to the Buyer.



     “Mining Activities” means those activities of the Phoenix Entities related to the mining,
extraction, processing, sale and trading of coal and other minerals or natural resources that
involve



8









 




surface mining, underground mining, auger mining, processing, sale or transporting of coal and
other minerals or natural resources and their by-products, including reclamation activities. For
the purpose of this definition, “Mining Activities” shall include any activities regulated or
required under SMCRA and Legal Requirements governing, controlling or applying to coal mining
operations or the extraction of other minerals or natural resources.




     “Mining Applications” has the meaning set forth in Section 4.19(d).



     “Mining Authorizations” means the mining or exploration licenses, Governmental Authorizations
and other authorities held by any of the Phoenix Entities with respect to the Surface Mining
Business, including without limitation any authorization or permit relating to coal mining,
exploration, preparation, loadout or reclamation operations.



     “MSHA” means the Mine Safety and Health Administration, U.S. Department of Labor, or any
successor agency.



     “Multi-Employer Plan” has the meaning given it in ERISA Section 3(37)(A).



     “Negotiation Period” has the meaning set forth in Section 2.5(e)(i).



     “Newbridge Condition” has the meaning set forth in Section 9.10.



     “Newbridge Report” means a mine inspection report by Newbridge Services, Inc. setting forth a
statement of the costs and expenses of conducting the reclamation activities constituting the AT
Reclamation Obligations, together with the face amount of the surety, reclamation or similar bonds
securing the AT Reclamation Obligations.



     “Occupational Safety and Health Law” means any Legal Requirement designed to provide safe and
healthful working conditions and to reduce occupational safety and health hazards, and any program,
whether governmental or private (including those promulgated or sponsored by industry associations
and insurance companies), designed to provide safe and healthful working conditions, including the
Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), as amended, the Mine Safety and
Health Act (30 U.S.C. § 801 et seq.), as amended, and comparable state statutes and regulations.



     “Order” means any award, decision, injunction, judgment, order, ruling, subpoena or verdict
entered, issued, made or rendered by any court, administrative agency or other Governmental Body or
by any arbitrator.



     “Ordinary Course of Business” means any action taken by a Person if such action is consistent
with the past custom and practice (including with respect to quantity and frequency) of such Person
and is taken in the ordinary course of the normal day-to-day operations of such Person, and if such
action is similar in nature and magnitude to actions customarily taken in the ordinary course of
the normal day-to-day operations of other Persons that are in the same line of business as such
Person.



     “Organizational Documents” means any of the following, as applicable: (a) the articles or
certificate of incorporation and the bylaws or regulations of a corporation, (b) the charter and



9









 




operating agreement or limited liability company agreement of any limited liability company,
(c) any charter or similar document adopted or filed in connection with the creation, formation or
organization of any other Person and (d) any amendment to any of the foregoing.




     “OSMRE” means the Office of Surface Mining, Reclamation and Enforcement, U.S. Department of
the Interior, or any successor agency.



     “Other AT Assets” has the meaning set forth in Section 2.1(d)(iv).



     “Other AT Liabilities” has the meaning set forth in Section 2.1(d)(v).



     “Other Benefit Obligations” means all obligations, arrangements or customary practices,
whether or not legally enforceable, to provide benefits, other than salary, as compensation for
services rendered, to present or former directors, employees or agents, other than obligations,
arrangements and practices that are Plans. Other Benefit Obligations include without limitation
consulting agreements under which the compensation paid does not depend upon the amount of service
rendered, sabbatical policies, severance payment policies, stock option or other equity plans,
bonus arrangements and fringe benefits within the meaning of IRC Section 132.



     “Out Leases” has the meaning set forth in Section 4.7(f).



     “Outside Indemnification Notification Date” has the meaning set forth in Section 12.4(a).



     “Owned Fixtures and Improvements” has the meaning set forth in Section 4.7(e)(i).



     “Owned Real Property” has the meaning set forth in Section 4.7(e).



     “PAAP Ancillary Documents” means the Ancillary Documents to which one or more of the Phoenix
AA Parties is a party.



     “PACT” means PACT Resources, LLC, a Kentucky limited liability company.



     “PCC” has the meaning set forth in the first paragraph of this Agreement.



     “PCC AT Assets/AT Liabilities” has the meaning set forth in Section 2.1(d)(ii).



     “PCI” has the meaning set forth in the first paragraph of this Agreement.



     “Pension Plan” has the meaning given it in ERISA Section 3(2)(A).



     “Permitted Encumbrances” means (a) liens on the AT Fixed Assets securing the AT Fixed Assets
Debt, (b) liens securing current Taxes, assessments, fees or other governmental charges or levies
not yet delinquent, (c) Encumbrances which do not individually or in the aggregate materially
detract from the value, or materially impair the use, of properties in the Surface Mining Business,
(d) inchoate mechanics and materialmen’s liens for construction in progress, (e) liens of
warehousemen and carriers arising in the Ordinary Course of Business, (f) zoning, building codes
and other land use laws regulating the use or occupancy of owned real property or the activities
conducted thereon that are imposed by any Governmental Body having jurisdiction over such real



10









 




property and (g) liens incurred or deposits made in the Ordinary Course of Business in
connection with workers’ compensation, unemployment insurance, social security and other similar
laws which are not material, individually or in the aggregate.




     “Permitting
Condition” has the meaning set forth in Section 9.12.



     “Person” means any individual, corporation (including any non-profit corporation), general or
limited partnership, limited liability company, joint venture, estate, trust, association,
organization, labor union, or other entity or Governmental Body.



     “Phoenix AA Parties” means together the Sellers and the Acquired Company, who are all of the
Phoenix Entities that are a party to this Agreement.



     “Phoenix Entities” means together the Sellers and all of their Subsidiaries other than the
Excluded Subsidiaries.



     “Phoenix Group Entities” means together the Phoenix Entities and the Excluded Subsidiaries.



     “Phoenix Reorganization Entities” has the meaning set forth in Section 2.1(a).



     “Plan” has the meaning given it in ERISA Section 3(3).



     “Plan Sponsor” has the meaning given it in ERISA Section 3(16)(B).



     “Post-Closing Tax Period” has the meaning set forth in Section 8.3(e).



     “Pre-Closing Reorganization” has the meaning set forth in Section 2.1.



     “Pre-Closing Tax Period” has the meaning set forth in Section 8.3(b).



     “Proceeding” means any action, arbitration, audit, hearing, investigation, litigation or suit
(whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted
or heard by or before, or otherwise involving, any Governmental Body or arbitrator.



     “Qualified Plan” means any Plan that meets or purports to meet IRC Section 401(a).



     “Real Property” means both the Owned Real Property and the Leased Real Property.



     “Recoverable Tons Condition” has the meaning set forth in Section 9.9.



     “Related Person” means with respect to a specified Person other than an individual (a) any
Person that directly or indirectly controls, is directly or indirectly controlled by, or is
directly or indirectly under common control with such specified Person, (b) any Person that holds a
material interest in such specified Person (excluding shareholders of PCI solely in their capacity
as shareholders of PCI), (c) each Person that serves as a director, manager, executive officer,
executor or trustee of such specified Person, (d) any Person in which such specified Person holds a
material interest, (e) any Person with respect to which such specified Person serves as a general
partner or a



11









 




trustee (or in a similar capacity) and (f) any Related Person of any individual described in
clause (b) or (c). For purposes of this definition, “material interest” means direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 25% of the outstanding voting power of a
Person or equity securities or other equity interests representing at least 25% of the outstanding
equity securities or equity interests in a Person.




     “Release” means any spilling, leaking, emitting, discharging, depositing, escaping, leaching,
dumping or other releasing into the Environment, whether intentional or unintentional, and without
limiting the foregoing includes such term as defined in CERCLA.



     “Release Funds Pool” means at any relevant time (a) the sum of (i) the funds remaining in the
escrow pursuant to the Escrow Agreement at that time and (ii) the amount of the RFR Fee at that
time (taking into account any applicable reduction in the RFR Fee pursuant to Section 6.11 that has
occurred by that time) that has not yet been deposited by the Buyer with the Escrow Agent as
provided in Section 6.11, less (b) an amount equal to the sum of all then pending, unresolved
Claims made against such escrow.



     “Remaining Phoenix Entities” means together all of the Phoenix Group Entities other than the
Acquired Phoenix Entities.



     “Representative” means, with respect to a particular Person, any director, officer, employee,
agent, consultant, advisor or other representative of such Person, including legal counsel,
accountants and financial advisors.



     “Restrictive Covenants Agreements” has the meaning set forth in Section 6.7(e).



     “Restricted Parties” has the meaning set forth in Section 6.7(a).



     “Restricted Period” has the meaning set forth in Section 6.7(a).



     “RFR Conditions” has the meaning set forth in Section 6.11.



     “RFR Fee” means the sum of One Million Dollars ($1,000,000.00), as reduced pursuant to Section
6.11 if applicable.



     “RFR Mineral Leasehold Condition” has the meaning set forth in Section 6.11.



     “RFR Surface Leasehold Condition” has the meaning set forth in Section 6.11.



     “Rose France Mineral Leasehold” has the meaning set forth in Section 6.11.



     “Rose France Reserves” means the coal reserves described on Schedule 1A.



     “Rose France Surface Leasehold” has the meaning set forth in Section 6.11.



     “Scheduled Closing Time” means the time for the Closing provided for in Section 3.1, as
extended pursuant to Section 11.1(d) if applicable.



12









 





     “Scheduled Escrow Releases” means the releases of funds from the escrow under the Escrow
Agreement to be made with payments to the Sellers as follows: (a) on such date as is six (6) months
after the Closing Date, the Escrow Agent shall release and pay to the Sellers one-third of the
Release Funds Pool at that time, (b) on such date as is twelve (12) months after the Closing Date,
the Escrow Agent shall release and pay to the Sellers one-half of the Release Funds Pool at that
time, and (c) on such date as is eighteen (18) months after the Closing Date, the Escrow Agent
shall release and pay to the Sellers the remainder of the Release Funds Pool.



     “Sellers” has the meaning set forth in the first paragraph of this Agreement.



     “Sellers Indemnified Persons” has the meaning set forth in Section 12.3.



     “SMCRA” means the Surface Mining Control and Reclamation Act of 1977 (30 U.S.C. § 1201 et
seq.), as amended.



     “Special Acquisition Conditions” has the meaning set forth in Section 9.11.



     “Subsidiary” means, with respect to any Person (the “owner”), each other Person that is a
corporation, joint venture, trust, partnership, limited liability company or other entity (a) of
which the securities or other interests having the power to elect a majority of that other Person’s
board of directors or similar governing body are held by the owner or one or more of the owner’s
Subsidiaries (other than securities or other interests having such power only upon the happening of
a contingency that has not occurred), or (b) over which the owner has, directly or indirectly, the
power to direct its business and policies.



     “Superior Proposal” means an unsolicited, bona fide offer made by a third Person to consummate
an Acquisition Proposal that PCI’s Board of Directors determines in good faith is reasonably likely
to result in a transaction that is more favorable to the shareholders of PCI than the transactions
contemplated by this Agreement, taking into account all legal, financial, regulatory and other
aspects of the Acquisition Proposal and the entity making the Acquisition Proposal.



     “Surface Mining Business” means the business of the surface mining of coal, which includes the
following with respect to mining of coal by surface mining methods whether now known or hereafter
developed, including without limitation strip mining, auger mining and highwall mining: the
production, processing, exploration, storing, shipment, ownership, leasing, subleasing, loading,
unloading, marketing and sale of surface mined coal and activities directly relating thereto,
including without limitation developing or otherwise controlling real property used or useful in
the surface coal mining business, including surface mining rights or the rights to severed coal
reserves mineable by surface mining methods or applying for any Mining Authorizations or engaging a
contract miner; however, it excludes the Excluded Subsidiaries Surface Mining.



     “Tax” means any tax (including any income tax, payroll tax including employee withholdings,
gross receipts tax, commercial activities tax, capital gains tax, value-added tax, sales tax,
severance tax or property tax), levy, assessment, tariff, duty (including any customs duty) or
deficiency, and any related charge or amount (including any fine, penalty, interest or addition to
tax), imposed, assessed or collected by or under the authority of any Governmental Body or payable



13









 




pursuant to any tax-sharing agreement or any other Contract relating to the sharing or payment
of any such tax, levy, assessment, tariff, duty or deficiency.




     “Tax Return” means any return (including any information return), report, statement, schedule,
notice, form or other document or information filed with or submitted to, or required to be filed
with or submitted to, any Governmental Body in connection with the determination, assessment,
collection or payment of any Tax or in connection with the administration, implementation or
enforcement of or compliance with any Legal Requirement relating to any Tax.



     “Termination Fee” means a fee in the amount of One Million Two Hundred Thousand Dollars
($1,200,000.00).



     “Threatened” means a Claim, Proceeding, dispute, action or other matter will be deemed to have
been “Threatened” if any demand or statement has been made (orally or in writing) or any notice has
been given (orally or in writing), or if any other event has occurred or any other circumstances
exist, that would lead a prudent Person to conclude that such a Claim, Proceeding, dispute, action
or other matter is likely to be asserted, commenced, taken or otherwise pursued in the future.



     “Transaction Consideration” has the meaning set forth in Section 2.3.



     “Transaction Documents” means the Membership Interests Assignment, the Escrow Agreement, the
Restrictive Covenants Agreements and the Transition Services Agreement.



     “Transfer Sections” has the meaning set forth in Section 2.1(d)(vi)(A).



     “Transition Services Agreement” means an agreement in a mutually agreed form between the
Sellers and the Buyer pursuant to which the Sellers provide to the Buyer for a mutually agreed fee
the agreed upon transition accounting, financial and other administrative services from the date of
the Closing through and including December 31, 2009.



     “VEBA” means a voluntary employees’ beneficiary association under IRC Section 501(c)(9).



     “WARN Act” has the meaning set forth in Section 7.4(a).



     “Workers’ Compensation Laws” means all Legal Requirements that provide for awards to employees
and their dependents for employment-related accidents and occupational diseases, including without
limitation the Federal Black Lung Benefits Act, as amended, 29 U.S.C. Section 801 et seq.



     “Working
Capital” means an amount equal to the AT Current Assets minus the AT Current
Liabilities.



14









 





2. PRE-CLOSING REORGANIZATION; ACQUISITION TRANSACTION; TRANSACTION CONSIDERATION




          2.1 Pre-Closing Reorganization




     Prior to the Closing, the Phoenix AA Parties, in order to position the Acquired Company and
the other Acquired Phoenix Entities properly for completing the Acquisition Transaction, shall
effect a reorganization of the Sellers and their direct and indirect Subsidiaries (the “Pre-Closing
Reorganization”), as follows:



          (a) The Phoenix Entities that will be involved in the Pre-Closing Reorganization are PCC, the
Acquired Company and all of the other Phoenix Entities listed on Schedule 2.1(a) (the
"Phoenix Reorganization Entities”), all of which Phoenix Reorganization Entities other than PCC
(which is currently a wholly owned Subsidiary of PCI) are currently Subsidiaries wholly owned
directly or indirectly by PCC.




          (b) The present assets of the Phoenix Reorganization Entities which are to be included in the
Acquisition Transaction (the “AT Assets”) are as follows:





          (i) the fixed assets listed on Schedule 2.1(b)(i) which identifies both fixed
assets and the Phoenix Reorganization Entity which is the owner thereof (the “AT Fixed Assets”);




          (ii) the coal reserves leases listed on Schedule 2.1(b)(ii) which identifies such
leases and as well both the Phoenix Reorganization Entity a party thereto and the
landlord/lessor with respect thereto (the “AT Coal Leases”), and including the coal reserves
available thereunder with such changes therein occurring in the Ordinary Course of Business (the
“AT Leased Coal Reserves”);




          (iii) the real property rights covered under deeds and other instruments listed on
Schedule 2.1(b)(iii), and including the coal reserves available thereby with such
changes therein occurring in the Ordinary Course of Business (collectively with the AT Leased
Coal Reserves, the “AT Coal Reserves”);




          (iv) all leases other than the AT Coal Leases listed on Schedule 2.1(b)(iv) which
identifies such leases and as well both the Phoenix Reorganization Entity a party thereto and
the landlord/lessor with respect thereto (the “AT Other Leases”);




          (v) the coal sales agreements listed on Schedule 2.1(b)(v) which identifies such
agreements and as well both the Phoenix Reorganization Entity a party thereto and the other
party with respect thereto (the “AT Coal Sales Agreements”);




          (vi) the coal purchase agreements listed on Schedule 2.1(b)(vi) which identifies
such agreements and as well both the Phoenix Reorganization Entity a party thereto and the other
party with respect thereto (the “AT Coal Purchase Agreements”);




          (vii) the other Contracts, including without limitation fleeting agreements (if any),
listed on Schedule 2.1(b)(vii) which identifies such other Contracts and as well both
the Phoenix



15









 







Reorganization Entity a party thereto and the other party with respect thereto (the “AT
Other Contracts”);




          (viii) all Governmental Authorizations listed on Schedule 2.1(b)(viii) which
identifies each such Governmental Authorization and the Phoenix Reorganization Entity holding
each such Governmental Authorization, including without limitation any applications for any such
Governmental Authorizations, and any such Governmental Authorizations issued after the date of
this Agreement and prior to the Closing pertaining to the AT Coal Reserves (the “AT Governmental
Authorizations”);




          (ix) the inventory of the Surface Mining Business, including without limitation coal, spare
parts, fuel and supplies inventory (the “AT Inventory”);




          (x) the software, Contracts relating to software including software licenses, hardware,
electronic scales and related equipment, and other such technology and equipment used in
connection with the Surface Mining Business listed on Schedule 2.1(b)(x) (the “AT
Technology Assets”);




          (xi) the accounts receivable, the advance royalties, the prepaid assets and the other
current assets of the Surface Mining Business, all determined in accordance with GAAP (U.S.)
(which items, together with the AT Inventory, collectively constitute the “AT Current Assets");
and




          (xii) the other assets (if any) listed on Schedule 2.1(b)(xii) which identifies
such assets in the manner set forth therein, including without limitation any contractual rights
of the Phoenix Reorganization Entities under previous acquisition agreements and other
acquisition documents (to the extent they reside in a Phoenix Reorganization Entity which is an
Acquired Phoenix Entity (or are assignable and are assigned to any Acquired Phoenix Entity) and
relate to any of the AT Assets or the AT Liabilities).



          (c) The present liabilities of the Phoenix Reorganization Entities which are to be included in
the Acquisition Transaction (the “AT Liabilities”) are as follows:





          (i) the AT Fixed Assets acquisition debt listed on Schedule 2.1(c)(i) which
identifies specifics regarding the debt and the Phoenix Reorganization Entity which is the
debtor with respect thereto (the “AT Fixed Assets Debt”);




          (ii) the obligations and other liabilities of the Phoenix Reorganization Entities arising
after the Closing under the AT Coal Leases, the AT Other Leases, the AT Coal Sales Agreements,
the AT Coal Purchase Agreements, the AT Other Contracts, the AT Governmental Authorizations, any
Contracts included in the AT Technology Assets and the Contracts pertaining to the AT Fixed
Assets Debt (the “AT Contracts”);




          (iii) the reclamation obligations (whether accruing prior to or after the Closing Date)
relating to the AT Governmental Authorizations listed on Schedule 2.1(c)(iii)-1 which
identifies the Phoenix Reorganization Entity having such reclamation obligations and information
relating to the associated AT Governmental Authorizations including any permit



16









 







numbers and the reclamation bond gross amount on the face of any such permit (the “AT
Reclamation Obligations”), specifically excluding the reclamation obligations (whether accruing
prior to or after the Closing Date) relating to the excluded Governmental Authorizations listed
on Schedule 2.1(c)(iii)-2 (the “Excluded Governmental Authorizations") which identifies
the Phoenix Entity having such reclamation obligations and information relating to the
associated Excluded Governmental Authorizations including any permit numbers and the reclamation
bond gross amount on the face of any such permit (the “Excluded Reclamation Obligations”);




          (iv) subject to the consent of any insurance carrier and/or other service provider who
provides or arranges for current health insurance coverage, with respect to the APE Employees
accruing after the Closing Date under the current health (medical, dental and/or vision)
insurance plan(s)of the Phoenix Group Entities for a period of time ending on or before December
31, 2010 in the event the Buyer elects the option hereby granted to, at the expense of the
Acquired Phoenix Entities (and/or the Buyer), continue coverage of the APE Employees under the
current health (medical, dental and/or vision) insurance plan(s) of the Phoenix Group Entities
for such a period (the “AT Optional Health Plan Obligations”);




          (v) all accounts payable and accrued expenses of the Surface Mining Business, including
without limitation the Accrued Coal Leases Liabilities, all determined in accordance with GAAP
(U.S.) (the “AT Current Liabilities"); and




          (vi) the other liabilities (if any) listed on Schedule 2.1(c)(vi) which identifies
such liabilities in the manner set forth therein.



          (d) The actions to effect the Pre-Closing Reorganization shall be carried out by the Phoenix
Reorganization Entities in the following manner:





          (i) the actions taken by the Phoenix Reorganization Entities shall be as provided below in
this Section 2.1(d), and where the Buyer has the right to make a direction with respect to any
such actions such direction (if any) to be effective shall be made by the Buyer in a written
notice to the Sellers (the “Buyer PRE Notice”) given not less than seven (7) days prior to the
Closing;




          (ii) except as otherwise provided in Section 2.1(d)(vi), those AT Assets and AT Liabilities
held by PCC (the “PCC AT Assets/AT Liabilities”) shall be transferred by PCC to the Acquired
Company;




          (iii) those AT Assets and AT Liabilities held by the Acquired Company (the “Acquired
Company AT Assets/AT Liabilities”) shall be retained by the Acquired Company;




          (iv) except as otherwise provided in Section 2.1(d)(vi), all other AT Assets (other than
the AT Assets included in the PCC AT Assets/AT Liabilities and the Acquired Company AT Assets/AT
Liabilities) (the “Other AT Assets”) directed by the Buyer for transfer to the Acquired Company
shall be transferred by the Phoenix Reorganization Entities to the Acquired Company;



17









 






          (v) except as otherwise provided in Section 2.1(d)(vi), all other AT Liabilities (other
than the AT Liabilities included in the PCC AT Assets/AT Liabilities and the Acquired Company AT
Assets/AT Liabilities) (the “Other AT Liabilities”) directed by the Buyer for transfer to the
Acquired Company shall be transferred by the Phoenix Reorganization Entities to and assumed by
the Acquired Company;




          (vi) (A) notwithstanding Section 2.1(d)(ii), Section 2.1(d)(iv) and Section 2.1(d)(v) (the
“Transfer Sections”), if and to the extent there are any Consents required with respect to the
transfer of any AT Assets or AT Liabilities which are to be transferred to the Acquired Company
as provided in the Transfer Sections, and the Sellers are unable with the use of commercially
reasonable efforts to obtain such Consents prior to the Closing, the AT Assets or the AT
Liabilities subject thereto shall not be so transferred and instead shall be retained by the
Phoenix Reorganization Entity holding the same, and (B) notwithstanding anything to the contrary
in Section 2.1 or elsewhere in this Agreement, with respect to any AT Assets or AT Liabilities
that are associated in any part with the Excluded Reclamation Obligations (e.g., an AT Coal
Lease where a portion of the leased property has AT Coal Reserves to be included in the
Acquisition Transaction and another portion of the leased property relates to mined out property
associated with the Excluded Reclamation Obligations), the Phoenix Reorganization Entities shall
take such actions as are directed by the Buyer to exclude from the Acquisition Transaction those
portions of the AT Assets and AT Liabilities associated with the Excluded Reclamation
Obligations (and the same shall not be considered to be AT Assets and AT Liabilities) while
including in the Acquisition Transaction the portion of the AT Assets and AT Liabilities which
are not associated with the Excluded Reclamation Obligations and to the extent that cannot be
done due to necessary Consents which cannot be obtained or otherwise then the portion of the AT
Assets and AT Liabilities which are not associated with the Excluded Reclamation Obligations
shall be retained by the Remaining Phoenix Entities and shall be treated as PCC AT Assets/AT
Liabilities hereunder;




          (vii) for those PCC AT Assets/AT Liabilities (if any) that, by reason of the provisions of
Section 2.1(d)(vi), are not held by any of the Acquired Phoenix Entities, the applicable
Remaining Phoenix Entity and the applicable Acquired Phoenix Entity shall have an arrangement
with respect thereto under which the Acquired Phoenix Entity has responsibility for the
post-Closing obligations and obtains the post-Closing benefits of such PCC AT Assets/AT
Liabilities;




          (viii) any Other AT Assets or Other AT Liabilities not timely directed by the Buyer for
transfer to the Acquired Company shall not be so transferred and shall be retained by the
Phoenix Reorganization Entity holding the same;




          (ix) for any Phoenix Reorganization Entities other than PCC and the Acquired Company which
are retaining either or both Other AT Assets and/or Other AT Liabilities, the Phoenix
Reorganization Entities holding the ownership interests (in the form of shares, membership
interests or otherwise) in such retaining Phoenix Reorganization Entities shall transfer all of
such ownership interests to such Phoenix Reorganization Entities other than PCC as directed by
the Buyer, and in the absence of such a direction by the Buyer with respect to any such
retaining Phoenix Reorganization Entity, shall make such transfer of such ownership interests to
such Phoenix Reorganization Entities other than PCC as is directed by the Sellers, so



18









 







that they shall all then become and as of the Closing be Subsidiaries wholly owned directly
or indirectly by the Acquired Company;




          (x) for any Phoenix Reorganization Entities other than PCC and the Acquired Company which
are not retaining any Other AT Assets or Other AT Liabilities, the Phoenix Reorganization
Entities holding the ownership interests (in the form of shares, membership interests or
otherwise) in such Phoenix Reorganization Entities shall transfer to PCC all of such ownership
interests, so that they shall become wholly owned Subsidiaries of PCC and as of the Closing the
Acquired Company shall not have any direct or indirect ownership interests therein;




          (xi) those Phoenix Reorganization Entities (other than PCC) which are corporations (if any)
shall be converted to limited liability companies;




          (xii) those APE Employees being employed by the Acquired Phoenix Entities shall have been
employed and shall as of the Closing be employed by such of the Acquired Phoenix Entities as are
directed by the Buyer, and to the extent not so directed by the Buyer shall have been employed
and shall as of the Closing be employed by such of the Acquired Phoenix Entities as are
determined by the Sellers, it being understood and agreed in all events that neither the Buyer
nor any of the Acquired Phoenix Entities is assuming or shall have after the Closing any
obligations with respect to any Company Plans or any Company Other Benefit Obligations (other
than the AT Optional Health Plan Obligations in the event the Buyer elects the option under
Section 2.1 (c)(iv) to at the expense of the Acquired Phoenix Entities continue coverage of the
APE Employees under the current health (medical, dental and/or vision) insurance plan(s) of the
Phoenix Entities for a period of time ending on or before December 31, 2010); and




          (xiii) for any Phoenix Reorganization Entity which will be an Acquired Phoenix Entity, any
assets of such Phoenix Reorganization Entity that are not AT Assets and any liabilities of such
Phoenix Reorganization Entity that are not AT Liabilities shall be transferred to a Phoenix
Entity which will not be an Acquired Phoenix Entity.



          2.2 Acquisition Transaction




     Subject to the terms and conditions of this Agreement, at the Closing and following the
Pre-Closing Reorganization, the Sellers and the Buyer shall engage in the completion of an
acquisition transaction pursuant to which the Sellers shall sell, assign, transfer and deliver to
the Buyer, and the Buyer shall acquire from the Sellers, the Acquired Company Membership Interests,
free and clear of all Encumbrances.



          2.3 Transaction Consideration




     The consideration to be provided by the Buyer with respect to the Acquisition Transaction (the
"Transaction Consideration”) shall be as follows:



          (a) At the Closing, indirectly through the acquisition of the Acquired Company and hence as
well the other Acquired Phoenix Entities, the Buyer will have taken on all of the AT


19









 







Liabilities by reason of such AT Liabilities residing in and/or having been assumed by the
Acquired Phoenix Entities.




          (b) By the Closing, in order to position the Remaining Phoenix Entities to obtain the release
and return to them following the Closing of the cash collateral and Company Surety Bonds posted by
the Phoenix Group Entities (or third Persons on behalf of the Phoenix Group Entities) to secure the
AT Reclamation Obligations, the Buyer shall (i) with respect to any AT Governmental Authorizations
for which a Consent is required by reason of a transfer thereof or a change in control of the
Phoenix Entity holding the same, file an application for such Consent and post an adequate bond or
other collateral which will enable the Remaining Phoenix Entities to obtain such release and return
upon the granting of such Consent and (ii) with respect to any AT Governmental Authorizations not
requiring such a Consent, post a substitute bond or other collateral with respect thereto which
will enable the Remaining Phoenix Entities to obtain such release and return upon approval of such
substituted bond or other collateral.




          (c) At the Closing, the Buyer shall pay to the Sellers an amount equal to the Excluded
Reclamations Obligations Value, or at the option of the Sellers some portion of that amount shall
be paid by the Buyer to the Escrow Agent as a credit against and to satisfy that portion of the
obligation of the Sellers to deposit the Escrow Deposit Amount with the Escrow Agent.




          (d) After the Closing, the Buyer shall deposit with the Escrow Agent in the escrow under the
Escrow Agreement (i) 50% of the RFR Fee if and within ten (10) days after the Sellers have
satisfied the RFR Surface Leasehold Condition and (ii) the other 50% of the RFR Fee if and within
ten (10) days after the Sellers have satisfied the RFR Mineral Leasehold Condition.




          2.4 Allocation of Transaction Consideration




     The Transaction Consideration shall be allocated among the AT Assets in accordance with the
values mutually agreed to by the Buyer and the Sellers in writing at or prior to the Closing.



          2.5 Working Capital Adjustment




          (a) Schedule 2.5(a) sets forth the consolidated balance sheet of the Phoenix
Reorganization Entities as of June 30, 2009 reflecting the AT Assets and the AT Liabilities and
prepared in accordance with GAAP (U.S.) (the “June 30 Balance Sheet”), and (ii) a written estimate
of the Working Capital as of June 30, 2009 based on the June 30 Balance Sheet (the “June 30 Working
Capital”).




          (b) At least five (5) business days prior to the Closing Date, the Sellers shall deliver to
the Buyer (i) an estimated consolidated balance sheet of the Acquired Phoenix Entities immediately
following the Closing prepared in accordance with GAAP (U.S.) (the “Estimated Closing Balance
Sheet”), and (ii) a written estimate of the Working Capital immediately following the Closing based
on the Estimated Closing Balance Sheet (the “Estimated Working Capital”). The Estimated Working
Capital shall be determined in a manner consistent with the calculation of the June 30 Working
Capital and in accordance with GAAP (U.S.). With respect to the Estimated Working Capital, the
parties agree that:







20









 









          (i) If the Estimated Working Capital is less than the Benchmark Working Capital, then at
the Closing the Sellers shall pay to the Buyer the amount by which the Benchmark Working Capital
exceeds the Estimated Working Capital, via certified check or wire transfer of immediately
available funds.




          (ii) If the Estimated Working Capital is greater than the Benchmark Working Capital, then
at the Closing the Buyer shall pay to the Sellers the amount by which the Estimated Working
Capital exceeds the Benchmark Working Capital, via certified check or wire transfer of
immediately available funds (any adjustment pursuant to subsection (i) or (ii) above being the
“Estimated Working Capital Adjustment”).



          (c) Within ninety (90) days after the Closing Date, the Buyer shall prepare and deliver to the
Sellers a statement (the “Actual Working Capital Statement”) of the Buyer’s determination of the
actual Working Capital immediately following the Closing, provided that the accounts receivable
included in the AT Current Assets shall for this purpose be limited to the accounts receivable
included in the AT Current Assets which are received by the Buyer within the period of sixty (60)
days after the Closing Date (the “Actual Working Capital”). The Actual Working Capital shall be
determined in a manner consistent with the calculation of the Estimated Working Capital and in
accordance with GAAP (U.S.). Following the determination of the Actual Working Capital under this
Section 2.5(b), the parties hereby agree that:





          (i) If the Actual Working Capital is less than the Estimated Working Capital, then the
Sellers shall pay to the Buyer the amount by which the Estimated Working Capital exceeds the
Actual Working Capital; and




          (ii) If the Actual Working Capital is greater than the Estimated Working Capital, then the
Buyer shall pay to the Sellers the amount by which the Actual Working Capital exceeds the
Estimated Working Capital (any adjustment pursuant to subsection (i) or (ii) above being the
“Final Working Capital Adjustment”).



          (d) The Sellers may, within fifteen (15) days after receiving notice of the Actual Working
Capital Statement, deliver a notice to the Buyer objecting to the Final Working Capital Adjustment
(the “Adjustment Objection”). The Adjustment Objection shall set forth the Buyer’s calculation of
the Final Working Capital Adjustment and shall specify those items or amounts to which the Sellers
disagree. The Sellers shall be deemed to have agreed with all other items and amounts contained in
the Actual Working Capital Statement and the calculation of the Final Working Capital Adjustment.
A failure on the part of the Sellers to provide timely notice shall be deemed an acceptance of the
Final Working Capital Adjustment by the Sellers and the Buyer.




          (e) The parties shall resolve the Adjustment Objection (if any) in the following manner:





          (i) For a period of fifteen (15) days from the date of the Adjustment Objection (the
“Negotiation Period”), the parties shall attempt to negotiate the amount of the Final Working
Capital Adjustment in good faith.



21









 






          (ii) If the Adjustment Objection is not resolved during the Negotiation Period, the Final
Working Capital Adjustment shall be determined according to the following terms:




          (A) The Buyer and the Sellers shall attempt to agree upon a neutral and impartial
certified public accounting firm to be retained as the accounting referee to resolve the
Adjustment Objection (the “Accounting Referee”). If the Buyer and the Sellers are unable to
agree upon the Accounting Referee within ten (10) days following the end of the Negotiation
Period, then the Buyer, on the one hand, and the Sellers, on the other hand, shall submit in
writing to each other a list of three names of neutral and impartial certified public
accounting firms within twelve (12) days following the end of the Negotiation Period. The
first name that matches on both lists shall be retained as the Accounting Referee. If there
are no matches on the lists, the parties shall submit new lists of three names within one
(1) business day, and this process shall continue until an Accounting Referee is selected.




          (B) The Buyer, on the one hand, and the Sellers, on the other hand, shall submit the
Actual Working Capital Statement, the Adjustment Objection and the Buyer’s response to the
Adjustment Objection to the Accounting Referee within five (5) days following the
appointment of the Accounting Referee. In making the calculation of the Actual Working
Capital, the Accounting Referee shall consider only those items or amounts in the Actual
Working Capital Statement and the Buyer’s calculation of Actual Working Capital to which the
Sellers have disagreed in the Adjustment Objection and the Buyer’s response to the
Adjustment Objection.




          (C) The Accounting Referee shall deliver to the Buyer and the Sellers, as promptly as
practicable (but in any case no later than thirty (30) days from the date of engagement of
the Accounting Referee), a report setting forth the calculation of the Actual Working
Capital. Such report shall be final and binding upon the Buyer and the Sellers and shall be
used to calculate the Final Working Capital Adjustment.




          (D) The fees and costs of the Accounting Referee shall be borne equally by the Buyer
and the Sellers.



          (f) The Sellers, on the one hand, or the Buyer, on the other hand, shall pay the Final Working
Capital Adjustment to the Buyer or the Sellers, respectively, within ten (10) days of the final
determination thereof by agreement or the calculation of the Accounting Referee. Unless otherwise
agreed to by the parties, the Final Working Capital Adjustment shall be paid via certified check or
wire transfer of immediately available funds.




          (g) Any accounts receivable included in the AT Current Assets which are not counted in the
determination of the Actual Working Capital pursuant to Section 2.5(b) because they are not
received within sixty (60) days after the Closing shall if and as collected by the Buyer (including
the Acquired Phoenix Entities) be for the account of the Sellers and paid over to the Sellers
within thirty (30) days after the end of the calendar month in which they are received.









22









 








3. CLOSING




          3.1 Closing




     The closing of the Acquisition Transaction (the “Closing”) shall take place at the offices of
Squire, Sanders & Dempsey L.L.P., 2000 Huntington Center, 41 South High Street, Columbus, Ohio
43215, at 10:00 a.m. or such other mutually agreed time on September 30, 2009 or such other
mutually agreed date, or at such other place and time as the Sellers and the Buyer may mutually
agree.



          3.2 Closing Deliveries




     At the Closing:



          (a) The Sellers shall deliver, or cause to be delivered, to the Buyer and the Escrow Agent, as
applicable:





          (i) each of the PAAP Ancillary Documents, executed by a duly authorized officer of the
Phoenix AA Parties;




          (ii) certificates, dated as of the Closing Date, executed by duly authorized officers of
the Sellers certifying in such detail as the Buyer may reasonably request that the conditions
specified in Article 9 have been satisfied;




          (iii) the opinions of one or more counsel for the Phoenix Entities, dated as of the Closing
Date, in such form as is reasonably requested by the Buyer and its counsel;




          (iv) the Escrow Deposit Amount;




          (v) the payment (if any) payable by the Sellers to the Buyer with respect to the Estimated
Working Capital Adjustment pursuant to Section 2.5(a);




          (vi) the resignations of the limited liability company managers and the officers of the
Acquired Phoenix Entities; and




          (vii) such other duly executed documents and certificates as may be reasonably requested by
the Buyer prior to or at the Closing.



          (b) The Buyer shall deliver, or cause to be delivered, to the Sellers:





          (i) each of the Buyer Ancillary Documents, duly executed by an authorized officer of the
Buyer;




          (ii) a certificate, dated as of the Closing Date, executed by a duly authorized officer of
the Buyer certifying in such detail as the Sellers may reasonably request that the conditions
specified in Article 10 have been satisfied;



23









 







          (iii) the opinions of one or more counsel for the Buyer, dated as of the Closing Date, in
such form as is reasonably requested by the Sellers and their counsel;




          (iv) the payment payable by the Buyer to the Sellers (or to the Escrow Agent at the option
of the Sellers pursuant to Section 2.3(c)) of the Excluded Reclamation Obligations Value;




          (v) the payment (if any) payable by the Buyer to the Sellers with respect to the Estimated
Working Capital Adjustment pursuant to Section 2.5(a); and




          (vi) such other duly executed documents and certificates as may be reasonably requested by
the Sellers prior to or at the Closing.



4. REPRESENTATIONS AND WARRANTIES OF SELLERS




     The Sellers jointly and severally represent and warrant to the Buyer as of the date hereof and
as of the Closing (or solely as of the date hereof or as of the Closing where specifically stated
so) as follows:



          4.1 Organization and Good Standing; Power




          (a) Each of the Sellers is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization. Each of the Sellers has full corporate
power and authority to carry on its business, to own, lease or use the assets that it purports to
own, lease or use in its business and to operate its properties in connection with its business.
The Sellers have made available to the Buyer copies of the Organizational Documents of the Sellers.




          (b) Each of the Phoenix Reorganization Entities is a corporation or limited liability company
duly organized, validly existing and in good standing under the laws of the state of its
organization. Each of the Phoenix Reorganization Entities has full corporate or limited liability
company (as applicable) power and authority to carry on its business, to own, lease or use the
assets that it purports to own, lease or use in its business and to operate its properties in
connection with its business, and to perform all of its obligations under each Contract to which it
is a party. The jurisdictions in which the Phoenix Reorganization Entities are licensed, qualified
or registered to do business as a foreign corporation or limited liability company (as applicable)
are set forth on Schedule 4.1(b), and there are no other jurisdictions in which the nature
of the business as now conducted by any of the Phoenix Reorganization Entities or the property
owned or leased by any of the Phoenix Reorganization Entities makes such licensing, qualification
or registration necessary, except where the failure to be so duly licensed, qualified or registered
would not have a Material Adverse Effect. The Sellers have made available to the Buyer copies of
the Organizational Documents of the Phoenix Reorganization Entities. Notwithstanding anything to
the contrary set forth in this Section 4.1(b), PCC shall not be considered a Phoenix Reorganization
Entity for purposes of this Section 4.1(b).








24









 








          4.2 Authority; No Conflicts; Consents




          (a) Each of the Phoenix AA Parties has the requisite corporate or limited liability company
(as applicable) power and authority to execute and deliver this Agreement and each of the PAAP
Ancillary Documents to which it is a party, to perform its obligations hereunder and thereunder and
to consummate the Acquisition Transaction. The execution, delivery and performance by each of the
Phoenix AA Parties of this Agreement and the consummation by each of the Phoenix AA Parties of the
Acquisition Transaction have been duly authorized by all requisite corporate or limited liability
company (as applicable) action on its part, including the requisite approvals of its board of
directors and shareholders (if necessary) in the case of each of the Sellers and its managers and
members in the case of the Acquired Company. Each of the Phoenix AA Parties has duly executed and
delivered this Agreement, and on the Closing Date will have duly executed and delivered each of the
PAAP Ancillary Documents to which it is a party. This Agreement constitutes, and on the Closing
Date each of the PAAP Ancillary Documents will constitute, the legal, valid and binding obligations
of each of the Phoenix AA Parties a party thereto enforceable against each such Phoenix AA Party in
accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditors’ rights and remedies generally and to general
principles of equity.




          (b) Neither the execution and delivery of this Agreement nor the consummation or performance
of the Acquisition Transaction will, directly or indirectly (with or without notice or lapse of
time):





          (i) contravene, conflict with or result in a violation of (A) any provision of any of the
Organizational Documents of any of the Phoenix Group Entities or (B) any resolution adopted by
the board of directors, managers, shareholders or members of any of the Phoenix Group Entities;




          (ii) contravene, conflict with or result in a violation of, or give any Governmental Body
or other Person the right to challenge the Acquisition Transaction or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which any of the Phoenix Group
Entities, or any of the assets owned or used by any of the Phoenix Group Entities, may be
subject;




          (iii) subject to the approvals of Governmental Bodies provided for in Section 7.1,
contravene, conflict with or result in a violation of any of the terms or requirements of, or
give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify,
any Governmental Authorization that is held by any of the Phoenix Group Entities, or that
otherwise relates to the business or any of the assets owned or used by any of the Phoenix Group
Entities;




          (iv) except as set forth on Schedule 4.2(c), contravene, conflict with or result in
a violation or Breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, accelerate the maturity or performance of, or cancel, terminate or
modify, any of the AT Contracts; or



25









 






          (v) result in the imposition or creation of any Encumbrance (except Permitted Encumbrances)
upon or with respect to any of the assets of the business owned or used by any of the Phoenix
Group Entities.



          (c) Subject to the approvals of Governmental Bodies provided for in Section 7.1, and except as
set forth on Schedule 4.2(c), the Phoenix Group Entities are not and will not be required
to give any notice to, or obtain any Consent from, any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of the Acquisition Transaction.




          4.3 Ownership




     Schedule 4.3-1 sets forth for each of the Phoenix Reorganization Entities, as of the
date hereof: (a) the identity of its shareholders or members (as applicable) and (b) the shares or
membership interests, respectively, held by each of its shareholders or members (as applicable).
As of the date hereof, the Phoenix Reorganization Entities have no outstanding bonds, debentures,
notes or other obligations, or any other equity or other securities other than the shares and
membership interests set forth on Schedule 4.3-1. Schedule 4.3-2, which shall be
completed by the Sellers and approved by the Buyer (which approval shall not be unreasonably
withheld or delayed) prior to the Closing, sets forth for each of the Phoenix Reorganization
Entities as of the Closing: (a) the identity of its shareholders or members (as applicable) and (b)
the shares or membership interests, respectively, held by each of its shareholders or members (as
applicable). As of the Closing, the Phoenix Reorganization Entities have no outstanding bonds,
debentures, notes or other obligations, or any other equity or other securities other than the
shares and membership interests set forth on Schedule 4.3-2. Notwithstanding anything to
the contrary set forth in this Section 4.3, PCC shall not be considered a Phoenix Reorganization
Entity for purposes of this Section 4.3. PCI owns 100% of the equity interests and other
securities of PCC.



          4.4 Subsidiaries




     As of the Closing, none of the Acquired Phoenix Entities has any Subsidiaries (other than any
other Acquired Phoenix Entities that are Subsidiaries) or otherwise any ownership interest in any
other Person.



          4.5 Financial Statements




     Schedule 4.5 sets forth (a) the balance sheets, and the related statements of income,
cash flow and changes in stockholders’ equity and notes thereto, of PCC and its Subsidiaries for
the fiscal years ended December 31, 2006 and 2007 (the “2006 and 2007 Audited Financial
Statements”) and PCI and its Subsidiaries for the fiscal year ended December 31, 2008, all of which
are audited (the “Audited Financial Statements”), and (B) the balance sheet as of June 30, 2009,
and the related statements of income, cash flow and changes in stockholders’ equity for the six
months then ended, which are unaudited (the “Interim Financial Statements,” and collectively with
the Audited Financial Statements, the “Financial Statements”). The Financial Statements have been
prepared in accordance with GAAP (Canada) (except for the 2006 and 2007 Audited Financial
Statements, which have been prepared in accordance with GAAP (U.S.)) and fairly present the
financial condition and the results of operations, changes in stockholders’ equity, and



26









 




cash flow
of PCC and its Subsidiaries and PCI and its Subsidiaries, as applicable, as at the respective dates of
and for the periods referred to in the Financial Statements, subject, in the case of the Interim
Financial Statements, to normal year-end adjustments which, when taken together, shall not be
material and are consistent with GAAP (Canada) or GAAP (U.S.), as applicable. Except for certain
differences between GAAP (U.S.) and GAAP (Canada), the Financial Statements reflect the consistent
application of accounting principles throughout the periods involved. No financial statements of
any Person are required by GAAP (Canada) or GAAP (U.S.), as applicable, to be included in the
Financial Statements that have not been included.




          4.6 Books and Records




     The books of account, minute books, stock record books and other records of the Phoenix Group
Entities which have been made available to the Buyer are complete and correct in all material
respects and have been maintained in accordance with sound business practices.



          4.7 Properties




          (a) As of the Closing, each of the Acquired Phoenix Entities will own (with good and
marketable title in the case of owned real property, except for and subject to the Permitted
Encumbrances) all of the owned properties and assets (whether real, personal or mixed and whether
tangible or intangible) which are AT Assets. As of the Closing, all such owned properties and
assets will be free and clear of any and all Encumbrances and will not, in the case of owned real
property, be subject to any rights of way, building use restrictions, exceptions, variances,
reservations or limitations of any nature, except, with respect to all such owned properties and
assets, for the Permitted Encumbrances. All buildings, plants and structures owned or leased by
the Acquired Phoenix Entities as of the Closing will be wholly within the boundaries of such real
property owned or leased by the Acquired Phoenix Entities and will not encroach upon the property
of, or otherwise conflict with the property rights of, any other Person.




          (b) The AT Fixed Assets include all tangible assets used by the Phoenix Group Entities at any
time for the conduct of the Surface Mining Business.




          (c) The Acquired Phoenix Entities will not be a party to any capital or operating leases with
respect to the AT Fixed Assets as of the Closing.




          (d) The AT Coal Leases and the AT Other Leases constitute all real property and water rights,
and other interests in land, including coal and other mineral extraction rights (both underground
and surface), easements, rights of way and options, and all rights of the Acquired Phoenix Entities
to timber, limestone, natural gas (including coalbed methane and gob gas) and any other natural
resources, which will as of the Closing be leased or subleased by the Acquired Phoenix Entities
(the “Leased Real Property”). Notwithstanding anything to the contrary contained in this
Agreement, nothing contained herein shall be deemed or construed to be a covenant for quiet
enjoyment or a warranty of title whatsoever on the part of the Sellers relating to the Leased Real
Property, either express or implied, and the Sellers expressly disclaim any express or implied
representation or warranty as to title of the lessors of the Leased Real Property. The Sellers
have heretofore made available to the Buyer true and complete copies of such leases and


27









 







 subleases. As of the Closing, with respect to each such lease or sublease and the Leased Real
Property, and except for Permitted Encumbrances:





          (i) such lease or sublease is in full force and effect in all respects and enforceable in
accordance with its terms with respect to the Phoenix Group Entity a party thereto;




          (ii) to the Knowledge of the Phoenix Group Entities, such lease or sublease is in full
force and effect in all respects and enforceable in accordance with its terms with respect to
the other party (or parties) to such lease or sublease;




          (iii) (A) none of the Acquired Phoenix Entities nor any of their predecessor Phoenix Group
Entities (if any) were or are in default under any such lease or sublease, and subject to any
notices or Consents set forth on Schedule 4.2(c) no event has occurred which, with the
passage of time or expiration of any grace period, would constitute a default of the obligations
of the Acquired Phoenix Entities or any of their predecessor Phoenix Group Entities (if any)
under any such lease or sublease, (B) to the Knowledge of any of the Phoenix Group Entities, no
other party to any such lease or sublease is in default thereunder, and (C) none of the Phoenix
Group Entities has received a written or other notice of default or potential default with
respect to any such lease or sublease;




          (iv) there are no unwritten or oral modifications to any such lease or sublease or any
course of dealing or business operations that can be construed as a modification to any such
lease or sublease;




          (v) no such lease or sublease has been mortgaged, deeded in trust or subjected to an
Encumbrance;




          (vi) there are no other matters that materially adversely affect the rights of the Acquired
Phoenix Entities to the Leased Real Property or the fixtures and improvements on the Leased Real
Property, including all tipples, loadouts and other transportation and mineral processing
facilities (the “Leased Fixtures and Improvements”); and




          (vii) except as set forth on Schedule 4.7(d)(vii), there are no existing Disputes
between the Phoenix Group Entities, on the one hand, and any of the lessors or sublessors with
respect to the Leased Real Property or any Person having rights under or with respect to any of
the Leased Real Property, on the other hand. Also set forth on Schedule 4.7(d)(vii) is
a listing of all advance and minimum royalties which have been paid by any of the Phoenix Group
Entities with respect to the Leased Real Property, and which advance or minimum royalties may be
recouped upon the mining of the Leased Real Property. All minimum royalties payable with
respect to the Leased Real Property are payable in advance and recoupable in accordance with the
terms of the applicable AT Coal Lease.



          (e) Schedule 4.7(e) sets forth all real property and water rights, and other interests
in land, including coal and other mineral rights (both underground and surface), easements, rights
of way and options, and all rights of any of the Acquired Phoenix Entities to timber, limestone,
natural gas (including coalbed methane and gob gas) and any other natural resources, which will as


28









 







 of the Closing be owned by any of the Acquired Phoenix Entities (the “Owned Real Property”).
All existing surveys, title insurance policies, title insurance abstracts and other evidence of
title in the possession of the Phoenix Group Entities relating to any of the Owned Real Property
have been heretofore made available to the Buyer. As of the Closing, with respect to each such
parcel of the Owned Real Property and except for the Permitted Encumbrances and as otherwise set
forth on Schedule 4.7(e):





          (i) the identified owner has good and marketable fee simple title to the parcel of the
Owned Real Property and all fixtures and improvements on such Owned Real Property, including any
tipple, riverdock, loadout and other transportation or mineral processing facilities (the “Owned
Fixtures and Improvements”), free and clear of any Encumbrances;




          (ii) there are no pending or, to the Knowledge of any of the Phoenix Group Entities,
Threatened, condemnation, eminent domain or requisition Proceedings; and




          (iii) there are no other matters that materially adversely affect the title of any of the
Acquired Phoenix Entities to the Owned Real Property or the Owned Fixtures and Improvements.



          (f) Set forth on Schedule 4.7(f) is a true and complete list of all of the leases,
subleases, assignments thereof and other instruments, agreements and arrangements pursuant to which
any of the Acquired Phoenix Entities will as of the Closing lease, sublease or otherwise demise any
property, whether surface, underground, mineral or any combination thereof, to any other Person
(all such instruments, agreements and arrangements being hereinafter referred to as the “Out
Leases”). True and complete copies of all of the Out Leases (including all amendments thereto and
all instruments in any way modifying any thereof) have heretofore been delivered by the Sellers to
the Buyer. All of the Out Leases are valid, in good standing and in full force and effect and
enforceable in accordance with their terms. To the Knowledge of any of the Phoenix Group Entities,
there are no existing defaults by any party under any of the Out Leases, and no event has occurred
which, with notice or the passage of time or both, would constitute a default by any party under
any of the Out Leases. There are no existing Disputes between any party and any other Person with
respect to any of the Out Leases.




          (g) Except as set forth on Schedule 4.7(g), the Phoenix Group Entities have not
received any written or other notice of Claims that any of the Phoenix Group Entities have mined
any coal or other minerals or extracted any other natural resources that they did not have the
right to mine or extract or mined any coal or other minerals or extracted any other natural
resources in such reckless and imprudent fashion as to give rise to any Claims for loss, waste or
trespass, and to the Knowledge of the Phoenix Group Entities no facts exist upon which such a Claim
could be based. The Sellers have made available to the Buyer the most recent complete and correct
version of each of the following items to the extent such items (i) are in the possession of any of
the Phoenix Group Entities, (ii) relate to or affect the Real Property, including the coal or
mineral reserves, coal or mineral ownership, mining or extraction conditions, mines, permits,
licenses and mining or mineral extraction plans of the Phoenix Group Entities with respect thereto,
and (iii) are material or relevant to the conduct of the Surface Mining Business: geological data,
reserve data, existing mine maps, surveys, core hole logs and associated data, coal measurements,
coal samples, lithologic data, coal and mineral reserve calculations (broken down in tons, by
location and by


29









 







current status of permitting) or reports, washability analyses or reports (including number of
samples and sample sizes), mine plans, mining permit applications and supporting data, blasting and
other permits, engineering studies and any and all other books and records, information, maps,
reports and data in that regard; provided, however, that the Sellers make no representation or
warranty as to the accuracy of such information except that to the Knowledge of the Phoenix Group
Entities there is no material inaccuracy in such information.




          4.8 Condition and Sufficiency of Certain Assets




     Except as otherwise set forth on Schedule 4.8, all of the AT Fixed Assets and the AT
Technology Assets are in good operating condition and repair, and are adequate for the uses for
which they were designed and to which they are being put, and none of the equipment included in the
AT Fixed Assets and the AT Technology Assets is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or cost. Except for the
Excluded Governmental Authorizations and except as otherwise set forth on Schedule 4.8, the
AT Fixed Assets and the AT Technology Assets are sufficient for the continued conduct of the
Surface Mining Business to be conducted by the Acquired Phoenix Entities after the Closing in
substantially the same manner as conducted by the Phoenix Entities prior to the Closing.



          4.9 Liabilities




     All of the AT Fixed Assets Debt was incurred for the acquisition of the AT Fixed Assets. As
of the Closing, all amounts due prior to the Closing with respect to the AT Liabilities will have
been paid in full or be reflected in the Estimated Closing Balance Sheet, and, except for the AT
Liabilities and the liabilities under this Agreement, the Acquired Phoenix Entities will not have
any debts, obligations or other liabilities of any nature (whether known or unknown and whether
absolute, accrued, contingent, or otherwise).



          4.10 Taxes




          (a) Each of the Phoenix Group Entities has filed or caused to be filed on a timely basis all
Tax Returns that are or were required to be filed by or with respect to it, either separately or as
a member of a group of business entities, pursuant to applicable Legal Requirements. All such Tax
Returns were true, correct and complete in all respects and were prepared in compliance with all
applicable laws and regulations. Except as set forth on Schedule 4.10(a), none of the
Phoenix Group Entities has requested or been (or is) the beneficiary of any extension of time
within which to file any Tax Return the original due date of which precedes the Closing Date. Each
of the Phoenix Group Entities has paid, or made provision for the payment of, all Taxes that have
or may have become due pursuant to those Tax Returns (whether or not shown on any Tax Return) or
otherwise, or pursuant to any assessment received by such entity, except such Taxes, if any, as are
set forth on Schedule 4.10(a) as being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP (Canada) or GAAP (U.S.), as applicable) have been
provided in the Interim Financial Statements.




          (b) Except as set forth on Schedule 4.10(b), no Claim has ever been made by an
authority in a jurisdiction where any of the Phoenix Group Entities does not file Tax Returns that
any such Phoenix Group Entity is or may be subject to taxation by that jurisdiction. There are no


30









 







Encumbrances for Taxes (other than Taxes not yet due and payable) upon any of the assets of
any of the Phoenix Group Entities.




          (c) Except as set forth on Schedule 4.10(c), none of the Phoenix Group Entities has
Knowledge that any Governmental Body intends to assess any additional Taxes for any period for
which Tax Returns have been filed. Except as set forth on Schedule 4.10(c), no foreign,
federal, state or local tax audits or administrative or judicial Tax Proceedings are pending or
being conducted with respect to any of the Phoenix Group Entities. Except as set forth on
Schedule 4.10(c), none of the Phoenix Group Entities has received from any foreign,
federal, state or local taxing authority or Governmental Body (including all jurisdictions where
any of the Phoenix Group Entities has not filed Tax Returns (each a “Taxing Authority” and
collectively the “Taxing Authorities”)) any (i) notice indicating an intent to open an
audit or other review, (ii) request for information related to Tax matters, or (iii) notice of
deficiency or proposed adjustment for any amount of Tax proposed, asserted or assessed by any
Taxing Authority against any of the Phoenix Group Entities. Schedule 4.10(c) sets forth a
complete and accurate list of the Tax Returns of the Phoenix Group Entities that, since December
31, 2006, have been audited, and indicates those Tax Returns that currently are the subject of
audit, including a reasonably detailed description of the nature and outcome of each audit. All
deficiencies proposed as a result of such audits have been paid, reserved against, settled, or, as
set forth on Schedule 4.10(c), are being contested in good faith by appropriate
proceedings. Schedule 4.10(c) sets forth all adjustments to the United States federal
income Tax Returns filed by any of the Phoenix Group Entities for all taxable years since January
1, 2006, and the resulting deficiencies proposed by the IRS. Except as set forth on Schedule
4.10(c), none of the Phoenix Group Entities has been given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given by any other Person) of any
statute of limitations relating to the payment of Taxes of such entity or for which such entity may
be liable.




          (d) The charges, accruals, and reserves with respect to all Taxes on the respective books of
each of the Phoenix Group Entities are adequate (determined in accordance with GAAP (Canada) or
GAAP (U.S.), as applicable) and are at least equal to such Phoenix Group Entity’s liability for
such Taxes. There exists no proposed tax assessment against any of the Phoenix Group Entities
except as disclosed in the Interim Financial Statements or as set forth on Schedule
4.10(d). All Taxes that any of the Phoenix Group Entities is or was required by Legal
Requirements to withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body or other Person.




          (e) Except as set forth on Schedule 4.10(e), none of the Phoenix Group Entities is a
party to, or bound by, any Tax allocation or Tax sharing agreements. Except as set forth on
Schedule 4.10(e), none of the Phoenix Group Entities has any liability for Taxes of any
Person under Section 1.1502-6 of the Regulations (or any similar provision of state, local or
foreign law), as a transferee or successor, by Contract, or otherwise.




          (f) Except as set forth on Schedule 4.10(f), none of the Phoenix Group Entities will
be required to include any item of income in, or exclude any item of deduction from, taxable income
for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i)
change in the method of accounting for a taxable period ending on or prior to the Closing Date;
(ii) “closing agreement” as described in Section 7121 of the IRC (or any corresponding or similar


31









 







provision of state, local or foreign income or other Tax law) executed on or prior to the
Closing Date; (iii) inter-company transactions or any excess loss account described in Treasury
Regulations under Section 1502 of the IRC (or any corresponding or similar provision of state,
local or foreign income Tax law); (iv) installment sale or open transaction disposition made on or
prior to the Closing Date; or (v) prepaid amount received on or prior to the Closing Date.




          (g) Except as set forth on Schedule 4.10(g), none of the Phoenix Group Entities is a
party to any agreement, Contract, arrangement or plan that has resulted or would result, separately
or in the aggregate, in the payment of (i) any “excess parachute payment” within the meaning of
Section 280G of the IRC (or any corresponding provision of state, local or foreign Tax law) and
(ii) any amount that will not be fully deductible as a result of Section 162(m) of the IRC (or any
corresponding provision of state, local or foreign Tax law).




          (h) Each of the Phoenix Group Entities has collected all sales and use Taxes required to be
collected, and has remitted or will remit on a timely basis such amounts to the appropriate Taxing
authorities, or have been furnished properly completed exemption certificates. Each of the Phoenix
Group Entities (i) has in its (or its Related Persons’) possession all material records and
supporting documents required by all applicable sales and use Tax statutes and regulations
regarding the collection and payment of sales and use Taxes required to be collected and paid over
by such Phoenix Group Entity and regarding all exempt transactions by such Phoenix Group Entity for
all periods open under the applicable statute of limitations, and (ii) has maintained all such
records and supporting documents in material compliance with all sales and use Tax statutes and
regulations applicable thereto.




          (i) None of the Phoenix Group Entities organized as a limited liability company has an
election in effect to be treated as a corporation for federal or state income tax purposes.




          4.11 Inventory




     All of the AT Inventory consists of a quality and quantity usable and saleable in the Ordinary
Course of Business.



          4.12 Coal Interests




     As of the Closing, the following shall be true with respect to certain coal interests of the
Phoenix Group Entities:



          (a) the AT Coal Reserves shall constitute all of the coal reserves as to which the Phoenix
Entities have any rights;




          (b) neither of the Excluded Subsidiaries shall have any interest in a lease or sublease that
grants such Excluded Subsidiary the right to mine coal by surface mining methods only; and




          (c) except as provided in the second sentence of Section 4.7(d), the real property rights of
the Acquired Phoenix Entities in and to the AT Coal Reserves shall be sufficient to enable


32









 







 the Acquired Phoenix Entities to mine on a surface mining basis all of the AT Coal Reserves
without any need for the acquisition of additional real property rights.




          4.13 Absence of Certain Changes and Events




     Since December 31, 2008, the Phoenix Entities have conducted the Surface Mining Business only
in the Ordinary Course of Business, there has not been any change therein having a Material Adverse
Effect and no event has occurred or circumstance exists that may result in a change therein having
a Material Adverse Effect.



          4.14 Contracts; Defaults




          (a) As of the Closing, and except for this Agreement, the PAAP Ancillary Documents and any
other Contracts entered into in connection with the Pre-Closing Reorganization, the AT Contracts
will constitute all of the Contracts of the Acquired Phoenix Entities, and the Sellers have made
available to the Buyer true and complete copies of all of the AT Contracts.




          (b) Except as set forth on Schedule 4.14(b), to the Knowledge of the Phoenix Group
Entities, no APE Employee is bound by any Contract that purports to limit the ability of such APE
Employee to (i) engage in or continue any conduct, activity or practice relating to the Surface
Mining Business or (ii) assign to the Phoenix Group Entities or to any other Person any rights to
any invention, improvement or discovery.




          (c) Each of the AT Contracts (except for the AT Coal Leases which are addressed in Section
4.7(d), and the AT Governmental Authorizations which are addressed in Section 4.20(b)) is in full
force and effect and is valid and enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors’ rights and
remedies generally and to general principles of equity.




          (d) Except as set forth on Schedule 4.14(d):





          (i) the Phoenix Group Entities are, and (excluding AT Coal Sales Agreements and AT
Governmental Authorizations) at all times have been, in compliance with all material terms and
requirements of each AT Contract;




          (ii) to the Knowledge of any of the Phoenix Group Entities, each other Person that has or
had any obligation or liability under any AT Contract is, and at all times has been, in
compliance with all material terms and requirements of such AT Contract;




          (iii) subject to the approvals of Governmental Bodies provided for in Section 7.1, and
except as set forth on Schedule 4.2(c), no event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene, conflict with or result in a
violation or breach of, or give any of the Phoenix Group Entities or any other Person the right
to declare a default or exercise any remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate or modify, any AT Contract; and



33









 






          (iv) none of the Phoenix Group Entities has given to or received from any Person, at any
time since December 31, 2008, any notice or other communication (whether oral or written)
regarding any actual, alleged, possible or potential violation or breach of, or default under,
any AT Contract.



          (e) There are no powers of attorney relating to the Surface Mining Business that are currently
effective and outstanding.




          (f) There are no pending renegotiations of, attempts to renegotiate or outstanding rights to
renegotiate any amounts paid or payable to the Phoenix Group Entities under any of the AT Contracts




          (g) with any Person and no such Person has made written demand for such renegotiation that
remains outstanding or otherwise unresolved.




          (h) All AT Contracts have been entered into in the Ordinary Course of Business and have been
entered into without the commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in violation of any Legal
Requirement.




          4.15 Environmental, Health and Safety Matters




     Notwithstanding anything contained herein to the contrary, this Section 4.15 shall not apply
to the Excluded Governmental Authorizations. Except as set forth on Schedule 4.15:



          (a) The Phoenix Group Entities are, and to the Knowledge of the Phoenix Group Entities since
December 31, 2006 have been, in compliance with, and are not in violation of or liable under, any
Environmental Law or Occupational Safety and Health Law. The Phoenix Group Entities do not have
any basis to expect, nor have the Phoenix Group Entities or any other Person for whose conduct the
Phoenix Group Entities are or may be held to be responsible received, any actual or Threatened
Order, notice or other communication from (i) any Governmental Body or private citizen, or (ii) the
current or prior owner or operator of any Facilities or conductor of any Mining Activities,
relating to, or arising out of, or associated with, any actual or potential violation or failure to
comply with any Environmental Law or Occupational Safety and Health Law, any actual or Threatened
obligation to undertake or bear the cost of any Environmental, Health and Safety Liabilities with
respect to any of the Facilities or the Mining Activities or any other properties or assets
(whether real, personal or mixed) in which the Phoenix Group Entities have or have had an interest,
any property or Facilities or Mining Activities at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, processed, stored, treated or disposed of by
the Phoenix Group Entities, or any other Person for whose conduct the Phoenix Group Entities are,
or may be, held responsible, or from or to which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled or received.




          (b) Except for the AT Reclamation Obligations and the Excluded Reclamation Obligations, there
are no pending or, to the Knowledge of any of the Phoenix Group Entities Threatened, Claims,
Encumbrances or other restrictions of any nature, relating to, resulting from or associated with
any Environmental, Health and Safety Liabilities or arising under or pursuant to


34









 







 any Environmental Law or Occupational Safety and Health Law, with respect to or affecting any
of the Facilities or any other properties and assets (whether real, personal or mixed) in which the
Phoenix Group Entities have or had an interest.




          (c) Other than standard, routine objections made by private environmental groups such as the
Sierra Club, the Phoenix Group Entities do not have any basis to expect, nor have the Phoenix Group
Entities or any other Person for whose conduct the Phoenix Group Entities are or may be held
responsible received, any citation, directive, inquiry, notice, Order, summons, warning or other
communication that relates to Hazardous Activity, Hazardous Materials or any alleged, actual or
potential violation or failure to comply with or any liability under any Environmental Law or
Occupational Safety and Health Law, or of any alleged, actual or potential obligation to undertake
or bear the cost of any Environmental, Health and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal or mixed) in which the Phoenix
Group Entities have or have had an interest, or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined, transferred, imported, used or processed by
the Phoenix Group Entities, or any other Person for whose conduct the Phoenix Group Entities are or
may be held responsible, have been transported, treated, stored, handled, transferred, disposed,
recycled or received.




          (d) Except for the AT Reclamation Obligations and the Excluded Reclamation Obligations,
neither any of the Phoenix Group Entities, nor any other Person for whose conduct the Phoenix Group
Entities are or may be held responsible, has any Environmental, Health and Safety Liabilities with
respect to the Facilities or with respect to any other properties and assets (whether real,
personal or mixed) in which the Phoenix Group Entities (or any predecessor) have or had an
interest, or to the Knowledge of any of the Phoenix Group Entities at any property geologically or
hydrologically adjoining the Facilities or any such other property or assets.




          (e) There are no Hazardous Materials present on or in the Environment at the Facilities or to
the Knowledge of any of the Phoenix Group Entities at any geologically or hydrologically adjoining
property, including any Hazardous Materials contained in barrels, above or underground storage
tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, or deposited or located in land, water, sumps or any other part of
the Facilities or such adjoining property, or incorporated into any structure therein or thereon,
except for Hazardous Materials used in the Ordinary Course of Business in material compliance with
Environmental Laws. None of the Phoenix Group Entities or any other Person for whose conduct the
Phoenix Group Entities are or may be held responsible, or to the Knowledge of any of the Phoenix
Group Entities any other Person, has permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets (whether real, personal
or mixed) in which the Phoenix Group Entities have or had an interest, except for Hazardous
Activities conducted in the Ordinary Course of Business in material compliance with Environmental
Laws.




          (f) There has been no Release or, to the Knowledge of any of the Phoenix Group Entities
Threatened Release, of any Hazardous Materials at or from the Facilities or to the Knowledge of any
of the Phoenix Group Entities at any other locations where any Hazardous Materials were generated,
manufactured, refined, transferred, produced, imported, used or processed from or by the
Facilities, or from or by any other properties and assets (whether real,


35









 







personal or mixed) in which the Phoenix Group Entities have or had an interest, or to the
Knowledge of any of the Phoenix Group Entities any geologically or hydrologically adjoining
property, by the Phoenix Group Entities or to the Knowledge of any of the Phoenix Group Entities by
any other Person.




          (g) The Phoenix Group Entities have made available to the Buyer true and complete copies and
results of any reports, studies, analyses, tests or monitoring possessed by the Phoenix Group
Entities (or its agents) pertaining to Releases of Hazardous Materials or Hazardous Activities in,
on or under the Facilities, or concerning compliance by the Phoenix Group Entities, or to the
Knowledge of any of the Phoenix Group Entities any other Person for whose conduct the Phoenix Group
Entities are or may be held responsible, under or pursuant to any Environmental Laws or
Occupational Safety and Health Laws.




          4.16 Intellectual Property




     There are no domestic or foreign patents, patent rights, patent applications, trademarks,
trademark applications, service marks, service mark applications, trade names or copyrights, or
applications for such which are in the process of being prepared, owned by or registered in the
name of the Phoenix Group Entities and used in the Surface Mining Business. No Claim is pending or
to the Knowledge of any of the Phoenix Group Entities Threatened to the effect that the operations
of the Phoenix Group Entities infringe upon, misappropriate or conflict with the rights of any
other Person, and to the Knowledge of any of the Phoenix Group Entities there is no valid basis for
any such Claim (whether or not pending or Threatened).



          4.17 Employees




          (a) Schedule 4.17(a) sets forth a complete and accurate list of the following
information for each employee of the Phoenix Group Entities engaged in the Surface Mining Business
as of the date of this Agreement (the “APE Employees"): name, job title or position, current
employer, work location, current compensation, date of hire, vacation policy and bonus policy.
Except as set forth on Schedule 4.17(a), there are no employment or severance agreements,
plans or arrangements pursuant to which the Phoenix Group Entities are obligated to make any
payment to any of the APE Employees or which change the status of any of the APE Employees to
something other than an at-will employee.




          (b) Except as set forth on Schedule 4.17(b), to the Knowledge of the Phoenix Group
Entities, no APE Employee is a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, noncompetition or proprietary rights agreement, between such APE
Employee and any other Person that in any way adversely affects or will affect (i) the performance
of his or her duties as an employee of the Acquired Phoenix Entities or (ii) the ability of the
Acquired Phoenix Entities after the Closing to conduct the Surface Mining Business. To the
Knowledge of any of the Phoenix Group Entities, none of the APE Employees has a present intention
to terminate his or her employment with the Acquired Phoenix Entities.




          4.18 Labor Relations; Compliance







36









 








     The Phoenix Group Entities have not been, and are not, a party to or negotiating any
collective bargaining or other labor Contract for any of their employees, and the Phoenix Group
Entities have not agreed to recognize any union or other collective bargaining representative for
any of their employees. To the Knowledge of any of the Phoenix Group Entities, no union organizing
campaign or representation petition is currently pending with respect to any of their employees.
Since December 31, 2006, there has not been, and there is not presently pending or existing, and,
to the Knowledge of any of the Phoenix Group Entities, there is not Threatened with respect to
their employees, (a) any strike, slowdown, picketing, work stoppage or employee grievance, (b) any
Proceeding against or affecting the Phoenix Group Entities relating to the alleged violation of any
Legal Requirement pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board, the Equal
Employment Opportunity Commission or any comparable Governmental Body, organizational activity or
other labor or employment Dispute against or affecting the Phoenix Group Entities or any of their
premises, and the Phoenix Group Entities are not subject to any settlement agreement, conciliation
agreement, letter of commitment, deficiency letter or consent decree with any present or former
employee or applicant for employment, labor union or other employee representative or any
Governmental Body or arbitrator relating to any Proceedings or (c) any application for
certification of a collective bargaining agent. To the Knowledge of the Phoenix Group Entities, no
event has occurred or circumstance exists that could provide the basis for any work stoppage or
other labor Dispute with respect to the employees of the Phoenix Group Entities. There is no
lockout of any employees of any of the Phoenix Group Entities by any of the Phoenix Group Entities,
and no such action is contemplated by any of the Phoenix Group Entities. The Phoenix Group
Entities have complied in all respects as pertains to their employees with all Legal Requirements
relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the withholding, payment or reporting of any federal, state or
local income, social security and similar Taxes, occupational safety and health, and plant closing.
The Phoenix Group Entities are not liable for the payment of any compensation, Damages, Taxes,
fines, penalties or other amounts, however designated, for failure to comply with any of the
foregoing Legal Requirements with respect to any employees of any of the Phoenix Group Entities.
The Phoenix Group Entities are in compliance in all material respects with all of the Workers’
Compensation Laws relating to the employees of the Phoenix Group Entities. The Phoenix Group
Entities have not received any withdrawal orders from the Mine Safety and Health Administration
within the period of 90 days prior to the Closing under Section 104 of the Mine Safety and Health
Act, 30 U.S.C. Sec. 814. All pending Claims against the Phoenix Group Entities with respect to the
APE Employees under any Workers’ Compensation Laws are set forth on Schedule 4.18.



          4.19 Employee Benefits




     The following applies only with respect to employee benefits in which APE Employees
participate:



          (a) Except as set forth on Schedule 4.19(a), none of the Phoenix Group Entities is, or
has been, a Plan Sponsor or an ERISA Affiliate, nor do any of the Phoenix Group Entities or an
ERISA Affiliate contribute to, or have contributed to, any Plan or Multi-Employer Plan, and none of
the Phoenix Group Entities or an ERISA Affiliate has, or has had, any Other Benefit Obligation


37









 







 or a Company VEBA or liability under the Coal Act. Copies of Plan documents, summaries,
insurance policies, service provider contracts, and, if applicable, the two most recent Form 5500
filings, for the Plans set forth on Schedule 4.19(a), written information regarding the
Other Benefit Obligations set forth on Schedule 4.19(a), and payroll and employment manuals
and policies of the Phoenix Group Entities have been made available to the Buyer. Except as set
forth on Schedule 4.19(a), the consummation of the Acquisition Transaction will not result
in the payment, vesting or acceleration of any benefit or right under any Plan or Other Benefit
Obligations (except potential accelerated vesting of stock options under PCI’s stock option plan).




          (b) Each of the Phoenix Group Entities has performed its obligations under the Plans and has
made appropriate entries in its financial records and statements for liabilities under the Plans
that have accrued but are not due. Except as set forth on Schedule 4.19(b), contributions
and payments made or accrued with respect to the Plans are deductible under IRC Sections 162 or
404. No amount, or any asset of any Plan, is subject to Tax as unrelated business taxable income.




          (c) Each Pension Plan and any related trust agreement or annuity contract (or any funding
instrument) complies currently, and has complied in the past, with the provisions of ERISA and the
IRC, where required in order to be a qualified plan under IRC Section 401(a) and tax exempt under
IRC Section 501, and no event has occurred or circumstance exists that will or could give rise to
disqualification or loss of tax exempt status of any such Pension Plan or trust.




          (d) None of the Phoenix Group Entities, nor any Person who is a fiduciary or otherwise has a
relationship to a Plan, has any liability to the IRS or the Pension Benefit Guaranty Corporation
with respect to a Plan, or any liability under ERISA Sections 502 or 4071.




          (e) Except as set forth on Schedule 4.19(e), filings required by ERISA and the IRC as
to each Plan have been timely filed, and notices and disclosures to participants required by either
ERISA or the IRC have been timely provided.




          (f) Other than routine claims for benefits submitted by participants or beneficiaries in the
ordinary course, no claim against or Proceeding involving any Plan is pending or, to the Knowledge
of any of the Phoenix Group Entities, is Threatened.




          (g) No payment that is owed or may become due to any director, officer, employee or agent of
any of the Phoenix Group Entities will be non-deductible to the Phoenix Group Entities or subject
to tax under IRC Sections 280G or 4999, nor shall any of the Phoenix Group Entities be required to
“gross-up” or otherwise compensate any such Person because of the imposition of any excise Tax on a
payment to such Person, except as set forth on Schedule 4.19(g).




          (h) Each Group Health Plan maintained by any of the Phoenix Group Entities has been
administered in material compliance with the continuation coverage and notice requirements of ERISA
Section 601 et seq. and IRC Section 4980B.




          4.20 Compliance with Legal Requirements; Governmental Authorizations







38









 








          (a) This Section 4.20 shall not apply to the extent such matters are addressed in Section 4.10
(Taxes), 4.15 (Environmental, Health and Safety Matters), 4.18 (Labor Relations: Compliance), 4.19
(Employee Benefits) or 4.21 (Legal Proceedings; Orders). Except as set forth on Schedule
4.20(a), with respect to the Surface Mining Business:





          (i) the Phoenix Group Entities are, and since December 31, 2006 have been, in compliance
with each Legal Requirement that is applicable to them or to their conduct or operation or the
ownership or use of any of their assets;




          (ii) no event has occurred or circumstance exists that (with or without notice or lapse of
time) (A) may constitute or result in a violation by any of the Phoenix Group Entities of, or a
failure on the part of any of the Phoenix Group Entities to comply with, any Legal Requirement,
or (B) may give rise to any obligation on the part of any of the Phoenix Group Entities to
undertake, or to bear all or any portion of the cost of, any remedial action of any nature;




          (iii) none of the Phoenix Group Entities has received, at any time since December 31, 2006,
any notice or other communication (whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible or potential violation of, or failure
to comply with, any Legal Requirement, or (B) any actual, alleged, possible or potential
obligation on the part of any of the Phoenix Group Entities to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature;




          (iv) the Phoenix Group Entities are, and since December 31, 2006 have been, in compliance
in all respects with all of the terms and requirements of each Governmental Authorization set
forth on Schedule 4.20(b) and applicable to any of the Phoenix Group Entities; without
limiting the foregoing, the Phoenix Group Entities are current in the commencement, conduct,
completion and maintenance of all reclamation necessitated by their Mining Activities and are in
compliance with their mining plans for so doing, including all mining plans submitted to the
Commonwealth of Kentucky and OSMRE to obtain the Mining Authorizations, including those set
forth on 

Schedule 4.20(d), and with all applicable Legal Requirements; and the Phoenix
Group Entities are in compliance with all of the requirements of SMCRA, the Federal Mine Safety
and Health Act of 1977, as amended, all similar statutes of the Commonwealth of Kentucky, and
all rules and regulations promulgated under said laws and any other Legal Requirements imposed
by OSMRE, MSHA, the Commonwealth of Kentucky and any other Governmental Body or other Person;




          (v) subject to the approvals of Governmental Bodies provided for in Section 7.1, no event
has occurred or circumstance exists that may (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of or a failure to comply with any
term or requirement of any Governmental Authorization set forth on Schedule 4.20(b), or
(B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation or
termination of, or any modification to, any Governmental Authorization set forth on 

Schedule
4.20(b);




          (vi) none of the Phoenix Group Entities has received, at any time since December 31, 2006,
any notice or other communication (whether oral or written) from any Governmental



39









 







Body or any other Person regarding (A) any actual, alleged, possible or potential violation
of or failure to comply with any term or requirement of any Governmental Authorization or other
Legal Requirement, or (B) any actual or alleged revocation, withdrawal, suspension,
cancellation, termination of or modification to any Governmental Authorization, which remains
outstanding and under protest, uncured or otherwise unresolved; all plans for corrective action,
consent decrees, agreed orders, settlement agreements, long term remediation plans, fines,
penalties and similar charges imposed on or assessed against any of the Phoenix Group Entities
or contract miners engaged by any of the Phoenix Group Entities by the Commonwealth of Kentucky,
OSMRE, MSHA or any other Governmental Body have been either fully resolved or paid in full,
excepting only those payable or requiring future reclamation with respect to citations, notices
of non-compliance and notices of violation which are set forth on Schedule 4.20(a) and
designated as still outstanding and unresolved, none of which shall have a Material Adverse
Effect; and none of the Phoenix Group Entities is subject to or under any cessation orders or
cease and desist orders issued by the Commonwealth of Kentucky, OSMRE or MSHA or any other
Governmental Body; and




          (vii) none of the matters set forth on Schedule 4.20(a) are reasonably likely to
have a Material Adverse Effect.



          (b) Schedule 4.20(b) sets forth a complete and accurate list of each Governmental
Authorization (including all permits and Mining Authorizations) that is held by any of the Phoenix
Group Entities that relates to the Surface Mining Business or otherwise to any of the assets owned
or used by any of the Phoenix Group Entities in the Surface Mining Business, and further the
following shall apply with respect thereto:





          (i) each Governmental Authorization set forth on Schedule 4.20(b) is valid and in
full force and effect;




          (ii) all applications required to have been filed for the timely renewal of the
Governmental Authorizations set forth on 

Schedule 4.20(b) have been duly filed on a
timely basis with the appropriate Governmental Bodies, and all other filings required to have
been made with respect to such Governmental Authorizations have been duly made on a timely basis
with the appropriate Governmental Bodies; and




          (iii) the Governmental Authorizations set forth on Schedule 4.20(b) collectively
constitute all of the Governmental Authorizations necessary to permit the Phoenix Group Entities
to lawfully conduct and operate the Surface Mining Business in the manner the Phoenix Group
Entities currently conduct and operate the Surface Mining Business and to permit the Phoenix
Group Entities to own and use the assets of the Surface Mining Business in the manner in which
they currently own and use such assets.



          (c) subject to the approvals of Governmental Bodies provided for in Section 7.1, the
execution, delivery and performance by the Phoenix AA Parties of this Agreement and any of the
other documents referred to herein to which the Phoenix AA Parties are a party and consummation of
the Acquisition Transaction (i) will require no action by or in respect of, or any Consent from,
any Governmental Body, (ii) will not give any Governmental Body the right to challenge any portion
of the Acquisition Transaction or exercise any remedy or obtain any relief under any Legal


40









 







 Requirement to which any of the Phoenix Group Entities are subject and (iii) will not
contravene, conflict with or result in a violation of any of the terms or requirements of, or give
any Governmental Body the right to revoke, withdraw, suspend, cancel or terminate, any Governmental
Authorization that is held by any of the Phoenix Group Entities and which relates to the Surface
Mining Business.




          (d) With respect to Mining Authorizations, there are no applications for Mining Authorizations
in the name of any of the Phoenix Group Entities other than those set forth on Schedule
4.20(d) (the “Mining Applications"); the Phoenix Group Entities would, on grant of any such
Mining Applications, hold legal and beneficial title to the entire interest in each of such Mining
Applications; except as set forth on Schedule 4.20(d), each of the Mining Applications has
been made in accordance and compliance with all applicable Legal Requirements; and the Phoenix
Group Entities have not received any written or other communication that indicates that any of the
Mining Applications will not be granted, provided that Sellers make no representation or warranty
regarding the expected approval date of any such Mining Applications or whether any such Mining
Applications will ever be approved.




          (e) The Phoenix Group Entities have, in connection with the Surface Mining Business, posted
all deposits, letters of credit, guarantees, indemnities, trust funds, bid bonds, performance
bonds, reclamation bonds and surety bonds (and all such similar undertakings) required to be posted
in connection with its operations, including those necessary to secure the performance of the
reclamation or other obligations of the Phoenix Group Entities pursuant to, in connection with or
as a condition of the Governmental Authorizations (collectively, the “Company Surety Bonds”).
Except as set forth on Schedule 4.20(e), the Company Surety Bonds are in amounts, and are
in all other respects, sufficient for their purpose and are in full force and effect and no facts
exist that could require the Phoenix Group Entities to increase the amounts of the Company Surety
Bonds. All of the Company Surety Bonds are listed on a list set forth on Schedule 4.20(e),
and such list includes all obligees, beneficiaries, amounts and effective dates and the purpose of
each such Company Surety Bond, including the permit number to which it relates. Except as set
forth on Schedule 4.20(e): (i) the Phoenix Group Entities are in compliance with all of the
Company Surety Bonds applicable to them; and (ii) the operation of the Mining Activities of the
Phoenix Group Entities and processing operations and the state of reclamation with respect to the
Company Surety Bonds and the Governmental Authorizations are “current” or in “deferred status”
regarding reclamation obligations and otherwise and are otherwise in material compliance with all
applicable mining, reclamation and analogous Legal Requirements.




          (f) Neither any of the Phoenix Group Entities nor any Person “owned or controlled” by any of
the Phoenix Group Entities, or any Person that “owns or controls” any of the Phoenix Group Entities
or any Related Person of any of the Phoenix Group Entities, has been notified in writing or
otherwise by OSMRE or the agency of any state administering the SMCRA or any comparable state
statute that it is: (i) ineligible to receive additional surface mining permits or any other Mining
Authorizations or Governmental Authorizations (i.e., “permit blocked” under OSMRE’s Applicant
Violator System (AVS)); or (ii) is under investigation to determine whether its eligibility to
receive or maintain any such Governmental Authorizations should be revoked. No facts exist that
presently or upon the giving of notice or the lapse of time or otherwise would render any of the
Phoenix Group Entities ineligible to receive surface mining permits or any other


41









 







potential Mining Authorizations or Governmental Authorizations. As used herein, the terms
“owned or controlled” and “owns or controls” shall be defined as set forth in 30 C.F.R. Section
701.5.




          4.21 Legal Proceedings; Orders




          (a) Except as set forth on Schedule 4.21(a), there is no pending Proceeding:





          (i) that has been commenced by or against any of the Phoenix Group Entities with respect to
the Surface Mining Business or that otherwise relates to or may affect the Surface Mining
Business or any of the assets owned or used by any of the Phoenix Group Entities in the Surface
Mining Business;




          (ii) that challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, this Agreement and/or the Acquisition Transaction; or




          (iii) that is related to any of the Mining Authorizations.



          (b) To the Knowledge of any of the Phoenix Group Entities, except as set forth on Schedule
4.21(a), (i) no such Proceeding has been Threatened and (ii) no event has occurred or
circumstance exists that may give rise to or serve as a basis for the commencement of any such
Proceeding. The Sellers have made available to the Buyer copies of all pleadings, correspondence
and other documents relating to each Proceeding set forth on Schedule 4.21(a). The
Proceedings set forth on Schedule 4.21(a) will not have a Material Adverse Effect.




          (c) Except as set forth on Schedule 4.21(c):





          (i) there is no Order with respect to the Surface Mining Business to which any of the
Phoenix Group Entities, or any of the assets owned or used by any of the Phoenix Group Entities
with respect to the Surface Mining Business, is subject or in respect of any of the Mining
Authorizations or Governmental Authorizations; and




          (ii) no Person is subject to any Order that prohibits such Person from engaging in or
continuing any conduct, activity or practice relating to the Surface Mining Business.



          (d) Except as set forth on Schedule 4.21(d):





          (i) the Phoenix Group Entities are, and since December 31, 2006 have been, in full
compliance with all of the terms and requirements of each Order with respect to the Surface
Mining Business to which they, or any of the assets owned or used by them in the Surface Mining
Business, are or have been subject;




          (ii) no event has occurred or circumstance exists that may constitute or result in (with or
without notice or lapse of time) a violation of or failure to comply with any term or
requirement of any Order with respect to the Surface Mining Business to which any of the Phoenix
Group Entities, or any of the assets owned or used by any of the Phoenix Group Entities in the
Surface Mining Business, is subject; and



42









 







          (iii) none of the Phoenix Group Entities has received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person regarding any actual,
alleged, possible or potential violation of, or failure to comply with, any term or requirement
of any Order with respect to the Surface Mining Business to which any of the Phoenix Group
Entities or any other Person, or any of the assets owned or used by any of the Phoenix Group
Entities in the Surface Mining Business, is or has been subject.



          (e) Except as set forth on Schedule 4.21(e), to the Knowledge of any of the Phoenix
Group Entities, there are no existing Claims by Persons owning, controlling or occupying lands or
realty adjoining or near any of the Owned Real Property or the Leased Real Property and/or the AT
Coal Reserves regarding, with respect thereto, adverse possession, the location of boundary lines,
encroachments, mineral rights, subsidence, water quality or quantity, flood damage, blasting
damage, trespass, waste, transportation of coal or other materials, nuisances or any other similar
matter.




          4.22 Insurance




          (a) Schedule 4.22(a) sets forth the policies of insurance to which any of the Phoenix
Group Entities is a party or under which any of the Phoenix Group Entities, or any director,
manager or officer of any of the Phoenix Group Entities, is covered and which are in force for the
current policy year. The Sellers have made available to the Buyer:





          (i) true and complete copies of all policies of insurance to which any of the Phoenix Group
Entities is a party or under which any of the Phoenix Group Entities, or any director, manager
or officer of any of the Phoenix Group Entities, is or has been covered at any time within the
three (3) policy years preceding the date of this Agreement;




          (ii) true and complete copies of all pending applications for policies of insurance; and




          (iii) any statement by the accountant for the Phoenix Group Entities with regard to the
adequacy of the insurance coverage of any of the Phoenix Group Entities or of the reserves for
claims.



          (b) Schedule 4.22(b) sets forth:





          (i) any self-insurance arrangement by or affecting any of the Phoenix Group Entities,
including any reserves established thereunder; and




          (ii) any Contract or other arrangement with respect to the Surface Mining Business, other
than a policy of insurance, for the transfer or sharing of any risk by any of the Phoenix Group
Entities.



          (c) Schedule 4.22(c) sets forth, by year, for the current policy year and the
preceding two (2) policy years, a summary of the loss experience under each policy.




          (d) Except as set forth on Schedule 4.22(d):







43









 









          (i) all policies to which any of the Phoenix Group Entities is a party or that provide
coverage to any of the Phoenix Group Entities, or any director, manager or officer of any of the
Phoenix Group Entities:




	 	(A)	 	are valid, outstanding and enforceable;
	 
	 	(B)	 	to the Knowledge of any of the Phoenix Group
Entities, are issued by an insurer that is financially sound and
reputable;
	 
	 	(C)	 	are sufficient for compliance with all Legal
Requirements and Contracts to which any of the Phoenix Group Entities is
a party or by which any of the Phoenix Group Entities is bound; and
	 
	 	(D)	 	do not provide for any retrospective premium
adjustment or other experienced-based or tail liability on the part of
any of the Phoenix Group Entities or any director thereof;






          (ii) none of the Phoenix Group Entities has received (A) any refusal of coverage or any
notice that a defense will be afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy is no longer in full force or
effect or will not be renewed or that the issuer of any insurance policy is not willing or able
to perform its obligations thereunder;




          (iii) the Phoenix Group Entities have paid, or caused to be paid, all premiums due, and
have otherwise performed all of their obligations, under each insurance policy to which any of
the Phoenix Group Entities is a party or that provides coverage to any of the Phoenix Group
Entities; and




          (iv) to the Knowledge of any of the Phoenix Group Entities, the Phoenix Group Entities have
given notice to the appropriate insurer of all Claims that may be insured by such insurer.



          4.23 Solvency




     None of the Phoenix Group Entities has stopped or suspended payment of its debts, become
unable to pay its debts as they become due or otherwise become insolvent in any jurisdiction. None
of the Phoenix Group Entities is the subject of any pending, rendered or Threatened insolvency
proceedings of any character. None of the Phoenix Group Entities has made an assignment for the
benefit of creditors or taken any action with a view to or that could constitute a valid basis for
the institution of any such insolvency proceedings.



          4.24 Relationships with Related Persons




     Except as set forth on Schedule 4.24, no officer, director, manager, shareholder
(except shareholders of PCI), member or Related Person of any of the Acquired Phoenix Entities has
any interest in any property (whether real, personal or mixed, and whether tangible or intangible),
used in or pertaining to the Surface Mining Business conducted by the Phoenix Entities. Except as
set forth on Schedule 4.24, no executive officer, director, manager, shareholder (except
shareholders of



44









 




PCI), member or Related Person of any of the Acquired Phoenix Entities owns (of record or as a
beneficial owner) an equity interest or any other financial or profit interest in a Person that (a)
has business dealings or a material financial interest in any transaction with any of the Acquired
Phoenix Entities relating to the Surface Mining Business or (b) engages in competition with any of
the Acquired Phoenix Entities with respect to the Surface Mining Business. Except as set forth on
Schedule 4.24, no executive officer, director, manager, shareholder (except shareholders of
PCI), member or Related Person of any of the Acquired Phoenix Entities is a party to any AT
Contract, or has any Claim or right against any of the Acquired Phoenix Entities. Except as set
forth on Schedule 4.24, no officer, director, manager, shareholder, member or Related
Person of any of the Acquired Phoenix Entities provides in any other capacity any services to any
of the Acquired Phoenix Entities.




          4.25 No Brokers or Finders




     Except for Cormark, neither any of the Phoenix Group Entities nor any of their Representatives
have incurred any obligation or liability, contingent or otherwise, for brokerage or finders’ fees
or agents’ commissions or other similar payment in connection with this Agreement or any of the
other documents referred to herein or otherwise with respect to the Acquisition Transaction. The
Sellers are solely responsible for any fees or commissions owed to Cormark for brokerage or
finders’ fees or for agents’ commissions or other similar payment in connection with this Agreement
or any of the other documents referred to herein or otherwise with respect to the Acquisition
Transaction, and the Buyer will not incur any liability to Cormack for brokerage or finders’ fees
or for agents’ commissions or other similar payment in connection with this Agreement or any of the
other documents referred to herein or otherwise with respect to the Acquisition Transaction.



          4.26 Certain Payments; Grants and Allowances




     None of the Acquired Phoenix Entities, any of the Representatives of the Acquired Phoenix
Entities, or any other Person associated with or acting for or on behalf of any of the Acquired
Phoenix Entities has directly or indirectly, with respect to or on behalf of the Surface Mining
Business, (a) made any contribution, gift, bribe, rebate, payoff, influence payment, kickback or
other payment to any Person, private or public, regardless of form, whether in money, property or
services, (i) to obtain favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, (iii) to obtain special concessions or for special concessions
already obtained, for or in respect of any of the Acquired Phoenix Entities or any Related Person
of any of the Acquired Phoenix Entities, or (iv) in violation of any Legal Requirement, or (b)
established or maintained any fund or asset that has not been recorded in the books and records of
the Acquired Phoenix Entities. None of the Acquired Phoenix Entities has received with respect to
the Surface Mining Business any grant, allowance, aid or subsidy from any Governmental Body during
the last three (3) years including any such payments which are currently due and owing as a result
of any act or failure to act by any of the Acquired Phoenix Entities or which would become due and
owing as a result of the consummation of the Acquisition Transaction.




45











 





          4.27 Customers and Suppliers



     Set
forth on Schedule 4.27 is a list of the top five (5) customers of the Surface
Mining Business (determined on the basis of revenues) for each of the last three (3) completed
fiscal years. Except as set forth on Schedule 4.27 and Schedule 4.14(d), since
December 31, 2006, there has not been (a) any adverse change to any of the Acquired Phoenix
Entities in its business relationship with any of its customers (including the customers set forth
on Schedule 4.27) or suppliers, or (b) any adverse change to any of the Acquired Phoenix
Entities in any term (including credit terms) of the agreements or other arrangements with any such
customers or suppliers, in each case other than in the Ordinary Course of Business. Except as set
forth on Schedule 4.27, since December 31, 2006, none of the Acquired Phoenix Entities has
received any customer complaints relating to the Surface Mining Business, nor has any of the
Acquired Phoenix Entities had any of its coal deliveries returned or rejected by a purchaser
thereof, other than complaints in the Ordinary Course of Business which have not, and are not
likely to have, individually or in the aggregate, an adverse effect on the relationship of any of
the Acquired Phoenix Entities with any customer of the Surface Mining Business. Except as set
forth on Schedule 4.27, to the Knowledge of any of the Acquired Phoenix Entities, none of
the customers of, or suppliers to, the Surface Mining Business has a current intention to suspend
deliveries or to cancel, terminate or otherwise modify their relationship with any of the Acquired
Phoenix Entities.



          4.28 Disclosure



          (a) No representation or warranty or other statement made by the Sellers in this Agreement,
the Schedules, the certificates and other documents delivered pursuant to this Agreement or
otherwise in connection with the Acquisition Transaction contains an untrue statement or omits to
state a material fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.



          (b) To the Knowledge of any of the Acquired Phoenix Entities, there is no fact that has
specific application to any of the Acquired Phoenix Entities (other than general economic or
industry conditions) and that materially adversely affects or, as far as any of the Acquired
Phoenix Entities can reasonably foresee, materially Threatens, the assets, business, prospects,
financial condition or results of operations of the Acquired Phoenix Entities relating to the
Surface Mining Business that has not been set forth in this Agreement or the Schedules.



          4.29 Scope of Representations, Warranties and Covenants



     EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT AND THE PAAP ANCILLARY DOCUMENTS, THE
SELLERS ARE NOT MAKING ANY REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND, EXPRESS, IMPLIED, OR
STATUTORY, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, OF ANY NATURE WHATSOEVER WITH RESPECT TO THE AT ASSETS, THE AT LIABILITIES, THE
SURFACE MINING BUSINESS OR THE PHOENIX GROUP ENTITIES. THE SELLERS DO NOT MAKE ANY REPRESENTATION
OR WARRANTY REGARDING THE FUTURE OPERATIONS, PROJECTIONS OF ANY NATURE, FINANCIAL REQUIREMENTS OR



46









 




PERFORMANCE OF THE SURFACE MINING BUSINESS OR THE ACQUIRED PHOENIX ENTITIES.




5. REPRESENTATIONS AND WARRANTIES OF BUYER




     The Buyer represents and warrants to the Sellers as of the date hereof and as of the Closing
as follows:



          5.1 Organization and Good Standing



     The Buyer is a limited liability company duly organized, validly existing and in good standing
under the laws of the State of Ohio. The Buyer has full limited liability company power and
authority to carry on its business, to own, lease or use the assets that it purports to own, lease
or use in its business and to operate its properties in connection with its business.



          5.2 Authority; No Conflicts



          (a) The Buyer has the requisite power and authority to execute and deliver this Agreement and
each of the Buyer Ancillary Documents, to perform its obligations hereunder and thereunder, and to
consummate the Acquisition Transaction. The execution, delivery and performance by the Buyer of
this Agreement and the consummation of the Acquisition Transaction have been duly authorized by all
requisite action on the part of the Buyer. The Buyer has duly executed and delivered this
Agreement, and on the Closing Date will have duly executed and delivered each of the Buyer
Ancillary Documents. This Agreement constitutes, and on the Closing Date each of the Buyer
Ancillary Documents will constitute, the legal, valid and binding obligations of the Buyer
enforceable against it in accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting creditors’ rights and remedies
generally and to general principles of equity.



          (b) The execution, delivery and performance by the Buyer of this Agreement and the Buyer
Ancillary Documents, and the consummation of the Acquisition Transaction, do not and will not in
any material respects (with or without the giving of notice, the lapse of time or both): conflict
with, contravene, result in a violation or breach of, result in a default under, give rise to a
right of acceleration, amendment, cancellation, modification, termination or vesting under, result
in a decreased right of the Buyer or obligation of any other Person under, or result in an
increased or additional obligation of the Buyer or right of any other Person under, (a) any
applicable Legal Requirement, (b) the Organizational Documents of the Buyer or (c) any Contract to
which the Buyer is a party or by which the Buyer or any of its material properties or assets may be
bound or affected.



          5.3 Certain Proceedings



     There is no pending Proceeding that has been commenced against the Buyer and that challenges,
or may have the effect of preventing, delaying, making illegal or otherwise interfering with, the
Acquisition Transaction. To the Buyer’s Knowledge, no such Proceeding has been Threatened.



47









 





          5.4 No Brokers or Finders



     The Buyer and its officers and agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in
connection with this Agreement or the Acquisition Transaction.



          5.5 Scope of Representations, Warranties and Covenants



     EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT AND THE BUYER ANCILLARY DOCUMENTS, THE BUYER
IS NOT MAKING ANY REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND, EXPRESS, IMPLIED, OR STATUTORY.



6. COVENANTS OF SELLERS




     6.1 Operation of Business



     From the date hereof to the Closing (or the earlier termination of this Agreement in
accordance with Section 11.1), except as expressly permitted or required by this Agreement or as
otherwise consented to by the Buyer in writing, the Sellers agree to use their best efforts to
(a) carry on the Surface Mining Business in the ordinary course, in substantially the same manner
as heretofore conducted, and to preserve intact in all material respects the present business
organization of the Phoenix Entities with respect to the Surface Mining Business, maintain the
properties and assets of the Phoenix Entities with respect to the Surface Mining Business in good
operating condition and repair, keep available the services of the present officers and significant
employees of the Phoenix Entities with respect to the Surface Mining Business, and preserve the
relationship with customers, suppliers and others having business dealings with the Phoenix
Entities with respect to the Surface Mining Business, and (b) not take any action or omit to take
any action, which action or omission would result in a breach of any of the representations and
warranties of the Sellers set forth herein that would entitle the Buyer to terminate this Agreement
under Section 11.1. Without limiting the generality of the foregoing, except (x) as set forth in
Schedule 6.1 and (y) as may be reasonably required to satisfy the conditions set forth in
Article 9, the Phoenix Entities shall not, without the written consent of the Buyer (which consent
shall not be unreasonably withheld, delayed or conditioned):




          (i) sell, assign, license, lease, or otherwise dispose of any of the AT Assets which are
material, individually or in the aggregate, to the Surface Mining Business, except in the
Ordinary Course of Business;




          (ii) mortgage, pledge or otherwise encumber or subject to an Encumbrance (other than a
Permitted Encumbrance) any of the AT Assets;




          (iii) accelerate the delivery or sale of products or services of the Surface Mining
Business, or offer discounts or price protection on the sale of products or services of the
Surface Mining Business or premiums thereon, except in the Ordinary Course of Business
consistent with past practice;



48









 






          (iv) make any material changes in the selling, distribution, advertising, promotion, terms
of sale or collection, purchase or payment practices of the Phoenix Entities with respect to the
Surface Mining Business other than in the Ordinary Course of Business;




          (v) purchase, order or otherwise acquire inventory with respect to the Surface Mining
Business in excess of reasonably forecasted requirements in the Ordinary Course of Business;




          (vi) increase or add any salary, bonuses or other compensation, or adopt, amend, suspend,
or terminate any benefit plan (including a Company Benefit Plan), in any manner that could
reasonably be expected to increase the costs, liabilities, or obligations with respect to the
APE Employees;




          (vii) enter into, amend or terminate any agreement containing covenants that in any way
purport to restrict the business activity of the Phoenix Entities with respect to the Surface
Mining Business or limit the freedom of the Acquired Phoenix Entities to engage in any line of
business or compete with any Person; or




          (viii) enter into a written agreement to do any of the foregoing.



     6.2 Access and Investigation



     Between the date of this Agreement and the Closing Date (or the earlier termination of this
Agreement in accordance with Section 11.1), the Sellers shall (a) afford the Buyer, and its
Representatives and lenders and their Representatives (collectively, the “Buyer’s Advisors”),
reasonable access, during normal business hours and upon reasonable prior notice, to the personnel,
properties, contracts, books and records, and other documents and data of the Phoenix Entities, and
(b) furnish the Buyer and the Buyer’s Advisors with such additional financial, operating and other
data and information as the Buyer may reasonably request; provided, however, that such
investigation shall be conducted in a manner so as to minimize any unreasonable disruptions to the
operations of the businesses of the Phoenix Entities. All information disclosed pursuant to this
Section 6.2 shall be subject to the Confidentiality Agreement, effective May 12, 2009, between PCI
and the Buyer (the “Confidentiality Agreement”).



     6.3 No Negotiation



     Between the date of this Agreement and the Closing, or until such time, if any, as this
Agreement is terminated pursuant to Section 11.1, none of the Phoenix Group Entities shall directly
or indirectly solicit, initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the merits of any unsolicited inquiries or
proposals from, any Person (other than the Buyer) relating to any transaction (a) involving the
sale of the Surface Mining Business of the Phoenix Entities or any of the assets thereof including
the AT Assets (other than in the Ordinary Course of Business) or (b) in which there would be any
merger, consolidation, business combination, or similar transaction involving any of the Phoenix
Reorganization Entities.



49









 





     Notwithstanding the foregoing, the Sellers may, in response to an Acquisition Proposal that
reasonably is expected to result in a Superior Proposal, (a) furnish non-public information with
respect to the Phoenix Group Entities and the Surface Mining Business to the Person who made such
Acquisition Proposal pursuant to a confidentiality agreement on terms no more favorable to such
Person than the Confidentiality Agreement, (b) participate in discussions or negotiations with such
Person regarding such Acquisition Proposal, and (c) enter into a definitive agreement with

respect to such Acquisition Proposal, if and so long as PCI’s Board of Directors determines in
good faith that such action is required in order for the Board of Directors to comply with its
fiduciary duties under applicable law.




     The Sellers shall promptly notify the Buyer orally (within two (2) days) and in writing
(within four (4) days) of any Acquisition Proposal, including the identity of the Person making
such Acquisition Proposal. The Sellers shall keep the Buyer informed of any developments with
respect to any such Acquisition Proposal immediately upon the occurrence thereof. The Sellers
shall also continue to negotiate in good faith with the Buyer to facilitate a potential
counterproposal to such Acquisition Proposal, unless and until the Sellers execute a definitive
purchase agreement with respect to such Acquisition Proposal.



     6.4 Destruction of Confidential Information



     In the event this Agreement is terminated in accordance with Section 11.1 and the Acquisition
Transaction is not consummated, the Buyer agrees, upon the written request of the Sellers, to
promptly destroy all confidential materials received from any of the Phoenix Entities.



     6.5 Required Approvals of Governmental Bodies



     The Sellers shall, and shall cause each of their Related Persons to, cooperate with the Buyer
with respect to all filings that the Buyer and/or one or more of its Related Persons is required by
Legal Requirements to make in connection with the Acquisition Transaction, including without
limitation with respect to the transfer of the AT Governmental Authorizations and assisting the
Buyer in substituting reclamation bonds or other collateral at the lowest possible cost. In this
regard, if and to the extent there are any applications included in the AT Governmental
Authorizations which cannot be transferred until the same have been issued, the Sellers shall at
the Buyer’s expense continue to pursue diligently all such applications until such issuance and
then continue their cooperation in getting the AT Governmental Authorizations the subject thereof
transferred to the Buyer (or the Acquired Phoenix Entity designated by the Buyer).



          6.6 Commercially Reasonable Efforts



     Prior to the Closing, the Sellers shall use their commercially reasonable efforts to cause the
conditions in Article 9 to be satisfied.



          6.7 Restrictive Covenants



     In order to induce the Buyer to enter into the Acquisition Transaction and in consideration
thereof, the Sellers have agreed to the provisions of this Section 6.7, as follows:



50









 





          (a) For a period of seven (7) years after the Closing Date (the “Restricted Period”), each of
the Sellers agrees that it will not, and will cause the other Phoenix Group Entities (collectively
with the Sellers, the “Restricted Parties”) not to, directly or indirectly, own, manage, operate or
control or participate in the ownership, management, operation or control of any Person that
competes with the Surface Mining Business by conducting a Competing Business. For purposes hereof,
a “Competing Business” is any business that (i) acquires, owns, leases, subleases, develops or
otherwise controls any real property (surface or mineral) which is used in
the surface coal mining business or applying for any Mining Authorizations with respect to
surface coal mining or mining, producing, acting as a contract miner, engaging a contract miner,
marketing, brokering or selling or reselling surface mined coal, from within the Illinois Coal
Basin, or (ii) produces, markets, brokers, sells or resells coal to any customer or former customer
or an affiliate of any customer or former customer of the Phoenix Group Entities or any of their
Related Persons; provided, however, that the Buyer acknowledges and agrees that the Excluded
Subsidiaries hold rights relating to the Excluded Subsidiaries Surface Mining, and that any actions
taken by the Excluded Subsidiaries in connection with the Excluded Subsidiaries Surface Mining
(including without limitation selling the surface mined coal to current and former customers of the
Phoenix Group Entities and their Related Persons) will not constitute a “Competing Business”
hereunder. For the avoidance of doubt, the Buyer acknowledges and agrees that nothing contained in
this Section 6.7(a) or elsewhere in this Agreement shall constitute a limitation or restriction on
the ability of the Excluded Subsidiaries to conduct deep mining operations, sell deep mined coal,
or acquire, own, lease, sublease, develop or otherwise control any real property (surface or
mineral) which is used in such deep coal mining, in each case whether within or outside the
Illinois Coal Basin.



          (b) For the Restricted Period, each of the Sellers agrees that it will not, and will cause
each of the Restricted Parties not to, directly or indirectly, (i) entice, induce or attempt to
cause any officer, director, manager, shareholder, member, employee, agent or consultant of the
Buyer or any of its Related Persons (including any of the same previously serving in any such
capacity with the Phoenix Group Entities) to terminate his or her employment with the Buyer or such
Related Person, or (ii) hire or employ any APE Employee that Buyer designates as critical pursuant
to Section 9.8(b).



          (c) Each of the Sellers shall, and shall cause each of its Related Persons to, maintain the
confidentiality of, and not use, (i) confidential or proprietary information regarding the Surface
Mining Business as conducted by the Phoenix Entities or (ii) trade secrets regarding the Surface
Mining Business as conducted by the Phoenix Entities; provided that this Section 6.7(c) shall not
apply to information: (A) that becomes available to such Person after the Closing from a source
other than the Phoenix Group Entities or any of their Representatives (and not as a result of a
violation of a contractual restriction or fiduciary duty known to such Person); or (B) that was or
becomes generally available to the public (and not as a result of a violation of a contractual
restriction or fiduciary duty known to such Person). Notwithstanding the preceding sentence, the
Sellers (and their Related Persons) may make, and may permit, disclosure of such information (I) in
response to any judicial or administrative proceedings (by oral questions, interrogatories,
requests for information or documents, subpoena, civil investigation demand or similar process),
(II) if requested by a Governmental Body or (III) to avoid violating any applicable securities
laws; provided that the Sellers shall, to the extent practicable, promptly notify the Buyer thereof
and



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cooperate with the Buyer at the Buyer’s reasonable request and cost if the Buyer should seek to
obtain an Order that confidential treatment will be accorded to such information.



          (d) The Sellers acknowledge that all of the restrictions in this Section 6.7 are reasonable in
all respects, including duration, geographical limitation and scope of activity restricted. The
Sellers agree that each of the covenants contained in this Section 6.7 shall be construed as
separate agreements independent of any other provision of this Agreement or of any other agreement
between the Sellers and the Buyer or any other Person. The Sellers agree that the
existence of any claim or cause of action by any of the Sellers against the Buyer or any other
entity, whether predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement of the covenants and restrictions contained in this Section 6.7. The Sellers
acknowledge that an actual Breach, or Threatened Breach, by any of the Sellers of the provisions of
this Section 6.7 shall cause irreparable harm to the Buyer, which harm cannot be fully redressed by
the payment of damages to the Buyer. Accordingly, the Buyer shall be entitled, in addition to any
other right or remedy it may have at law or in equity, to an injunction enjoining or restraining
any of the Sellers (and their Related Persons) from any Breach or Threatened Breach of the
provisions of this Section 6.7. The Sellers hereby waive the defense in any equitable proceeding
that there is an adequate remedy at law for any such actual or Threatened Breach. Moreover, in the
event of a Breach by any of the Sellers of any covenant of this Section 6.7, the term of such
covenant shall be extended by the period of the duration of such Breach.



          (e) The Sellers shall at or before the Closing cause each of the Key Phoenix Entities Persons
to execute Restrictive Covenants Agreement (the “Restrictive Covenants Agreements”) with the Buyer
pursuant to which the Key Phoenix Entities Persons are bound by the restrictive covenants set forth
in this Section 6.7.



          6.8 Employee Matters



     The Sellers hereby agree to cooperate with the Buyer and use their commercially reasonable
efforts to cause the APE Employees referred to in Section 9.8 to be employed by the Acquired
Phoenix Entities as of the Closing. The matters described in this Section 6.8 for cooperation
between the Sellers and the Buyer are hereinafter referred to as the “Employee Matters.”



          6.9 Liabilities of Phoenix Group Entities



     Excluding only the AT Liabilities, the Sellers shall be responsible for and shall satisfy all
of the obligations, indebtedness, causes of action and other liabilities of any kind of or against
any of the Phoenix Group Entities including the assumption of the defense thereof, whether
contingent, accrued or matured, known or unknown. Without limitation as to the foregoing, the
Sellers acknowledge and agree that they are responsible for and shall pay all liabilities
constituting fines and penalties hereafter levied for violations listed or required to be listed on
Schedule 4.15.



          6.10 APE Financial Statements



     The Sellers agree to provide to the Buyer, prior to the Closing, estimated APE Financial
Statements for the period consisting of the portion of calendar year 2009 ended on the Closing
Date,



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which shall be adjusted by the Sellers as necessary and finalized within ninety (90) days
after the Closing Date to provide the Buyer with accurate APE Financial Statements.



          6.11 Rose France Reserves



     The Sellers shall use their commercially reasonable efforts to assist the Buyer (or any
Acquired Phoenix Entity or any of their respective Affiliates as designated by the Buyer) in
obtaining one or more lease agreements, which contains terms and conditions customary in the area
where the Rose France Reserves are located and which is in form and substance acceptable to the
applicable lessor and reasonably acceptable to the Buyer (with respect to the Rose France Surface
Leasehold as defined below, the Buyer acknowledges that a royalty to the lessor of 4% is
acceptable) (an “Acceptable RFR Lease”), granting to the Buyer (or any Acquired Phoenix Entity or
any of their respective Affiliates as designated by the Buyer) a leasehold interest in (a) all of
the surface property overlying the Rose France Reserves (the “Rose France Surface Leasehold ”) and
(b) the Rose France Reserves themselves (the “Rose France Mineral Leasehold”). In the event the
Sellers present the Buyer with an Acceptable RFR Lease with respect to the Rose France Surface
Leasehold on or prior to December 31, 2009 (the “RFR Surface Leasehold Condition”), 50% of the RFR
Fee shall be earned and paid into the escrow under the Escrow Agreement as provided in Section
2.3(d); in the event the Sellers do not satisfy the RFR Surface Leasehold Condition, said 50% of
the RFR Fee shall be forfeited by the Sellers and shall not at any time be deposited into such
escrow or otherwise credited or paid to or for the benefit of the Sellers. In the event the
Sellers present the Buyer with an Acceptable RFR Lease with respect to the Rose France Mineral
Leasehold on or prior to June 30, 2010 (the “RFR Mineral Leasehold Condition,” and collectively
with the RFR Surface Leasehold Condition, the “RFR Conditions”), the other 50% of the RFR Fee shall
be earned and paid into the escrow under the Escrow Agreement as provided in Section 2.3(d); in the
event the Sellers do not satisfy the RFR Mineral Leasehold Condition, said 50% of the RFR Fee shall
be forfeited by the Sellers and shall not at any time be deposited into such escrow or otherwise
credited or paid to or for the benefit of the Sellers. For the avoidance of doubt, if the Sellers
fail to accomplish timely either of the RFR Conditions as set forth in the immediately preceding
two sentences, then there will be no RFR Fee and thus there would then be no RFR Fee amount to be
deposited by the Buyer with the Escrow Agent in the escrow being maintained pursuant to the Escrow
Agreement as provided in Section 2.3(d).



7. COVENANTS OF BUYER




          7.1 Required Approvals of Governmental Bodies



     The Buyer acknowledges that the “transfer” of any AT Governmental Authorizations, whether by
reason of an actual transfer from a Phoenix Reorganization Entity to another Phoenix Reorganization
Entity that is an Acquired Phoenix Entity or a change in control of any Acquired Phoenix Entity
holding any AT Governmental Authorizations, shall in each case require filings to be made with, and
approvals of, certain Governmental Bodies. The Buyer shall, and shall cause each of its Related
Persons to, prepare all filings required by Legal Requirements to be made by them to consummate the
Acquisition Transaction, including without limitation documentation to transfer the Governmental
Authorizations. The Buyer shall, and shall cause each of its Related Persons to, cooperate with
the Sellers with respect to all filings that the Sellers and/or one or more of their Related
Persons are required by Legal Requirements to make in connection with the



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Acquisition Transaction;
provided that this Agreement shall not require the Buyer to dispose of, or make any change in, any
portion of its business to obtain a Governmental Authorization.



          7.2 Commercially Reasonable Efforts



     Prior to the Closing, the Buyer shall use its commercially reasonable efforts to cause the
conditions in Article 10 to be satisfied.



          7.3 Release of Reclamation Obligations Collateral



     In addition to the Buyer taking by the Closing the action required by Section 2.3(b), the
Buyer hereby agrees after the Closing to pursue on a commercially reasonable basis the matters
described in Section 2.3(b) in order to obtain as soon as possible for the Remaining Phoenix
Entities the release and return of their collateral securing the AT Reclamation Obligations.



          7.4 Employee Matters



     The Buyer hereby agrees to cooperate with the Sellers with respect to the Employee Matters.
Further, the Buyer hereby agrees (a) to hire or cause the Acquired Phoenix Entities to hire a
sufficient number of the APE Employees so that as of the Closing the Acquisition Transaction will
not result in a “mass layoff” or “plant closing” under the Workers Adjustment and Retraining
Notification Act (the “WARN Act”) and (b) to be responsible for any action by the Buyer or the
Acquired Phoenix Entities after the Closing with respect to the APE Employees who are employed by
the Acquired Phoenix Entities as of the Closing that results in a “mass layoff” or “plant closing”
under the WARN Act.



          7.5 AT Liabilities



     The Buyer and the Acquired Phoenix Entities shall be responsible for and shall satisfy and
discharge the AT Liabilities as they become due.



8. MUTUAL COVENANTS OF PARTIES




     8.1 Further Actions



          (a) From the date hereof to the Closing (or the earlier termination of this Agreement in
accordance with Section 11.1), each party agrees to use its commercially reasonable efforts to take
all actions and to do all things necessary or appropriate to consummate the Acquisition
Transaction, including without limitation (i) filing or supplying all applications, notifications
and information required to be filed or supplied by it pursuant to applicable Legal Requirements,
(ii) obtaining all material Consents (including all Governmental Authorizations) necessary to be
obtained by it in order to consummate the Acquisition Transaction, and (iii) coordinating and
cooperating with the other parties in exchanging such information and providing such reasonable
assistance as may be reasonably requested by such other parties.



          (b) From the date hereof to the Closing (or the earlier termination of this Agreement in
accordance with Section 11.1), each party shall promptly notify the other parties in writing of any



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fact, condition, event or occurrence that will or is reasonably likely to result in the failure of
any of the conditions contained in Articles 9 and 10 (to the extent applicable to such party) to be
satisfied.



     8.2 Public Announcements



     From the date hereof to the Closing and except as required by applicable Legal Requirements,
no party shall make any public announcement in respect of this Agreement or the Acquisition
Transaction without the prior written consent of the Sellers and the Buyer.



     8.3 Tax Matters



          (a) Notwithstanding anything in this Agreement to the contrary, the Sellers shall jointly and
severally indemnify and hold harmless the Buyer and its Related Persons against and from any and
all liability for any Taxes of the Remaining Phoenix Entities as a result of the Acquisition
Transaction or otherwise. For the avoidance of doubt, no indemnification payment under this
Section 8.3(a) shall be subject to the limitations on indemnity contained in Article 12.



          (b) The Sellers shall remain responsible to prepare and file or cause to be prepared and filed
and pay all Taxes due with respect to all Tax Returns for the Acquired Phoenix Entities which are
filed on or after the Closing Date with respect to a taxable period ending prior to or on the
Closing Date (the “Pre-Closing Tax Period”). Upon the request of the Sellers and if and as
required by law, the Buyer shall, and shall cause the Acquired Phoenix Entities to, timely sign and
file each such Tax Return prepared by the Sellers and delivered to the Buyer, unless any such Tax
Return is manifestly inconsistent with law. The Buyer covenants not to amend any Tax Returns of
the Acquired Phoenix Entities for the Pre-Closing Tax Period without the prior written consent of
the Sellers, and the Buyer agrees that the Sellers shall have the right to amend any such Tax
Returns if such amendment would not have an adverse effect on the Buyer or the Acquired Phoenix
Entities in a Post-Closing Tax Period (as defined below), and that, upon the request of the Sellers
and if and as required by law, the Buyer shall sign and file, or cause the Acquired Phoenix
Entities to sign and file, as applicable, all such amended Tax Returns.



          (c) The Sellers shall also remain responsible to prepare and file or cause to be prepared and
filed and pay all Taxes due with respect to all Tax Returns for the Remaining Phoenix Entities
which are filed on or after the Closing Date, whether or not any such Tax Return is with respect to
a taxable period ending prior to, on or after the Closing Date.



          (d) The Buyer shall be liable for and indemnify, defend and hold harmless the Sellers and
their Related Persons from and against any and all Taxes imposed on or with respect to the Acquired
Phoenix Entities or their respective operations, ownership, assets or activities for any
Post-Closing Tax Period. For the avoidance of doubt, no indemnification payment under this Section
8.3(d) shall be subject to the limitations on indemnity contained in Article 12.



          (e) The Buyer shall cause the Acquired Phoenix Entities to promptly remit to the Sellers any
refund of Taxes of the Acquired Phoenix Entities with respect to a Pre-Closing Tax Period
(including without limitation, if received by the Acquired Phoenix Entities, expected refunds of
$319,000 for Charolais Mining Company, LLC, $73,000 for R&L Winn, Inc. and $108,000 for C&R Coal,
Inc. and Renfro Equipment Inc.), except to the extent that (i) such refund



55









 







is attributable to
actions not in the Ordinary Course of Business taken by the Buyer or the Acquired Phoenix Entities
on or after the Closing Date, or (ii) such refund is attributable to the carryback of a Tax
attribute (including without limitation a net operating loss, net capital loss, or research and
development credit) arising in a period other than a Pre-Closing Tax Period (a “Post-Closing Tax
Period”), and the carryback of such Tax attribute does not reduce the amount of any refund that
would otherwise be received by the Sellers. All other refunds of Taxes of the Acquired Phoenix
Entities shall be for the account of the Acquired Phoenix Entities.



          (f) If the Sellers pay a Tax for a Pre-Closing Tax Period as a result of an adjustment by a
Governmental Body of a Tax Return for such period, and any Acquired Phoenix Entity realizes a Tax
benefit (including without limitation a refund, credit, or reduction in Tax) in a Post-
Closing Tax Period as a result of such adjustment, the Buyer shall cause the applicable
Acquired Phoenix Entity to pay the amount of such Tax benefit to the Sellers within thirty (30)
days after the filing of a Tax Return reflecting such Tax benefit.



          (g) The Buyer and the Sellers will cooperate fully, and the Buyer will cause the Acquired
Phoenix Entities to cooperate fully, as and to the extent reasonably requested by any such party,
in connection with any Tax matters relating to the Acquired Phoenix Entities (including by the
provision of reasonably relevant records or information).



     8.4 Consideration of Alternative to Escrow



     The Sellers and the Buyer agree to consider prior to and for implementation at the Closing an
alternative to the escrow under the Escrow Agreement which would allow the Buyer to retain the
funds which would otherwise be in such escrow with those funds being administered and released in a
manner which is the same as or similar to the manner in which such administration and release would
be handled utilizing such escrow. However, neither the Sellers nor the Buyer are obligated to
accept such alternative and forego such escrow, a determination as to which shall be in the sole
discretion of each of the Sellers and the Buyer.



9. CONDITIONS PRECEDENT TO OBLIGATION OF BUYER TO CLOSE




     The obligation of the Buyer to consummate the Acquisition Transaction, including without
limitation taking all actions required to be taken by the Buyer at the Closing, is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be
waived by the Buyer, in whole or in part, in its sole discretion):



          9.1 Accuracy of Representations and Warranties



     The representations and warranties of the Sellers in this Agreement (considered collectively),
and each of such representations and warranties (considered individually), shall be true and
correct in all respects as of the Closing Date.



          9.2 Performance by Phoenix AA Parties



          (a) The Pre-Closing Reorganization shall have been effected in accordance with Section 2.1.



56









 





          (b) All of the other covenants and obligations that the Phoenix AA Parties are required to
perform or to comply with pursuant to this Agreement and any of the other documents referred to
herein at or prior to the Closing (considered collectively), and each of such covenants and
obligations (considered individually), must have been duly performed and complied with in all
material respects.



          (c) Each document required to be delivered to the Buyer pursuant to this Agreement or any of
the other documents referred to herein must be or have been delivered to the Buyer.



          9.3 Consents



     Each of the Consents identified in this Agreement and/or the Schedules must have been obtained
and must be in full force and effect, unless the same is not required because the Phoenix
Reorganization Entity holding the AT Assets and/or the AT Liabilities otherwise the subject of such
Consent becomes an Acquired Phoenix Entity pursuant to the terms hereof. The Sellers shall use
their commercially reasonable efforts to obtain and furnish to the Buyer all such Consents not less
than fourteen (14) days prior to the Closing, in order to enable the Buyer to make the decisions it
needs to make in order to timely provide the Buyer PRE Notice.



          9.4 Additional Documents



     Each of the following additional documents shall have been delivered to the Buyer:



          (a) the Transaction Documents, executed by the Sellers where applicable;



          (b) a joint certificate of the Sellers executed by an authorized representative or individual,
as the case may be, dated as of the Closing Date, certifying that the conditions set forth in
Section 9.1 have been satisfied;



          (c) copies of the Consents referred to in Section 9.3;



          (d) copies of the resolutions on the part of the Sellers with respect to any required
corporate approvals authorizing and approving this Agreement and any other documents referred to
herein and the Acquisition Transaction, certified by an officer of each of the Sellers to be true
and complete and in full force and effect and unmodified as of the Closing Date;



          (e) a certificate of good standing with respect to each of the Sellers issued by the Secretary
of State or other applicable authority of the jurisdiction of organization of such Seller; and



          (f) such other documents as the Buyer may reasonably request for the purpose of (i) evidencing
the accuracy of the representations and warranties of the Sellers, (ii) evidencing the performance
by the Phoenix AA Parties of, or the compliance by the Phoenix AA Parties with, any covenant or
obligation required to be performed or complied with by the Phoenix AA Parties, (iii) evidencing
the satisfaction of any condition referred to in Article 9 or (iv) otherwise facilitating the
consummation or performance of the Acquisition Transaction.



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          9.5 No Proceedings



     There must not have been commenced or Threatened against any of the parties to this Agreement
any Proceeding (a) involving any challenge to, or seeking damages or other relief in connection
with, the Acquisition Transaction, or (b) that may have the effect of preventing, delaying, making
illegal or otherwise interfering with the Acquisition Transaction.



          9.6 No Prohibition 



     Neither the consummation nor the performance of the Acquisition Transaction will, directly or
indirectly (with or without notice or lapse of time), contravene, conflict with or result in a
violation of, or cause the Buyer or any Related Person of the Buyer to suffer any adverse
consequence under, (a) any applicable Legal Requirement or Order or (b) any Legal Requirement or
Order that has been published, introduced or otherwise proposed by or before any Governmental Body.



          9.7 Business Conduct and No Material Adverse Effect



     Since December 31, 2008, the Surface Mining Business of the Phoenix Entities shall have been
conducted only in the Ordinary Course of Business consistent with past practice, and there shall
not have been any change therein during the period after December 31, 2008 and through the Closing
Date which has had or could have a Material Adverse Effect.



          9.8 Employee Matters



     There shall have been secured commitments for employment by the Acquired Phoenix Entities of
(a) not less than ninety percent (90%) of the APE Employees that the Buyer designates as desired
for the mining operation associated with the Surface Mining Business and (b) all of the APE
Employees that the Buyer designates as critical for the mining operation associated with the
Surface Mining Business not to exceed that number of the APE Employees as is equal to five percent
(5%) of the APE Employees that the Buyer designates pursuant to Clause (a). For purposes hereof,
all designations by the Buyer provided for in this Section 9.8 shall be made in writing not less
than ten (10) days prior to the Closing.



          9.9 Recoverable Tons of Coal




     The controlled recoverable tons of coal included in the AT Coal Reserves, as confirmed by a
JT Boyd Report, shall be not less than 22.4 million tons (in this regard, the Sellers
acknowledge that they will need to obtain necessary modifications to the Covington-Bandy lease
in order to have the coal reserves under that lease so treated as controlled recoverable tons of
coal included in the AT Coal Reserves) (the “Recoverable Tons Condition”).




          9.10 AT Reclamation Obligations



     The AT Reclamation Obligations, as confirmed by a Newbridge Report, shall not exceed the sum
of Five Million Dollars ($5,000,000.00) (the “Newbridge Condition”).



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          9.11 AT Coal Reserves Quality



     The quality of the AT Coal Reserves shall be acceptable to the Buyer in its sole and absolute
discretion (which condition, together with the Recoverable Tons Condition and the Newbridge
Condition, collectively the “Special Acquisition Conditions”).




          9.12 Mining Permit Approval



     The Phoenix Entities shall have received technical approval of KDSMRE mining permit number
889-0134A3 (the “Permitting Condition”).




          9.13 Abatement of Violations



     All violations of the Phoenix Reorganization Entities set forth on Schedule 4.15 shall
have been abated.



10. CONDITIONS PRECEDENT TO OBLIGATION OF SELLERS TO CLOSE




     The obligation of the Sellers to consummate the Acquisition Transaction, including without
limitation taking all actions required to be taken by the Sellers at the Closing, is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be
waived by the Sellers, in whole or in part, in their sole discretion):




          10.1 Accuracy of Representations and Warranties



     The representations and warranties of the Buyer in this Agreement (considered collectively),
and each of such representations and warranties (considered individually), shall be true and
correct in all respects as of the Closing Date.




          10.2 Performance by Buyer




          (a) All of the covenants and obligations that the Buyer is required to perform or to comply
with pursuant to this Agreement or any of the other documents referred to herein at or prior to the
Closing (considered collectively), and each of such covenants and obligations (considered
individually), must have been performed and complied with in all material respects.




          (b) Each document required to be delivered to the Sellers pursuant to this Agreement or any of
the other documents referred to herein must be or have been delivered to the Sellers, and the
consideration under Section 2.3 to be provided at the Closing must have been provided.




          10.3 Initiation of Action to Obtain Release of Reclamation Obligations
Collateral



     As of the Closing Date, the Buyer shall have taken the action required by Section 2.3(b) in
order to position the Remaining Phoenix Entities to obtain the release and return to them following
the Closing of the cash collateral posted by the Phoenix Entities to secure the AT Reclamation
Obligations subject to the approval of state regulatory authorities.



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          10.4 Additional Documents



     Each of the following additional documents shall have been delivered to the Sellers:




          (a) the Transaction Documents, executed by the Buyer where applicable;




          (b) a certificate of the Buyer, executed by an officer of the Buyer, dated as of the Closing
Date, certifying that the conditions set forth in Section 10.1 have been satisfied;




          (c) copies of the resolutions on the part of the Buyer with respect to any required limited
liability company approvals authorizing and approving this Agreement and any other documents
referred to herein and the Acquisition Transaction, certified by an officer of the Buyer to be true
and complete and in full force and effect and unmodified as of the Closing Date;




          (d) a certificate of full force and effect with respect to the Buyer issued by the Secretary
of State of the State of Ohio; and




          (e) such other documents as the Sellers may reasonably request for the purpose of (i)
evidencing the accuracy of any representation or warranty of the Buyer, (ii) evidencing the
performance by the Buyer of, or the compliance by the Buyer with, any covenant or obligation
required to be performed or complied with by the Buyer, (iii) evidencing the satisfaction of any
condition referred to in Article 10 or (iv) otherwise facilitating the consummation of the
Acquisition Transaction.




          10.5 No Proceedings



     There must not have been commenced or Threatened any Proceeding (a) involving any challenge
to, or seeking damages or other relief in connection with, the Acquisition Transaction, or (b) that
may have the effect of preventing, delaying, making illegal or otherwise interfering with the
Acquisition Transaction.




          10.6 No Prohibition 



     Neither the consummation nor the performance of the Acquisition Transaction will, directly or
indirectly (with or without notice or lapse of time), contravene, conflict with or result in a
violation of, or cause the Sellers or any Related Person of the Sellers to suffer any adverse
consequence under, (a) any applicable Legal Requirement or Order or (b) any Legal Requirement or
Order that has been published, introduced or otherwise proposed by or before any Governmental Body.



11. TERMINATION





          11.1 Termination Events



     This Agreement may, by notice given prior to or at the Closing, be terminated:




          (a) by either the Buyer or the Sellers if a material Breach of any provision of this Agreement
has been committed by the Phoenix AA Parties or the Buyer, respectively, and such



60









 







Breach is not
curable or, if curable, is not cured by the party committing such Breach within ten (10) days
following written notice thereof by the non-Breaching party or such Breach has not been waived by
the non-Breaching party;




          (b) (i) by the Buyer if any of the conditions in Article 9 have not been satisfied as of the
Closing Date or if satisfaction of any such condition is or becomes impossible (other than
through the failure of the Buyer to comply with its obligations under this Agreement) and the
Buyer has not waived such condition on or before the Closing Date or (ii) by the Sellers if any of
the conditions in Article 10 has not been satisfied as of the Closing Date or if satisfaction of
any such condition is or becomes impossible (other than through the failure of the Phoenix AA
Parties to comply with their obligations under this Agreement) and the Sellers have not waived such
condition on or before the Closing Date;




          (c) by mutual consent of the Buyer and the Sellers;




          (d) by either the Buyer or the Sellers if the Closing has not occurred (other than through the
failure of any party seeking to terminate this Agreement or its Related Persons to comply fully
with obligations under this Agreement) by the Scheduled Closing Time; provided, however, that if,
as of the Scheduled Closing Time, the Permitting Condition is the only condition to the Buyer’s
obligation to consummate the Acquisition Transaction that has not been satisfied (other than those
conditions that can only be satisfied at the Closing), the Sellers shall have the right to
unilaterally extend the Scheduled Closing Time to a later date as of which the Permitting Condition
is satisfied, but in no event later than December 31, 2009;




          (e) by the Sellers if the Sellers receive a Superior Proposal and execute a
definitive agreement with respect to such Superior Proposal; or




          (f) by the Sellers in the event any Special Acquisition Condition is not satisfied on or prior
to September 8, 2009 and the Buyer has not waived such Special Acquisition Condition (it being
understood that, if so waived by the Buyer, the Sellers shall have no liability to the Buyer for
Damages as a result of the failure of such Special Acquisition Condition to be satisfied).




          11.2 Termination Effect Generally



     Each party’s right of termination under Section 11.1 is in addition to any other rights it may
have under this Agreement or otherwise, and the exercise of a right of termination will not be an
election of remedies. If this Agreement is terminated pursuant to Section 11.1, all further
obligations of the parties under this Agreement will terminate, except that the obligations in
Sections 11.3, 13.1, 13.2 and 13.13 will survive; provided, however, that, if this Agreement is
terminated by a party because of the Breach of this Agreement by the other party or because one or
more of the conditions to the terminating party’s obligations under this Agreement is not satisfied
as a result of the other party’s failure to comply with its obligations under this Agreement, the
terminating party’s right to pursue all legal remedies will survive such termination unimpaired.



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          11.3 Termination Fee



     In the event the Sellers terminate this Agreement pursuant to Section 11.1(e), the Sellers
shall, within three (3) days of the date of such termination, pay to the Buyer the Termination Fee.



12. INDEMNIFICATION; REMEDIES





          12.1 Survival; Right to Indemnification not Affected by Knowledge



     All representations, warranties, covenants and obligations in this Agreement, the Schedules,
the certificates delivered pursuant to Sections 9.4(d) and 10.4(b) and any other certificate or
document delivered pursuant to this Agreement will survive the Closing. The right to
indemnification, payment of Damages or other remedy based on such representations, warranties,
covenants and obligations will not be affected by any investigation conducted with respect to, or
any Knowledge acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing, with respect to the accuracy or inaccuracy
of or compliance with any such representation, warranty, covenant or obligation. The waiver of any
condition based on the accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to indemnification, payment
of Damages or other remedy based on such representations, warranties, covenants and obligations.




          12.2 Indemnification and Payment of Damages by Sellers



     The Sellers, jointly and severally, shall indemnify and hold harmless the Buyer and its
Representatives, and their respective Related Persons (collectively, the “Buyer Indemnified
Persons”), against and from, and shall pay to the Buyer Indemnified Persons the amount of, any
Damages arising, directly or indirectly, from or in connection with:




          (a) any Breach of any representation or warranty made by either of the Sellers in this
Agreement, the Schedules or any other certificate or document delivered by either of the Sellers
pursuant to this Agreement;




          (b) any Breach by any of the Phoenix AA Parties of any covenant or obligation of the Phoenix
AA Parties in this Agreement; and




          (c) any Claim by any Person, based upon any agreement or understanding alleged to have been
made by any such Person with any of the Phoenix Entities (or any Person acting on their behalf),
for brokerage or finder’s fees or commissions or similar payments in connection with the
Acquisition Transaction.




          12.3 Indemnification and Payment of Damages by Buyer



     The Buyer shall indemnify and hold harmless the Sellers and their Representatives, and their
respective Related Persons (collectively, the “Sellers Indemnified Persons”), against and from, and
shall pay to the Sellers Indemnified Persons the amount of, any Damages arising, directly or
indirectly, from or in connection with:



62









 






          (a) any Breach of any representation or warranty made by the Buyer in this Agreement or in any
certificate or document delivered by the Buyer pursuant to this Agreement;




          (b) any Breach by the Buyer of any agreement or obligation of the Buyer under this Agreement;
or




          (c) any Claim by any Person, based upon any agreement or understanding alleged to have been
made by any such Person with the Buyer (or any Person acting on its behalf), for
brokerage or finder’s fees or commissions or similar payments in connection with the
Acquisition Transaction.




          12.4 Time Limitations




          (a) The Sellers shall have no liability (for indemnification or otherwise) with respect to any
representation or warranty other than those in Section 4.1 (Organization and Good Standing; Power),
Section 4.2(a) (Authority), Section 4.3 (Ownership), Section 4.7 (Properties), Section 4.10
(Taxes), Section 4.15 (Environmental Matters), Section 4.19 (Employee Benefits) and Section 4.25
(No Brokers or Finders) unless, on or before such date as is 18 months after the Closing Date (the
“Outside Indemnification Notification Date”), the Buyer notifies the Sellers of a Claim specifying
the factual basis of that Claim in reasonable detail to the extent then known by the Buyer. A
Claim with respect to any representation or warranty in Section 4.10 (Taxes) or Section 4.19
(Employee Benefits) shall survive until the expiration of the applicable statute of limitations. A
Claim with respect to any representation or warranty in Section 4.15 (Environmental Matters) shall
survive until the sixth anniversary of the Closing Date. A Claim with respect to any
representation or warranty in Section 4.1 (Organization and Good Standing; Power), Section 4.2(a)
(Authority), Section 4.3 (Ownership), Section 4.7 (Properties) or Section 4.25 (No Brokers or
Finders), or a Claim for indemnification or reimbursement not based upon any representation or
warranty, may be made at any time.




          (b) The Buyer shall have no liability (for indemnification or otherwise) with respect to any
representation or warranty other than those in Section 5.1 (Organization and Good Standing),
Section 5.2(a) (Authority) and Section 5.4 (No Brokers or Finders) unless, on or before the Outside
Indemnification Notification Date, either of the Sellers notifies the Buyer of a Claim specifying
the factual basis of that Claim in reasonable detail to the extent then known by either of the
Sellers. A Claim with respect to any representation or warranty in Section 5.1 (Organization and
Good Standing), Section 5.2(a) (Authority) and Section 5.4 (No Brokers or Finders), or a Claim for
indemnification or reimbursement not based upon any representation or warranty, may be made at any
time.




          12.5 Limitations on Amount — Sellers



     The Sellers shall have no liability (for indemnification or otherwise) with respect to the
matters described in Section 12.2(a) until the total of all Damages with respect to such matters
exceeds Two Hundred Thousand Dollars ($200,000.00) (the “Basket Amount”), at which point the Buyer
Indemnified Persons shall be entitled to recover any Damages in excess of the Basket Amount. In no
event, however, shall the Sellers be liable for Damages in excess of the aggregate amount of Three
Million Three Hundred Thousand Dollars ($3,300,000.00) (the “Cap Amount”).



63









 







Notwithstanding
anything in this Section 12.5 to the contrary, in no event shall the limitations set forth in this
Section 12.5 apply (a) in the event of fraud, willful misconduct or bad faith by the Sellers or any
of their Related Persons, (b) with respect to any breach of any representation, warranty, covenant
or obligation pursuant to Section 4.1 (Organization and Good Standing; Power), Section 4.2(a)
(Authority), Section 4.3 (Ownership), Section 4.7 (Properties), Section 4.10 (Taxes) or Section
4.19 (Employee Benefits) or (c) with respect to Section 12.2(b), Section 12.2(c) or Section 8.3(a).




          12.6 Limitations on Amount — Buyer



     The Buyer shall have no liability (for indemnification or otherwise) with respect to the
matters described in Section 12.3(a) until the total of all Damages with respect to such matters
exceeds the Basket Amount, at which point the Sellers Indemnified Persons shall be entitled to
recover any Damages in excess of the Basket Amount. In no event, however, shall the Buyer be
liable for Damages in excess of the Cap Amount. Notwithstanding anything in this Section 12.6 to
the contrary, in no event shall the limitations set forth in this Section 12.6 apply (a) in the
event of fraud, willful misconduct or bad faith by the Buyer, (b) with respect to any breach of any
representation, warranty, covenant or obligation pursuant to Section 5.1 (Organization and Good
Standing), Section 5.2(a) (Authority) or Section 5.4 (No Brokers or Finders) or (c) with respect to
Section 12.3(b), Section 12.3(c) or Section 8.3(d).




          12.7 Excluded Damages




	     For purposes of determining the amount of any Damages under this Article 12, and
notwithstanding anything to the contrary in this Agreement including without limitation the
definition of Damages, such amount shall exclude any and all Damages which are consequential,
indirect, incidental, lost profits or revenues, cost of capital, loss of business reputation or
opportunity, or special and punitive damages, except as and to the extent any such Damages were
actually awarded, paid or incurred in a third party Claim.





     Notwithstanding anything herein to the contrary, the Sellers shall have no liability for
Damages with respect to any Claim to the extent any Buyer Indemnified Person or any Acquired
Phoenix Entity, and the Buyer shall have no liability for Damages with respect to any Claim to the
extent any Sellers Indemnified Person or any Remaining Phoenix Entity, (a) receives or is entitled
to receive any insurance proceeds relating to such Claim, (b) receives or is entitled to receive
payment or indemnification from any third party respecting the matter covered by such Claim, or (c)
receives or is entitled to receive any Tax benefit in respect of the subject matter of such Claim.




          12.8 Procedure for Indemnification — Third Party Claims




          (a) Promptly after receipt by an indemnified party under Section 12.2 or Section 12.3 of
notice of the commencement of any Proceeding against it, such indemnified party shall, if a claim
is to be made against an indemnifying party under either such Section, give notice to the
indemnifying party of the commencement of such Claim, but the failure to notify the indemnifying
party shall not relieve the indemnifying party of any liability that it may have to any indemnified
party except to the extent that the indemnifying party demonstrates that the defense of such action
is prejudiced by the indemnified party’s failure to give such notice.



64









 






          (b) If any Proceeding referred to in Section 12.8(a) is brought against an indemnified party
and it gives notice to the indemnifying party of the commencement of such Proceeding, the
indemnifying party shall be entitled to participate in such Proceeding and, to the extent that he
or it wishes (unless (i) the indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint representation would be inappropriate or (ii)
the indemnifying party fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide indemnification with respect to such



Proceeding), to assume the defense of such Proceeding with counsel satisfactory to the
indemnified party and, after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party shall not, as long as it
diligently conducts such defense, be liable to the indemnified party under this Article 12 for any
fees of other counsel or any other expenses with respect to the defense of such Proceeding, in each
case subsequently incurred by the indemnified party in connection with the defense of such
Proceeding, other than reasonable costs of investigation. If the indemnifying party assumes the
defense of a Proceeding, (I) it will be conclusively established for purposes of this Agreement
that the Claims made in that Proceeding are within the scope of and subject to indemnification,
(II) no compromise or settlement of such Claims may be effected by the indemnifying party without
the indemnified party’s consent unless (A) there is no finding or admission of any violation of
Legal Requirements or any violation of the rights of any Person and no effect on any other Claims
that may be made against the indemnified party and (B) the sole relief provided is monetary Damages
that are paid in full by the indemnifying party, and (III) the indemnified party will have no
liability with respect to any compromise or settlement of such claims effected without its consent.
If notice is given to an indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten days after the indemnified party’s notice is given, give
notice to the indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.




          (c) Notwithstanding the foregoing, if an indemnified party determines in good faith that there
is a reasonable probability that a Proceeding may adversely affect it or its Related Persons other
than as a result of monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise or settle such Proceeding, but the indemnifying party shall not be
bound by any determination of a Proceeding so defended or any compromise or settlement effected
without its consent (which may not be unreasonably withheld).




          (d) The parties hereby consent to the non-exclusive jurisdiction of any court in which a
Proceeding is brought against any indemnified party for purposes of any Claim that such indemnified
party may have under this Agreement with respect to such Proceeding or the matters alleged therein,
and agree that process may be served on them with respect to such a Claim anywhere in the world.




          12.9 Procedure for Indemnification — Other Claims



     A claim for indemnification for any matter not involving a third party Claim may be asserted
by notice to the indemnifying party from whom indemnification is sought.



65









 






          12.10 Recovery of Indemnification Amounts



     Any indemnified party shall have the right to seek to recover and obtain recovery of any
indemnification amounts owed to it hereunder in any lawful way and through any lawful means. In
this regard, the Buyer Indemnified Persons shall have the right to obtain recovery of any
indemnification amounts owed to them hereunder from the amounts held in escrow under the Escrow
Agreement. Further, in this regard, the Buyer and the Sellers shall have the right to offset
and credit against any amounts payable by the Buyer to the Sellers (including without
limitation any portion of the RFR Fee) or the Sellers to the Buyer, respectively, after the Closing
under this Agreement or any of the Transaction Documents, and pay to the Buyer Indemnified Persons
or the Sellers Indemnified Persons, respectively, any indemnification amounts owed by the Sellers
to the Buyer Indemnified Persons or the Buyer to the Sellers Indemnified Persons, respectively,
hereunder.




          12.11 Exclusive Remedy



     The sole and exclusive recourse of the parties and their Related Persons against each other
for any Claims or Damages arising out of or relating to this Agreement and the Transaction
Documents (including any Claims or causes of action arising from or under any statute or the common
law) shall be expressly limited to this Article 12. Notwithstanding anything to the contrary in
this Agreement, this Section 12.11 shall not apply in the case of fraud, willful breach, willful
misconduct or bad faith.



13. GENERAL PROVISIONS





          13.1 Expenses



     Except as otherwise expressly provided in this Agreement, each party to this Agreement will
bear its respective expenses incurred in connection with the preparation, execution and performance
of this Agreement and the other documents referred to herein and the Acquisition Transaction,
including all fees and expenses of agents, counsel, accountants and other Representatives, provided
that the Sellers shall be responsible for and shall pay all of the filing fees required to obtain
any necessary Governmental Authorizations and transfer taxes. In the event of termination of this
Agreement, the obligation of each party to pay its own expenses will be subject to any rights of
such party arising from a Breach of this Agreement by another party.




          13.2 Confidentiality



     From and after the date of this Agreement, the Buyer and the Sellers shall maintain in
confidence and not use to the detriment of another party, and shall cause the directors, managers,
officers, employees, agents and advisors of the Buyer and the Sellers to maintain in confidence and
not use to the detriment of another party, any written, oral or other information obtained in
confidence from another party in connection with this Agreement or the Acquisition Transaction,
unless the use of such information is necessary or appropriate in making any filing or obtaining
any Consent or approval required for the consummation of the Acquisition Transaction.



66









 






          13.3 Notices



     All notices, consents, waivers and other communications under this Agreement must be in
writing and shall be deemed to have been duly given when (a) delivered by hand (with written
confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided
that a copy is mailed by registered mail, return receipt requested, or (c) received by the
addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in
each case to the
appropriate addresses and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):



	 	 	 	 	 

	 	Phoenix AA Entities:

	 	 	Phoenix Coal Inc.
	 	 

	 	 	National City Tower, Suite 3650
	 	 

	 	 	101 South Fifth Street
	 	 

	 	 	Louisville, Kentucky 40202
	 	 

	 	 	Attention: Dustin Angelo,
	 	 

	 	 	Chief Financial Officer
	 	 

	 	 	Telephone:
	 	 

	 	 	Facsimile No.
	 	 
	 	 	 
	 	with a copy to:

	 	 	Greenebaum Doll & McDonald PLLC
	 	 

	 	 	300 West Vine Street, Suite 1100
	 	 

	 	 	Lexington, Kentucky 40507
	 	 

	 	 	Attention: Bruce E. Cryder, Esq.
	 	 

	 	 	Telephone: (859) 231-8500
	 	 

	 	 	Facsimile No.: (859) 255-2742
	 	 
	 	 	 
	 	Buyer:

	 	 	Oxford Mining Company, LLC
	 	 

	 	 	544 Chestnut Street
	 	 

	 	 	P.O. Box 427
	 	 

	 	 	Coshocton, Ohio 43812-0427
	 	 

	 	 	Attention: Charles C. Ungurean,
	 	 

	 	 	President and Chief Executive Officer
	 	 

	 	 	Telephone: (740) 622-6302
	 	 

	 	 	Facsimile: (740) 628-8268
	 	 
	 	 	 
	 	with a copy to:

	 	 	Squire, Sanders & Dempsey L.L.P.
	 	 

	 	 	2000 Huntington Center
	 	 

	 	 	41 South High Street
	 	 

	 	 	Columbus, Ohio 43215
	 	 

	 	 	Attention: Daniel M. Maher. Esq.
	 	 

	 	 	Telephone: (614) 365-2700
	 	 

	 	 	Facsimile No.: (614) 365-2499





Any such notice or communication will be deemed to have been given either at the time of personal
delivery or, in the case of delivery by service or mail, as of the date of delivery at the address
and in the manner provided herein, or, in the case of telecopy, on receipt.




67









 









          13.4 Further Assurances



     The parties agree to (a) furnish upon request to each other such further information, (b)
execute and deliver to each other such other documents and (c) do such other acts and things, all
as any other party may reasonably request, for the purpose of carrying out the intent of this
Agreement and the other documents referred to in this Agreement.




          13.5 Waiver



     The rights and remedies of the parties to this Agreement are cumulative and not alternative.
Neither the failure nor the delay by any party in exercising any right, power or privilege under
this Agreement or the documents referred to in this Agreement shall operate as a waiver of such
right, power or privilege, and no single or partial exercise of any such right, power or privilege
shall preclude any other or further exercise of such right, power or privilege or the exercise of
any other right, power or privilege. To the maximum extent permitted by applicable law, (a) no
claim or right arising out of this Agreement or the documents referred to in this Agreement can be
discharged by a party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by any other affected party, (b) no waiver that may be given by a party
shall be applicable except in the specific instance for which it is given and (c) no notice to or
demand on any party shall be deemed to be a waiver of any obligation of such party or of the right
of the party giving such notice or demand to take further action without notice or demand as
provided in this Agreement or the other documents referred to herein.




          13.6 Entire Agreement and Modification



     This Agreement supersedes all prior agreements between the parties with respect to its subject
matter, and constitutes (along with the other documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement among the parties with respect to its subject
matter. Notwithstanding the foregoing, the parties agree that Section 8 of that certain Letter
Agreement dated July 17, 2009 by and between the Buyer and the Sellers shall survive the execution
of this Agreement and the Closing in accordance with its terms. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the amendment.




          13.7 Schedules



     The Schedules that relate to representations and warranties must relate only to the
representations and warranties in the Section of this Agreement to which they expressly relate and
not to any other representation or warranty in this Agreement. In the event of any inconsistency
between the statements in the body of this Agreement or the other documents referred to herein and
those in the Schedules (other than an exception expressly set forth as such in the Schedules with
respect to a specifically identified representation or warranty), the statements in the body of
this Agreement or the other documents referred to herein shall control.



68









 






          13.8 Assignments, Successors and Limited Third-Party Rights



     No party may assign any of its rights under this Agreement without the prior written consent
of the other parties; provided, however, that (a) the Buyer may assign this Agreement to a Related
Person (excluding individuals) with respect to the Buyer and (b) the Buyer may assign or transfer
certain of the AT Assets and/or AT Liabilities to another Person; and provided further, however,
that in all such cases the Buyer shall remain liable for all of the covenants, agreements and
obligations of the Buyer under this Agreement and the Buyer Ancillary Documents. Subject to the
preceding sentence, this Agreement shall apply to, be binding in all respects upon and inure to the
benefit of the successors and permitted assigns of the parties. Except for the rights of the
Buyer Indemnified Persons and the Sellers Indemnified Persons under Article 12, nothing expressed
or referred to in this Agreement shall be construed to give any Person other than the parties to
this Agreement any legal or equitable right, remedy or Claim under or with respect to this
Agreement or any provision of this Agreement.




          13.9 Severability



     If any provision of this Agreement is held invalid or unenforceable by any court of competent
jurisdiction, the other provisions of this Agreement shall remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or degree shall remain in
full force and effect to the extent not held invalid or unenforceable.




          13.10 Headings; Construction



     The headings of the Articles and Sections in this Agreement are provided for convenience only
and shall not affect their construction or interpretation. All references to “Article” or
“Articles” or “Section” or “Sections” refer to the corresponding Article or Articles or Section or
Sections of this Agreement. All words used in this Agreement shall be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly provided, the word
“including” does not limit the preceding words or terms.




          13.11 Time of Essence



     With regard to all dates and time periods set forth or referred to in this Agreement, time is
of the essence.




          13.12 Governing Law



     This Agreement shall be governed by the laws of the State of Delaware without regard to
conflicts of law principles.




          13.13 Dispute Resolution



     All Disputes arising in connection with this Agreement or the Acquisition Transaction shall be
submitted to binding arbitration before three (3) neutral arbitrators (unless the parties agree to
use only one (1) arbitrator) selected in accordance with the rules of Commercial Arbitration of the
American Arbitration Association (the “AAA”) and conducted in accordance with the AAA’s rules



69









 







of
Commercial Arbitration utilizing the AAA’s expedited procedures and applying the laws of the State
of Delaware. The arbitration proceeding shall be conducted in Columbus, Ohio.




          13.14 Counterparts



     This Agreement may be executed in one or more counterparts, each of which shall be deemed to
be an original copy and all of which, when taken together, shall be deemed to constitute one and
the same agreement. The exchange of copies of this Agreement and of signature pages by facsimile
transmission shall constitute effective execution and delivery of this Agreement and signatures
transmitted by facsimile shall be deemed to be original signatures for all purposes.



[Remainder of Page Intentionally Left Blank with Signatures on Following Page]




70









 








     IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date
first written above.



	 	 	 	 	 	 	 	 	 	 	 

	Buyer:	 	 	 	Phoenix AA Parties:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Oxford Mining Company, LLC	 	 	 	Phoenix Coal Inc.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By: 
	 		 	 	 	By:	 		 	 
	Name:

	 	
 

Charles C. Ungurean
	 	 
	 	
Name:
	 	
 

Dustin Angelo
	 	 
	Title:

	 	President and Chief Executive Officer
	 	 	 	Title:
	 	CFO	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Phoenix Coal Corporation	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	By:	 		 	 
	 

	 	 	 	 	 	
Name:
	 	
 

Dustin Angelo
	 	 
	 

	 	 	 	 	 	Title:
	 	CFO	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Phoenix Newco, LLC	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	Phoenix Coal Corporation, its sole member	 	 
	 
	 
	 	 	 	 	 	By:	 		 	 
	 

	 	 	 	 	 	
Name:
	 	
 

Dustin Angelo
	 	 
	 

	 	 	 	 	 	Title:
	 	CFO	 	 







71












 





FIRST AMENDMENT

TO

ACQUISITION AGREEMENT




     This First Amendment to Acquisition Agreement (this “Amendment”) is entered into as of
September 4, 2009 by and among Oxford Mining Company, LLC, an Ohio (U.S.A.) limited liability
company (the “Buyer”), Phoenix Coal Inc., an Ontario (Canada) corporation (“PCI”), Phoenix Coal
Corporation, a Delaware (U.S.A.) corporation (collectively with PCI, the “Sellers”), and Phoenix
Newco, LLC, a Kentucky (U.S.A.) limited liability company (the “Acquired Company”).



RECITALS




     WHEREAS, as of August 14, 2009, the parties hereto entered into an Acquisition Agreement (the
“Acquisition Agreement”) setting forth the terms and conditions of the sale by the Sellers and the
acquisition by the Buyer of all of the membership interests in the Acquired Company (capitalized
terms used but not defined herein shall have the meanings given them in the Acquisition
Agreement);



     WHEREAS, the Acquisition Agreement provides that each of the Special Acquisition Conditions
is a condition to the Buyer’s obligation to close the Acquisition Transaction;



     WHEREAS, the Special Acquisition Condition set forth in Section 9.11 of the Acquisition
Agreement providing that the quality of the AT Coal Reserves shall be acceptable to the Buyer in
its sole and absolute discretion (the “Coal Quality Condition”) has not yet been satisfied and is
not hereby being waived by the Buyer;



     WHEREAS, each of the Special Acquisition Conditions other than the Coal Quality Condition
(the “Other Special Acquisition Conditions”) has been satisfied or is being waived by the Buyer as
acknowledged or waived herein;



     WHEREAS, the parties hereto desire to amend the Acquisition Agreement to extend the date for
satisfaction of the Coal Quality Condition (the “CQC Date”), following which CQC Date the Sellers
have the right to terminate the Acquisition Agreement pursuant to Section 11.2(f) thereof if the
Coal Quality Condition has not by then been satisfied or waived by the Buyer; and



     WHEREAS, the parties desire and intend to keep the Acquisition Agreement in full force and
effect except to the extent and in the manner that the terms and provisions thereof are modified,
revised and amended by this Amendment;



     NOW THEREFORE, the parties hereto, in consideration of the mutual promises and covenants
contained herein, hereby agree as follows:



AGREEMENT




     1. Acknowledgment or Waiver Regarding Other Special Acquisition Conditions. The Buyer
acknowledges satisfaction or waiver as of the date hereof of each of the Other Special Acquisition
Conditions.



     2. Extension of CQC Date. The parties hereto hereby effect extension of the CQC Date
by amending Section 11.2(f) of the Acquisition Agreement to read in its entirety as follows:



 









 





     “(f) by the Sellers in the event any Special Acquisition Condition is not
satisfied on or prior to September 15, 2009 (or such later date as is mutually agreed
to in writing by the Sellers and the Buyer) and the Buyer has not waived such Special
Acquisition Condition (it being understood that, if so waived by the Buyer, the Sellers
shall have no liability to the Buyer for Damages as a result of the failure of such
Special Acquisition Condition to be satisfied).”



     3. Reaffirmation. The parties hereto do hereby ratify and affirm all of the terms and
provisions of the Acquisition Agreement and such terms, as amended by this Amendment, shall remain
in full force and effect.



     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and
delivered as of the date first written above.




	 	 	 	 	 	 	 	 	 	 	 

	Buyer:	 	 	 	Sellers:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Oxford Mining Company, LLC	 	 	 	Phoenix Coal Inc.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:
	 	 	 	 
	Name:

	 	 

Charles C. Ungurean
	 	 
	 	Name:
	 	 

Dustin Angelo
	 	 
	Title:

	 	President & CEO
	 	 	 	Title:
	 	CFO	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Phoenix Coal Corporation	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	 	 	 
	 

	 	 	 	 
	 	Name:
	 	 

Dustin Angelo
	 	 
	 

	 	 	 	 	 	Title:
	 	CFO	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Acquired Company:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Phoenix Newco, LLC	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	By: Phoenix Coal Corporation, its sole member	 	 






	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	 	 	 
	 

	 	 	 	 
	 	Name:
	 	 

Dustin Angelo
	 	 
	 

	 	 	 	 	 	Title:
	 	CFO	 	 






-2-









 





SECOND AMENDMENT

TO

ACQUISITION AGREEMENT




     This Second Amendment to Acquisition Agreement (this “Amendment”) is entered into as of
September 30, 2009 by and among Oxford Mining Company, LLC, an Ohio (U.S.A.) limited liability
company (the “Buyer”), Phoenix Coal Inc., an Ontario (Canada) corporation (“PCI”), Phoenix Coal
Corporation, a Delaware (U.S.A.) corporation (collectively with PCI, the “Sellers”), and Phoenix
Newco, LLC, a Kentucky (U.S.A.) limited liability company (the “Acquired Company”).



RECITALS




     WHEREAS, as of August 14, 2009, the parties hereto entered into an Acquisition Agreement (the
“Acquisition Agreement”) setting forth the terms and conditions of the sale by the Sellers and the
acquisition by the Buyer of all of the membership interests in the Acquired Company (capitalized
terms used but not defined herein shall have the meanings given them in the Acquisition
Agreement);



     WHEREAS, as of September 4, 2009, the parties hereto entered into a First Amendment to
Acquisition Agreement amending the Acquisition Agreement (the “First Amendment”);



     WHEREAS, the parties hereto desire to amend the Acquisition Agreement, as amended by the
First Amendment (the “Amended Acquisition Agreement”), as provided herein; and



     WHEREAS, the parties hereto desire and intend to keep the Amended Acquisition Agreement in
full force and effect except to the extent and in the manner that the terms and provisions thereof
are modified, revised and amended by this Amendment;



     NOW THEREFORE, the parties hereto, in consideration of the mutual promises and covenants
contained herein, hereby agree as follows:



AGREEMENT




     1. Amendment to Article 1. Article 1 of the Acquisition Agreement is amended by
adding thereto the following definition of “Equipment Lease” and amending therein the definition
of “Excluded Subsidiaries Surface Mining” to read in its entirety as follows:



     “Equipment Lease” means a lease with Caterpillar Financial Services Corporation or other
lessor designated by the Buyer (a) with respect to which such lessor has acquired from the Phoenix
Reorganization Entities those assets designated by the Buyer which would otherwise be AT Fixed
Assets (with the financing debt with respect thereto being satisfied and cancelled) and (b) under
which such lessor has leased such assets to the Acquired Company on such terms as are acceptable to
the Buyer.



 









 





     “Excluded Subsidiaries Surface Mining” means the mining by the Excluded Subsidiaries by
surface mining methods of that certain coal in the Illinois Coal Basin to which the Excluded
Subsidiaries (a) presently hold rights pursuant to outstanding leases which principally relate to
the underground mining of coal or (b) hereafter hold rights by reason of transfer thereof from
Evergreen Mineral Co., Inc. to the Excluded Subsidiaries where such transfer is limited to the
transfer of the Penn Virginia Operating Co., LLC Panama Reserve Area Coal Lease and Sublease to
Evergreen Mineral Co., Inc.



     2. Amendment to Section 2.1(b)(i). Section 2.1(b)(i) of the Acquisition Agreement
is amended to read in its entirety as follows:




     (i) the fixed assets listed on Schedule 2.1(b)(i) which identifies both fixed
assets and the Phoenix Reorganization Entity which is the owner thereof, excluding those
fixed assets which the Buyer designates prior to the Closing for coverage under the
Equipment Lease (the “AT Fixed Assets”);



     3. Amendment to Section 2.1(b)(iv). Section 2.1(b)(iv) of the Acquisition
Agreement is amended to read in its entirety as follows:




     (iv) all leases other than the AT Coal Leases listed on Schedule 2.1(b)(iv)
which identifies such leases and as well both the Phoenix Reorganization Entity a party
thereto and the landlord/lessor with respect thereto, and also the Equipment Lease (except
that the Equipment Lease shall not be included as an AT Other Lease which is an AT Contract
for purposes of Sections 4.2(b)(iv), 4.14(c), 4.14(d) and 4.14(g)) (the “AT
Other Leases”);



     4. Amendment to Section 2.1(b)(xi). Section 2.1(b)(xi) of the Acquisition
Agreement is amended to read in its entirety as follows:




     (xi) the advance royalties, the prepaid assets and the other current assets other than
accounts receivable of the Surface Mining Business, all determined in accordance with GAAP
(U.S.) (which items, together with the AT Inventory, collectively constitute the “AT
Current Assets”); and



     5. Amendment to Section 2.1(c)(i). Section 2.1(c)(i) of the Acquisition Agreement
is amended to read in its entirety as follows:




     (i) the AT Fixed Assets acquisition debt listed on Schedule 2.1(c)(i) which
identifies specifics regarding the debt and the Phoenix Reorganization Entity which is the
debtor with respect thereto, excluding any such cancelled acquisition debt which relates to
the AT Fixed Assets which are covered under the Equipment Lease and also any such
acquisition debt which is paid off and cancelled prior to the Closing as provided in
Section 2.3(e) (the “AT Fixed Assets Debt”);



     6. Amendment to Section 2.1(c)(v). Section 2.1(c)(v) of the Acquisition Agreement
is amended to read in its entirety as follows:



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     (v) certain accrued expenses other than general accounts payable of the Surface Mining
Business, including without limitation the Accrued Coal Leases Liabilities, royalties and
taxes, accrued commissions and accrued property tax, all determined in accordance with GAAP
(U.S.) (the “AT Current Liabilities”); and



     7. Amendment to Section 2.3. Section 2.3 of the Acquisition Agreement is amended
by adding thereto a new Section 2.3(e) which shall read in its entirety as follows:



          (e) Prior to the Closing, the Buyer shall pay for the benefit of the Sellers a purchase price
amount equal to the amount necessary to pay off all outstanding acquisition debt on those fixed
assets designated by the Buyer for which there would be AT Fixed Assets Debt if the same were not
so paid off, with such payment for the benefit of the Sellers to be made directly to the creditors
with respect to such outstanding acquisition debt to accomplish such pay off.




     8. Amendment to Section 2.4. Section 2.4 of the Acquisition Agreement is amended
to read in its entirety as follows:



          2.4 Allocation of Transaction Consideration




     The Transaction Consideration shall be allocated among the AT Assets in accordance with the
values mutually agreed to by the Buyer and the Sellers in writing within ninety (90) days after
the Closing.



     9. Amendment to Section 6.7(a). Section 6.7(a) of the Acquisition Agreement is
amended to read in its entirety as follows:



          (a) For a period of seven (7) years after the Closing Date (the “Restricted Period”), each of
the Sellers agrees that it will not, and will cause the other Phoenix Group Entities (collectively
with the Sellers, the “Restricted Parties”) not to, directly or indirectly, own, manage, operate
or control or participate in the ownership, management, operation or control of any Person that
competes with the Surface Mining Business by conducting a Competing Business. For purposes hereof,
a “Competing Business” is any business that (i) acquires, owns, leases, subleases, develops or
otherwise controls any real property (surface or mineral) which is used in the surface coal mining
business or applying for any Mining Authorizations with respect to surface coal mining or mining,
producing, acting as a contract miner, engaging a contract miner, marketing, brokering or selling
or reselling surface mined coal, from within the Illinois Coal Basin, or (ii) produces, markets,
brokers, sells or resells coal to any customer or former customer or an affiliate of any customer
or former customer of the Phoenix Group Entities or any of their Related Persons; provided,
however, that the Buyer acknowledges and agrees that (A) the conduct of the business of the
surface mining of coal reserves contributed by Patriot Coal Corporation in any areas outside of
Muhlenberg County, Kentucky through any joint venture between the Phoenix Group Entities and
Patriot Coal Corporation where the Excluded Subsidiaries have contributed to the capital of such
joint venture the portion of the underground mining coal reserves under the lease for the Panama
Reserve Area referred to in the definition of Excluded Subsidiaries Surface Mining which are
located east of Pennyrile Parkway and where Patriot Coal Corporation has contributed to the







-3-









 







capital of such joint venture such surface mining coal reserves, and (B) the Excluded Subsidiaries
hold or will hold rights relating to the Excluded Subsidiaries Surface Mining and any actions
taken by the Excluded Subsidiaries in connection with the Excluded Subsidiaries Surface Mining
(including without limitation selling the surface mined coal to current and former customers of
the Phoenix Group Entities and their Related Persons), will not constitute a “Competing Business”
hereunder. For the avoidance of doubt, the Buyer acknowledges and agrees that nothing contained in
this Section 6.7(a) or elsewhere in this Agreement shall constitute a limitation or restriction on
the ability of the Excluded Subsidiaries to conduct deep mining operations, sell deep mined coal,
or acquire, own, lease, sublease, develop or otherwise control any real property (surface or
mineral) which is used in such deep coal mining, in each case whether within or outside the
Illinois Coal Basin.




     10. Amendment to Section 6.7(b). Section 6.7(b) of the Acquisition Agreement is
amended to read in its entirety as follows:



          (b) For the Restricted Period, each of the Sellers agrees that it will not, and will cause
each of the Restricted Parties not to, directly or indirectly, (i) entice, induce or attempt to
cause any officer, director, manager, shareholder, member, employee, agent or consultant of the
Buyer or any of its Related Persons (including any of the same previously serving in any such
capacity with the Phoenix Group Entities) to terminate his or her employment with the Buyer or
such Related Person, or (ii) hire or employ any of the critical APE Employees consisting of (A)
those APE Employees that the Buyer designates as critical pursuant to Section 9.8(b), (B) David
Brockman, Billy Don Clark, Michael Edens, Richard Parks, Jonathan Rogers, Eddie Tinsley and Morris
Tingley and (C) any of Mark Davis, Melissa May, Sally Hicks, Janet Smith, Jeff Hayden or Tom
Waters if he or she has been hired by the Buyer or any of its Affiliates after and within six (6)
months following the Closing.




     11. Amendment to Article 6. Article 6 of the Acquisition Agreement is further
amended by adding thereto a Section 6.12 which shall read in its entirety as follows:



          6.12 Designated Post-Closing Obligations




     From and after the Closing, the parties shall take or cause to be taken the specific
post-closing actions and shall fulfill the specific post-closing obligations applicable thereto
provided for, and in the manner set forth, in Schedule 6.12.



     12. Amendment to Section 9.12. Section 9.12 of the Acquisition Agreement is
amended to read in its entirety as follows:



          9.12 Mining Permit Approval




     The Phoenix Entities shall have received technical approval of KDSMRE mining permit number
889-0134A3, or in lieu thereof the Sellers shall have consented to a holdback at the Closing of
$1,000,000 of the consideration otherwise payable to the Sellers pursuant to Section 2.3(a), with
the amount of such holdback to be deposited and held in the trust account of Squire, Sanders &
Dempsey L.L.P., and with payment thereof from such trust account to be made to the Sellers after
the Closing upon receipt of such technical approval provided that the amount of



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such holdback shall be forfeited by the Sellers and paid back to the Buyer in the event such
technical approval is not obtained within forty-five (45) days after the Closing (the “Permitting
Condition”).




     13. Amendment to Section 9.13. Section 9.13 of the Acquisition Agreement is
amended to read in its entirety as follows:



          9.13 Abatement of Violations




     All violations of the Phoenix Reorganization Entities set forth on Schedule 4.15
shall have been abated, provided that any such abatement matters which are identified in
Schedule 6.12 for post-Closing action may be abated on a post-Closing basis as provided in
Schedule 6.12.



     14. Amendment to Section 13.7. Section 13.7 of the Acquisition Agreement is
amended to read in its entirety as follows:



          13.7 Schedules




     One or more Schedules to this Agreement may be modified and/or added to this Agreement
following the execution of this Agreement and at or prior to the Closing, and the Schedules that
the parties agree to at the Closing as the Schedules to this Agreement shall for all purposes be
deemed to be the Schedules in effect under this Agreement from the date of execution of this
Agreement and through and as of the Closing. The Schedules that relate to representations and
warranties must relate only to the representations and warranties in the Section of this Agreement
to which they expressly relate and not to any other representation or warranty in this Agreement.
In the event of any inconsistency between the statements in the body of this Agreement or the other
documents referred to herein and those in the Schedules (other than an exception expressly set
forth as such in the Schedules with respect to a specifically identified representation or
warranty), the statements in the body of this Agreement or the other documents referred to herein
shall control.



     15. Reaffirmation. The parties hereto do hereby ratify and affirm all of the terms and
provisions of the Amended Acquisition Agreement and such terms, as amended by this
Amendment, shall remain in full force and effect.



[Remainder of Page Intentionally Left Blank]








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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered
as of the date first written above.



	 	 	 	 	 	 	 	 	 	 	 

	Buyer:	 	 	 	Sellers:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Oxford Mining Company, LLC	 	 	 	Phoenix Coal Inc.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Jeffrey M Gutman
	 	 	 	By:
	 	/s/ David Wiley	 	 
	Name:

	 	 

Jeffrey M Gutman
	 	 
	 	Name:
	 	 

David Wiley
	 	 
	Title:

	 	SVP & CFO
	 	 	 	Title:
	 	President & CEO	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Phoenix Coal Corporation	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ David Wiley	 	 
	 

	 	 	 	 
	 	Name:
	 	 

David Wiley
	 	 
	 

	 	 	 	 	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Acquired Company:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Phoenix Newco, LLC	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	By: Phoenix Coal Corporation, its sole member	 	 






	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ David Wiley	 	 
	 

	 	 	 	 
	 	Name:
	 	 

David Wiley
	 	 
	 

	 	 	 	 	 	Title:
	 	President	 	 






-6-









 






SCHEDULES TO




ACQUISITION AGREEMENT



BY AND AMONG



OXFORD MINING COMPANY, LLC,



PHOENIX COAL INC.,



PHOENIX COAL CORPORATION, AND



PHOENIX NEWCO, LLC


These Schedules (each a “Schedule” and collectively the “Schedules”) are the Schedules referenced
in the Acquisition Agreement dated as of August 14, 2009 as amended (the “Agreement”), by and among
(i) Oxford Mining Company, LLC, an Ohio (U.S.A.) limited liability company (the “Buyer”),
(ii) Phoenix Coal Inc., an Ontario (Canada) corporation (“PCI”), (iii) Phoenix Coal
Corporation, a Delaware (U.S.A.) corporation (“PCC”, and collectively with PCI, the “Sellers”),
and (iv) Phoenix Newco, LLC, a Kentucky (U.S.A.) limited liability company (the “Acquired
Company”). Capitalized terms used but not otherwise defined herein shall have the respective
meanings ascribed to them in the Agreement.



The inclusion of any item in a Schedule, where for that Schedule the Agreement requires the listing
of a “material” item or one or more items that could (alone or in the aggregate) reasonably be
expected to have a Material Adverse Effect, is not deemed to be an admission or representation that
the included item is “material” or could (alone or in the aggregate) reasonably be expected to have
a Material Adverse Effect.



To the extent that any Schedule or any item described or identified on a Schedule refers to (1)
“C&R Coal” or “C&R Coal Inc.” or “C&R” or “C&R Coal Company, Inc.” or (2) “Phoenix Coal Processing
Company, LLC” or “Phoenix Coal Processing, LLC” or “Phoenix Coal Processing” or “PCP”, such
references shall be deemed to mean C&R Coal Company, Inc., a Kentucky corporation, and Phoenix Coal
Processing Company, LLC, a Delaware limited liability company, respectively.








 









 













 









 








Schedule 1A




Rose France Reserves


1. See attached, including the map on which the area for the Rose France Reserves is
outlined in blue.





2









 













 












 





Schedule 1A



Rose France Property




Coal Reserves — Engineering estimate



	 	 	 	 	 	 	 	 	 
	#9 Surface	 	Old Tonnage	 	New Tonnage
	Acres
	 	 	425	 	 	 	520	 
	Thickness
	 	 	5	 	 	 	5	 
	#/Cu.Ft.
	 	 	80	 	 	 	80	 
	Tonnage
	 	 	3,702,600	 	 	 	4,530,240	 
	% Recovery
	 	 	95	%	 	 	95	%
	Total Surface Tonnage
	 	 	3,517,470	 	 	 	4,303,728	 
	Average Ratio
	 	 	20.2	 	 	 	20.2	 
	 
	 	 	 	 	 	 	 	 
	#9 Auger
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Acres
	 	 	45	 	 	 	35	 
	Thickness
	 	 	5	 	 	 	5	 
	#/Cu.Ft.
	 	 	80	 	 	 	80	 
	Tonnage
	 	 	392,040	 	 	 	304,920	 
	% Recovery
	 	 	35	%	 	 	35	%
	Total Surface Tonnage
	 	 	137,214	 	 	 	106,722	 
	 
	 	 	 	 	 	 	 	 
	#10 Surface
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Acres
	 	 	350	 	 	 	465	 
	Thickness
	 	 	3.33	 	 	 	3.33	 
	#/Cu.Ft.
	 	 	80	 	 	 	80	 
	Tonnage
	 	 	2,030,767	 	 	 	2,698,019	 
	% Recovery
	 	 	95	%	 	 	95	%
	Total Surface Tonnage
	 	 	1,929,229	 	 	 	2,563,118	 
	Average Ratio
	 	 	19.3	 	 	 	19.3	 
	 
	 	 	 	 	 	 	 	 
	#11 Surface
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Acres
	 	 	135	 	 	 	50	 
	Thickness
	 	 	3.5	 	 	 	3.5	 
	#/Cu.Ft.
	 	 	80	 	 	 	80	 
	Tonnage
	 	 	823,284	 	 	 	304,920	 
	% Recovery
	 	 	75	%	 	 	75	%
	Total Surface Tonnage
	 	 	617,463	 	 	 	228,690	 
	Average Ratio {Estimate}
	 	 	15	 	 	 	15	 
	 
	 	 	 	 	 	 	 	 
	Total tons for Rose France
	 	 	6,201,376	 	 	 	7,202,258	 
	 
	 	 	 	 	 	 	 	 
	Average Ratio {Estimate}
	 	 	19.4	 	 	 	19.7	 






 









 








Rose-France Project — Property Descriptions

All Tracts




Opinion of Title

Roger Tract 235A

81 acres, more or less

Surface Only

Muhlenberg County, Kentucky

Carter Coordinate: 16 - 130

Title Opinion #RLW-M- 016 (8)




DESCRIPTION OF PROPERTY



Beginning at a hickory or gum and running N 73 E 18 poles to a hickory and dogwood; thence N 20 E
66 poles to a white oak; thence N 55 E 70 poles to a hickory and beech; thence N 15 W 86 poles to a
sweet gum and poplar; thence S 67Yz W 171 poles to a rock; thence S 9 E 109 poles and 19 links to a
rock Sam Drake’s line; thence with the line N 73 E 44 poles to the beginning, containing 81 acres.




Opinion of Title

Coal Only

Muhlenberg County, Kentucky

Carter Coordinates: 20 & 21 — J 29 and 16 & 25 — 130

Title Opinion # RLW-M-009




Rogers Tract

300, 301, 227, 238, 239, 240, 214, 235, 236, 310, 308, 209



DESCRIPTION OF PROPERTY




ROGERS TRACT 300



Beginning at an elm, black gum and dogwood, the Ditto corner, and running N. 51 ~ E. 66 poles and 10
links to a white oak, 1. G. W. Fortney corner; thence N. 52 E. 32 poles to two beeches; thence N. 50
W. 20 ~ poles to a white oak; thence N. 20 E. 74 poles to a rock not found; thence S. 38 E. 20 ~
poles to a rock at a sassafras; thence N. 44 E. 128 poles to a stake; thence N. 55 W. to a stake
formerly a double beech; thence N. 51 ~ E. 156 poles to a walnut bush, walnut and sycamore marked
as pointers, the C. C. & 1. Co.; thence N. 72 E. 2020 poles and 10 links to a beech C. C. & 1. Co.;
thence S. 7 ~ E. 52 poles to a rock; thence N. 82 E. 180 poles to a sugar tree and dogwood, Young’s
corner; now two elms marked as pointers; thence S. 8 ~ E. 58 poles and 10 links to a white oak,
Sharps corner; thence N. 83 E. 18 poles to a stake; thence S. 2 ~ E. 10 poles to a beech; thence N.
88 E. 185 poles to a sweet gum, Creel corner; thence S. 18 W. 65 poles and 20 links to a rock,
thence S. 83 W. 148 poles to a stake, formerly two black oaks; thence S. 4 12 E. 86 poles to three
sweet gums; thence S. 2 12 W. 46 poles to a walnut; thence S. 60 E. 46 poles and 10 links to a
rock; thence N. 34 E. 38 poles and 20 links to a hickory; thence S. 6 ~ W. 46 poles and 10 links to
a rock, chestnut, hickory and black oak marked as pointers; thence S. 22 ~ W. 98 poles and 20 links
to a black gum; thence S. 71 E. 2 poles to two service bushes; thence S. 77 W. 122 poles and 10
links to a rock; thence N. 23 ~ E. 40 poles to a rock and two hickories; thence N. 26 ~ W. 77 poles
to a black oak and rock; thence S. 75 W. 130 W. 130 poles to a rock, formerly poplar; thence S. 27
E. 121 poles and 18 links to a stake, Gleen corner; thence S. 52 W. 133 poles and 10 links to a
small white oak; thence N. 40 W. 74 poles and 5 links to 3 white oaks on the public road; thence N.
81 W. 64 poles to a black gum on the said road; thence N. 79 E. 11 poles and 10 links to a stake;
thence N. 8 E. 73 poles and 5 links to a stake; Estes corner; thence N. 2 W. 8 poles to a white oak
stump; thence S. 83 Y2 W. 126 poles to a small beech and a chestnut, the Kittinger corner; thence S.
80 W. 62 poles to a rock in a road, four beeches marked as pointers; thence S. 39 W. 48 poles to a
stake, thence S. 33 /12 W. 44 poles to a stake in the old line; thence S. 82 E. 57 poles and 12
links to a white oak; thence S. 40 W. 114 poles to a rock; thence N. 41 W. 100 poles and 10 links
to the beginning, containing, 1,343.02 acres. There is however, excepted from said tract the
following parts thereof: Beginning at a rock, white oak, and black gum, marked as pointers, running
N. 22 ~ E. 66 poles to a stake, formerly a white oak and dogwood; thence S. 88 E. 104 poles to a
stake; thence S. 3 W. 66 poles to two beeches and dogwoods; thence N. 88 W. 127 poles and 10 links
to the beginning, containing 45.61 acres, and being the same tract at one timeg owned by James
Browning.




ROGERS TRACT 301



Beginning at a rock, white oak, and black gum, marked as pointers, running N. 22 ~ E. 66 poles to a
stake, formerly a white oak and dogwood; thence S. 88 E. 104 poles to
a stake; thence S. 3 W. 66
poles to two beeches and dogwoods; thence N. 88 W. 127 poles and 10 links to the beginning,
containing 45.61 acres, and being the same tract at one timeg owned by James Browning.




ROGERS TRACT 227



Beginning at a large black gum stump, formerly two black gums on a steep hillside an old original
corner, running thence N. 8-45








 









 










W. 950-1/2 feet to a rock planted on top of hill in sink where tree formerly stood; thence N. 7-38
W. 1838 feet to a rock planted on steep hillside in old field; thence on divisional line S. 82-22
E. 352/5 poles to a stake planted in old original line with small lack oak marked as pointer;
thence with the old line S. 1-52 W. 2970 feet to a planted rock 2-1/4 W. 6-1/2 feet from center of
beech stump and S. 79 W. 9-1/2 feet from small sweet gum marked as pointer N. 68-1/2 W. 297 feet to
the beginning, and containing




ROGERS TRACT 238



Beginning at a beech, sugar tree and white oak marked “A” in plat as surveyed by James Nunan (all
now down); thence N. 5 W. 182 poles to a beech (old call a black oak stump), same corner designated
by two white oaks and a black oak called for in the Joseph Adcock 200 acre survey, recorded in Deed
Book No. 19, page 151 of the Muhlenberg County Court
Clerk’s Office; thence N. 85 E. 28 poles to a
rock; thence S. 13 E. 183 poles to a rock; thence “with South line” S. 85 W. 44-1/2 poles to the
beginning and containing 40 acres, more or less.




ROGERS TRACT 239



Beginning at the southeast corner, at a stone, with black oak pointer, 11 feet north, cherry pointer
13.5 feet north and white oak pointer three feet south; thence S. 87 W. 948.75 feet to a stone;
thence N. 6 W. 3012 feet to a beech in the old Adcock Survey; thence N. 87 E. 907.5 feet to a stake
with maple and gum pointers; thence S. 57 E. 3025 feet to the beginning, and containing 64.1 acres.




ROGERS TRACT 240



Beginning at a white oak M. Rose’s corner, running thence S. 89 W. with old line 578 feet to a sweet
gum; thence N. 16-15 W. 188 feet to a poplar stump; thence S. 88-30 W. 1655 feet to a corner of this
tract and the A. R. Adcock place, now owned by the Gibraltar Coal Mining Company; thence with the
Gibraltar Coal Mining Company line S. 6-50 E. 2325 feet to A. M. Creel’s corner; thence with the
said Creel’s line S. 74-30 E. 480 feet to another of A. M. Creel’s corners in G. B. Rose’s line;
thence with his line N. 1 E. 825 feet to his corner; thence with his line S. 82 E. 420 feet to
another corner; thence N. 5-15 E. 190 feet to another of the said G. B. Rose’s corners; thence S.
81-30 E. 1145 feet to the east side of a lane between this tract and G. B. Roses old place; thence
N. 1-15 W. 1535 feet to the beginning, containing 88.5 acres.




ROGERS TRACT 214



Beginning
at a black oak stump, the Drake corner, running thence N. 87' ii E. 181 poles and 15 links to
a poplar; thence N. 27 E. 28 poles to a black oak stump; thence N. 20 W. 52 poles to a white oak;
thence N. 42' ii W. 127 poles to a hickory, the Baxter corner; thence N. 77 E. 24 poles to a stake
in a road; thence with the meanders of said road S. 75 E. 26 poles and 20 links, S. 69 E. 6 poles;
S. 62 E. 20 poles to a stake in Rose’s line; thence with said line N. 20 W. 14 poles to a stake,
Rose’s corner; thence S. 87' ii E. 24 poles to a stake, formerly two black oaks, hickory and black
gum; thence S. 25 E. 120 poles to a red oak; thence N. 78 E. 55 poles to a sweet gum, Rose and
Lewi’s corner, thence S. 19 E. 77 poles and 5 links to an elm, Rose’s corner; thence N. 70 E. 46
poles to a stake, Rose’s corner; thence S. 59 E. 16 poles to a
stake, formerly beech; thence S. 2 ~ E. 177 poles to a rock; thence S. 9 E. 34 poles to a stake, Rose’s corner; thence S. 70 W. 256 poles
to a large sweet gum, Rose’s corner in the rolling line; thence S. 37 E. 4 poles and 20 links to a
sweet gum; thence S. 34 ~ W. 137 poles and 5 links to a rock; thence N. 60 W. 46 poles and 10 links
to a hickory; thence N. 2 ~ E. 46 poles to a walnut; thence N. 4 ~ W. 66 poles to a stake, formerly
two black oaks; thence N. 83 E. 148 poles to a rock; thence N. 18 E. 65 poles and 20 links to a
sweet gum, Creel’s corner; thence S. 8 W. 185 poles to a beech; thence N. 2 ~ W. 175 poles to the
beginning, containing 668.22 acres.




ROGERS TRACT 235



Beginning at a hickory and gum gone (now a stone), fifth corner to tract #1; thence with the line of
tract #1 N. 73 E. 18 poles to a hickory and dogwood; thence N. 20 E. 66 poles to a white oak;
thence N. 55 E. 70 poles to a hickory and beech, beginning in tract #1; thence with line of W. H.
Noffsinger N. 15 W. 86 poles, more or less, to a gum and poplar, corner to G. B. Ross; thence with
the said Ross’s line S. 67 ~ W. 171 poles to a rock; thence S. 9 E. 109 poles and 19 links to a
rock in Sam Drake’s line; thence N. 73 E. 44 poles to the beginning, containing 81 acres, more or
less.




ROGERS TRACT 236



Beginning at a stake; thence N. 33-36 E. 728.3 feet to a sweet gum stump; thence N. 33-25 W. 73.2
feet to a sweet gum stump; thence N. 70-05 E. 1448.7 feet to a stake in a ditch; said stake being
in line with the center line of a lane; thence S. 6-03 E. 1845.5 feet with the center line of said
lane to a stake; thence S 75-11 W. 424.4 feet to a rock; thence N. 40-13 W. 515.2 feet to a sycamore;
thence S. 39-30 W. 815.3 feet to a white oak; thence N. 37-47 W. 1224 feet to the beginning,
containing 60.85 acres.




ROGERS TRACT 310



A tract of land in Muhlenberg County, Kentucky, beginning at a small gum; thence N. 25-15 E. 1594.2
feet to a rock; thence N. 006 W. 669.5 feet to an elm; thence N. 33-36 E. 955 feet to a stake;
thence N. 33-36 E. 955 feet to a stake; thence S. 37-47 E. 1224 feet to a large white oak; thence
S. 76-14 W. 911.2 feet to a poplar; thence S. 13-42 E. 2421 feet to a white oak stump; thence N.
69-14 W. 1806.4 feet to the beginning, containing 64.35 acres.




ROGERS TRACT 209 (INCLUDES ROGERS TRACT 312)



Beginning at a poplar, Rose and Drake’s corner, running N 75 E 56 poles to two white oaks; thence N
39 E 49 poles and 5 links to a sycamore’ thence S 40 E 32 poles to a rock in the old line; thence N
75 E 96 poles to a rock, Drake’s corner; thence S 14 ~ E 97 ~poles to a rock; thence N 75 W 136
poles and 20 links to a rock, Creel’s corner, thence S 14 ~ E 71 poles and 5 links to a rock,
formerly two hickories S 75 W 69 poles and 15 links to a rock; thence N 14 Y2 W 171 poles and 15
links to the beginning, containing 161 acres.








 









 









Opinion of Title

Roger A. Frances and Ellen L. France Tract

82 acres, more or less

Surface Only

Muhlenberg County, Kentucky

Carter Coordinate: 20 — J29 & 16 — 130

PVA Tract # 160-94

Title Opinion #RLW-M- 007 (S)




Tract 1



Tract #1: Beginning at a rock by a Sycamore stump running N. 20% E. 2063 feet to a stake by a
small bridge; thence S. 89 W. 1000 feet to a stake; thence N. % E. 1375 feet to a stake; thence S.
82 E. 1594 feet to a stake in the lane; thence S. is E. 809 feet to a stake in lane at bridge;
thence S. 6 W. 332 feet to A. B. Oak stump; thence due South 1452 feet to a stake in old line;
thence with old line S. 70 W. 1376 feet to beginning, containing 82 acres, more or less.




Tract 2



Tract #1: Beginning at G. B. Rose’s corner running S 81-114 W 40 poles; thence S 3 E 11 poles;
thence N 81-1/4 E 40 poles; thence N 2 W 11 poles to the beginning, containing 2-1/2 acres, more or
less.



Tract #2: Beginning at a stone on West side of the land Alvis Adcock’s corner, running N 81-114 W 29
poles and 3/12 feet to a stake; thence S 2 W 11 poles and 10 feet; thence S 81-114 E 29 poles and
3-112 feet; thence N 2 W 11 poles and 10 feet to the beginning.




Opinion of Title

Warren Tract

20 acres, more or less

Surface Only

Muhlenberg County, Kentucky

Carter Coordinate: 25 - 130

PYA Tract # 175-1 (part)

Title Opinion #RLW-M-OIO(S)




DESCRIPTION OF PROPERTY



Beginning at a stake about 10 feet North of a Large white oak, old corner, running S 2-1/4 E 1100
feet to a black oak in old line; thence N 88-1/4 W 800 feet to a stake in field; N 2-1/4 W 1100
feet to a stake in old line thence with the old line N 88-1/4 E 800 feet to the beginning,
containing 20 acres, more or less.




Opinion of Title

Rose Tract

140 acres, more or less

Surface Only

Muhlenberg County, Kentucky

Carter Coordinate:

PYA Tract # 160-95

Title Opinion #RLW-M- 011 (S)




DESCRIPTION OF PROPERTY



BEGINNING at a stake in an old road about 10 feet West of white oak, an old corner, and running N.
88\14 E. 1736 feet with an old line (that passes through the cemetery) to a stake in said line W. C.
Rose’s corner to 20 A. tract; thence with W. C. Rose’s line S. 2 Y2 E. 1100 feet to his corner a
stake in field; thence with another of W. C. Rose’s lines S 88 \14 E. 800 feet to a B. Oak in
another old line; thence S. 2 \14 E. 596 feet to the old Adcock corner; thence with the old Adcock
line S. 12 E. 577 Y2 feet to a stake on a ditch; thence S. 70 W. about 2900 feet to a stake W. C.
Rose’s corner; thence with his line due North 1452 feet to B. Oak stump; thence N. 6 E. 332 feet to
a stake at a bridge; thence N. Y2 W. 809 to a stake; thence N. 1 W. 590 feet to the beginning,
containing 140 acres, more or less.




Opinion of Title

Coal Leasehold Only

Muhlenberg County, Kentucky

Carter Coordinate: 20 & 21 of J-29, 18 & 25 of J-30

Title Opinion # RLW-M-008




 









 





Rogers No.




209, 214, 227, 235, 236, 238, 239, 240, 300, 308, 301, 312




ROGERS TRACT 300



Beginning at an elm, black gum and dogwood, the Ditto corner, and running N. 51 Y2 E. 66 poles and
10 links to a white oak, J. G. W. Fortney corner; thence N. 52 E. 32 poles to two beeches; thence N.
50 W. 20 Y2 poles to a white oak; thence N. 20 E. 74 poles to a rock not found; thence S. 38 E. 20
1;2 poles to a rock at a sassafras; thence N. 44 E. 128 poles to a stake; thence N. 55 W. to a
stake formerly a double beech; thence N. 51 l;2 E. 156 poles to a walnut bush, walnut and sycamore
marked as pointers, the C. C. & 1. Co.; thence N. 72 E. 2020 poles and 10 links to a beech C. C. &
1. Co.; thence S. 7 1 ;2 E. 52 poles to a rock; thence N. 82 E. 180 poles to a sugar tree and
dogwood, Young’s corner; now two elms marked as pointers; thence S. 8 Y2 E. 58 poles and 10 links to
a white oak, Sharps corner; thence N. 83 E. 18 poles to a stake;
thence S. 2 1;2 E. 10 poles to a
beech; thence N. 88 E. 185 poles to a sweet gum, Creel corner; thence S. 18 W. 65 poles and 20 links
to a rock, thence S. 83 W. 148 poles to a stake, formerly two black oaks; thence S. 4 1;2 E. 86
poles to three sweet gums; thence S. 2 1;2 W. 46 poles to a walnut; thence S. 60 E. 46 poles and 10
links to a rock; thence N. 34 E. 38 poles and 20 links to a hickory; thence S. 61;2 W. 46 poles and
10 links to a rock, chestnut, hickory and black oak marked as
pointers; thence S. 22 1;2 W. 98 poles and 20 links to a black gum; thence S. 71 E. 2 poles to two service bushes; thence S. 77 W.
122 poles and 10 links to a rock; thence N. 23 Y2 E. 40 poles to a rock and two hickories; thence
N. 26 Y2 W. 77 poles to a black oak and rock; thence S. 75 W. 130 W. 130 poles to a rock, formerly
poplar; thence S. 27 E. 121 poles and 18 links to a stake, Gleen corner; thence S. 52 W. 133 poles
and 10 links to a small white oak; thence N. 40 W. 74 poles and 5 links to 3 white oaks on the
public road; thence N. 81 W. 64 poles to a black gum on the said road; thence N. 79 E. 11 poles and
10 links to a stake; thence N. 8 E. 73 poles and 5 links to a stake; Estes corner; thence N. 2 W. 68
poles to a white oak stump; thence S. 83 1 ;2 W. 126 poles to a small beech and a chestnut, the
Kittinger corner; thence S. 80 W. 62 poles to arock in a road, four beeches marked as pointers;
thence S. 39 W. 48 poles to a stake, thence S. 33 /I2 W. 44 poles to a stake in the old line;
thence S. 82 E. 57 poles and 12 links to a white oak; thence S. 40 W. 114 poles to a rock; thence
N. 41 W. 100 poles and 10 links to the beginning, containing, 1,343.02 acres. There is however,
excepted from said tract the following parts thereof: Beginning at a rock, white oak, and black
gum, marked as pointers, running N. 22 Y2 E. 66 poles to a stake, formerly a white oak and dogwood;
thence S. 88 E. 104 poles to a stake; thence S. 3 W. 66 poles to two beeches and dogwoods; thence
N. 88 W. 127 poles and 10 links to the beginning, containing 45.61 acres, and being the same tract
at one timeg owned by James Browning.




ROGERS TRACT 301



Beginning at a rock, white oak, and black gum, marked as pointers, running N. 22 Y2 E. 66 poles to
a stake, formerly a white oak and dogwood; thence S. 88 E. 104 poles to a stake; thence S. 3 W. 66
poles to two beeches and dogwoods; thence N. 88 W. 127 poles and 10 links to the beginning,
containing 45.61 acres, and being the same tract at one timeg owned by James Browning.




ROGERS TRACT 227



Beginning at a large black gum stump, formerly two black gums on a steep hillside an old original
corner, running thence N. 8-45 W. 950-1/2 feet to a rock planted on top of hill in sink where tree
formerly stood; thence N. 7-38 W. 1838 feet to a rock planted on steep hillside in old field;
thence on divisional line S. 82-22 E. 35- .2/5 poles to a stake planted in old original line with
small black oak marked as pointer; thence with the old line S. 1-52 W. 2970 feet to a planted rock
2-1/4 W. 6-1/2 feet from center of beech stump and S. 79 W. 9-1/2 feet from small sweet gum marked
as pointer N. 68-1/2 W. 297 feet to the beginning, and containing




ROGERS TRACT 238



Beginning at a beech, sugar tree and white oak marked “A” in plat as surveyed by James Nunan (all
now down); thence N. 5 W. 182 poles to a beech (old call a black oak stump), same corner designated
by two white oaks and a black oak called for in the Joseph Adcock 200 acre survey, recorded in Deed
Book No. 19, page 151 of the Muhlenberg County Court Clerk’s Office; thence N. 85 E. 28 poles to a
rock; thence S. 13 E. 183 poles to a rock; thence “with South line” S. 85 W. 44-1/2 poles to the
beginning and containing 40 acres, more or less.




ROGERS TRACT 239



Beginning at the southeast corner, at a stone, with black oak pointer, 11 feet north, cherry pointer
13.5 feet north and white oak pointer three feet south; thence S. 87 W. 948.75 feet to a stone;
thence N. 6 W. 3012 feet to a beech in the old Adcock Survey; thence N. 87 E. 907.5 feet to a stake
with maple and gum pointers; thence S. 57 E. 3025 feet to the beginning, and containing 64.1 acres.




ROGERS TRACT 240



Beginning at a white oak M. Rose’s corner, running thence S. 89 W. with old line 578 feet to a sweet
gum; thence N. 16-15 W. 188 feet to a poplar stump; thence S. 88-30 W. 1655 feet to a corner of this
tract and the A. R. Adcock place, now owned by the Gibraltar Coal Mining Company; thence with the
Gibraltar Coal Mining Company line S. 6-50 E. 2325 feet to A. M. Creel’s corner; thence with the
said Creel’s line S. 74-30 E. 480 feet to another of A. M. Creel’s corners in G. B. Rose’s line;
thence with his line N. 1 E. 825 feet to his corner; thence with his line S. 82 E. 420 feet to
another corner; thence N. 5-15 E. 190 feet to another of the said G. B. Rose’s corners; thence S.
81-30 E. 1145 feet to the east side of a lane between this tract and G.B. Rose’s old place; thence
N. 1-15 W. 1535 feet to the beginning, containing 88.5 acres.




ROGERS TRACT 214



Beginning
at a black oak stump, the Drake corner, running thence N. 87 12 E. 181 poles and 15 links
to a poplar; thence N. 27 E. 28 poles to a black oak stump; thence N. 20 W. 52 poles to a white
oak; thence N. 4212 W. 127 poles to a hickory, the Baxter corner; thence N. 77 E. 24 poles to a
stake in a road; thence with the meanders of said road S. 75 E. 26 poles and 20 links, S. 69








 









 









E. 6 poles; S. 62 E. 20 poles to a stake in Rose’s line; thence with said line N. 20 W. 14 poles to
a stake, Rose’s corner; thence S. 87 12 E. 24 poles to a stake, formerly two black oaks, hickory and
black gum; thence S. 25 E. 120 poles to a red oak; thence N. 78 E. 55 poles to a sweet gum, Rose
and Lewis’ corner; thence S. 19 E. 77 poles and 5 links to an elm, Rose’s corner; thence N. 70 E. 46
poles to a stake, Rose’s corner; thence S, 59 E. 16 poles to a stake, formerly beech; thence S. 2
)Iz E. 177 poles to a rock; thence S. 9 E. 34 poles to a stake,
Rose’s corner; thence S. 70 W. 256
poles to a large sweet gum, Rose’s corner in the rolling line; thence S. 37 E. 4 poles and 20 links
to a sweet gum; thence S. 34 )Iz W. 137 poles and 5 links to a rock; thence N. 60 W. 46 poles and
10 links to a hickory; thence N. 2 )Iz E. 46 poles to a walnut; thence N. 4 )Iz W. 66 poles to a
stake, formerly two black oaks; thence N. 83 E. 148 poles to a rock; thence N. 18 E. 65 poles and
20 links to a sweet gum, Creel’s corner; thence S. 8 W. 185 poles to a beech; thence N. 2 )Iz W. 175
poles to the beginning, containing 668.22 acres.




ROGERS TRACT 235



Beginning
at a hickory and gum gone (now a stone), fifth corner to tract #1; thence with the line of
tract#l N. 73 E. 18 poles to a hickory and dogwood; thence N. 20 E. 66 poles to a white oak; thence
N. 55 E. 70 poles to a hickory and beech, beginning in tract #1; thence with line of W. H.
Noffsinger N. 15 W. 86 poles, more or less, to a gum and poplar,
corner to G. B. Ross; thence with
the said Ross’s line S. 67 )Iz W. 171 poles to a rock; thence S. 9 E. 109 poles and 19 links to a
rock in Sam Drake’s line; thence N. 73 E. 44 poles to the beginning, containing 81 acres, more or
less.




ROGERS TRACT 236



Beginning at a stake; thence N. 33-36 E. 728.3 feet to a sweet gum stump; thence N. 33-25 W. 73.2
feet to a sweet gum stump; thence N. 70-05 E. 1448.7 feet to a stake in a ditch; said stake being
in line with the center line of a lane; thence S. 6-03 E. 1845.5 feet with the center line of said
lane to a stake; thence S 75-11 W. 424.4 feet to a rock; thence N. 40-13 W. 515.2 feet to a
sycamore; thence S. 39-30 W. 815.3 feet to a white oak; thence N. 37-47 W. 1224 feet to the
beginning, containing 60.85 acres.




ROGERS TRACT 310



A tract of land in Muhlenberg County, Kentucky, beginning at a small gum; thence N. 25-15 E. 1594.2
feet to a rock; thence N. 006 W. 669.5 feet to an elm; thence N. 33-36 E. 955 feet to a stake;
thence N. 33-36 E. 955 feet to a stake; thence S. 37-47 E. 1224 feet to a large white oak; thence
S. 76-14 W. 911.2 feet to a poplar, thence S. 13-42 E. 2421 feet to a white oak stump; thence N.
69-14 W. 1806.4 feet to the beginning, containing 64.35 acres.




ROGERS TRACT 209 (INCLUDES ROGERS TRACT 312)



Beginning at a poplar, Rose and Drake’s corner, running N 75 E 56 poles to two white oaks; thence N
39 E 49 poles and 5 links to a sycamore thence S 40 E 32 poles to a rock in the old line; thence N
75 E 96 poles to a rock, Drake’s corner; thence S 14 ~ E 97 ~ poles to a rock; thence N 75 W 136
poles and 20 links to a rock, Creel’s corner; thence S 14 ~ E 71 poles and 5 links to a rock,
formerly two hickories S 75 W 69 poles and 15 links to a rock; thence N 14 ~ W 171 poles and 15
links to the beginning, containing 161 acres.








 









 









Schedule 2.1(a)




Other Phoenix Reorganization Entities



	 	 	 	 	 
	Other Phoenix	 	Jurisdiction of 	 	 
	Reorganization Entity	 	Organization	 	Ownership
	C&R Coal Company, Inc.

	 	Kentucky
	 	R&L Winn, Inc. (100%)
	Charolais Coal Sales, LLC
	 	Delaware
	 	Phoenix Coal Corporation (100%)
	Charolais Mining Company, LLC
	 	Delaware
	 	Phoenix Coal Corporation (100%)
	Evergreen Mineral Co., Inc.
	 	Kentucky
	 	Phoenix Coal Corporation (100%)
	Old Liberty Equipment Co., Inc.
	 	Kentucky
	 	Phoenix Coal Corporation (100%)
	Phoenix Coal Processing
Company, LLC
	 	Delaware
	 	Phoenix Coal Corporation (100%)
	R&L Winn, Inc.
	 	Kentucky
	 	Phoenix Coal Corporation (100%)
	Renfro Equipment Inc.
	 	Kentucky
	 	Phoenix Coal Corporation (100%)
	Schoate Mining Co., LLC
	 	Kentucky
	 	Evergreen Mineral Co., Inc.
(50%) / Old Liberty Equipment
Co., Inc. (50%)






3









 








Schedule 2.1(b)(i)




AT Fixed Assets


1. The fixed assets described on the Forced Liquidation Value, Orderly Liquidation Value, and Fair
Market Value appraisal of the fixed assets of the Phoenix Entities by Hilco Appraisal Services,
LLC, a copy of the description listing of which fixed assets as it appears in said appraisal (with
valuation amounts redacted) is attached hereto.



2. All mining equipment and other fixed assets not specifically listed on the attachment to Item 1
of this Schedule 2.1(b)(i) which are owned by the Phoenix Group Entities and used in the conduct of
the Surface Mining Business, including without limitation those fixed assets which are owned by the
Phoenix Group Entities as of the date of the Agreement and listed on each Monthly Fixed Asset
Report attached hereto (each such Report being attached to provide a listing of fixed assets
without any representation by reason of attaching such Reports as to (i) whether those assets are
currently assets of the Phoenix Group Entities or (ii) any other information contained thereon).
The assets listed on the attachment as owned by Crittenden County Coal, Inc., if owned by
Crittenden County Coal, Inc. as of the date of the Agreement, will be transferred to the Acquired
Company prior to the Closing.



3.
	Office furniture and equipment located at the Cleaton shop,
 the surface mining sites [and the Madisonville office], excluding office equipment,
 computers and related software utilized at their work stations (and in some
 cases elsewhere as well) by employees who will remain employees of the Remaining
 Phoenix Entities after the Closing.  In this regard, to the extent that (i) any Phoenix
 Group Entity is a party to any software license agreement and (ii) software licenses
 derived from any such software license agreement are applicable to software installed
 on both computers constituting AT Assets and computers that will remain with employees
 of the Remaining Phoenix Entities after the Closing, the Sellers shall use their
 best reasonable efforts to ensure that such software licenses remain applicable to,
 and in full force and effect for, the software on such computers constituting AT Assets
 following the Closing.



4. GPS Topcon Hyper Ga. — base receiver, rover receiver, tribrach – S#: 498-00252/00274.



External radio — S#: 2003766

Data Collector — TDS Nomad — S#: ET0DC03531

Laser Rangefinder — True Pulse 360 — S#: 009940

Auto Level — Topcon AT-G3 8H1781

Tripod — Two CST Berger

Prism pole — Seco








4









 












	Hilco Appraisal Services LLC August 10,2009 Phoenix Coal, Inc.
Phoenix Coal, Inc., 1215 Nebo Road, Madisonvitle, Kentucky I HHooRet* Rank
* Unit* Year Make Effective Data: July 30,2009,.” r-:-
•-:.-”: , ..%v*i- • — OrdBriy F* UndeWon Msiwt V*w Value
t : . » oozens 22 803 1881 CaterpUar
D9N Crawler Tractor W002874 SCH (BRIAR HILL) ~ 23
871 1985 CaterpUar D9L Crawler Tractor
14Y02974 Counterweight. UC Good SCH (BRIAR Hill.) Y 21
527 1883 CampMsr 09L Crawler Tractor 14YB1325
Ejdra undercarriage aralIHe for unit RL V 24 879
2008 CatBtpMar D6TLGP Crawler Tractor KP2S2495
Segemerts down, showing wear SCH (BRIAR HILL) V 25
C142 2005 Caterpillar 08T Crawler Trador
KPZ00765 SCH (BRIAR HILL) RH 26 CMS 1998
CaterpHar 08R Crawlar Tractor 7XM0281S RB (JESSUP)
27 C152 1S85 Caterpillar pet Crawler Tractor
53Y03540 Winch KOMINE 28 423 2005 Caterpillar
D7RLGP Crawler Tractor ABJ00602 KOMINE 30
0148 1894 Caterpaiaf D7H Crawler Tractor
4K305775 Mew Undercarriage being msaledettmieof Inspection
KOMINE Y 28 9521 1969 (Est.) CaterpUar
D7F Crawler Tractor 61G00478 G5 v 31
804 1990 Caterpillar D6HLGP Crawler Tractor
1KDO40B8 CCC LN 3 3 886
2007 Calarpttar D11R Crawler Tractor 4,288
7PZD5O10 Undercarriage down SCH (BRIAR HILL) Y 5
5 424 2007 Caterpillar D11R Crawler Tractor
7P2S009 RL 1 t 529 2O06 Caterpillar
D11R Crawler Tractor 6,791 7PZD1448 KOMINE 2
2 878 2008 Caterpillar D11R Crawler Tractor
7,381 7PZ01450 KOMINE 6 7 C158 2006
CaterpUar D11R Crawler Tractor 7P201493 UC Appro*. 60%
SCH (BRIAR HILL) RH 7 6 901 2001 CatarpMar
011R Crawler Tractor 09TR0034S Purchased with CCC SCH
(BRIAR HILL) RH 6 8 612 1997 CaterpUar
011R Crawler Tractor 08TROO212 Purchased wttr/REI RB
(JESSUP) 4 4 C159 2006 CaterpWar D11R
Crawler Tractor 07P2B1449 UC Appro* 60% SCH (BRIAR rfflX) RH
12 13 528 1998 Caterplhr D11N Crawler
Tractor 74275288 KOMINE 15 16 C1S1 1997
Caterpillar D11N Crawler Tractor 74Z75270 RL
13 14 827 1994 CatopMar D11M Crawlar
Tractor 74Z75242 Not In service, UC poor, machowFalrCaid SCH (BRIAR
HILL) 14 15 C157 1990 Caterpillar D1 IN
Crawlar Tractor 7420776 Retxitt Engine IrrstafeBon being done at lime ot
Inspection RL Y 20 C149 1988
CalerpWar DION Crawler Tractor 2YD00824 RH (JESSUP)
Y 18 19 525 1984 CatenjOlaf 0101
Crawler Tractor 84W00974 WtianAwBiMe? CCC N
19 20 523 1981 CaterpBlar D10L Crawler
Tractor B4W00703 AviDeMitjr Decreasing, pent Han) to Get, — —
*• • Kecarnaaon ixvy REI (JESSUP) Y 17 18
C150 1981 Caterpillar 010 Crawler Tractor
84W00692 Radamaoon Tractor Move to Jump wtm CCC WrbrtaOut CCC Y
16 17 C155 1978 Caterpffjar _,g Crawler
Tractor 84W00S80 REI (JESSUP, Y 10 10
868 2008 Komatsu D475A-6 Crawler Tractor
20104 Counisrwelaht SCH (BRIAR MILL) Y 9 9
807 2005 Komatsu D476-SA Crawler Tractor
20063 Newer Undercarriage, 4 BBUSS Ripper SCH (BRIAR HILL) Y
11 11 852 2003 Kometou D475A-3 SO Crawler
Tractor 10743 Couftterwdght. Segrnerus SCH (BRIAR HILL)
Y LOADERS I I Y






 









 












	Hilco Appraisal Services IL.C August 10,2009 Phoenbt Coal. he.
Phoenix Coal. Inc., 1215 Nebo Road, IVIadisonvilte, Kentucky WeoRaf*
Rank* Un»# Year Mate «otM-h fipiMSfM “m
Orderly Fair liquidator! Market Vak» Value * * 32 1 535
2008 Catnpllar 992K Wheel Loader H4C00345 RL
33 3 534 2007 CaterpMar 9920 Wheel
Loader 6S79 AZX00629 TOKO KOMINE 34 4
C241 2007 Cateipiar 992G Wheel Loader
AZX00823 SCH (BRIAR HILL) 35 6 C243 1997
CaterpWw 992G Wheel Loader 7HR0009B KOMINE 36
6 916 1996 CatarpHar 992D Wheel Loader
7MJ75014 Ugh LB RSIiJESSUPJ 41 11 533
1994 CaterpSar 992C Wheel Loader 49Z75248
RBljesSUP) 40 10 C244 1993 CateipMar
992C Wheel Loader 49Z00670 WghUft ISLAND DOCK
38 8 856 1991 CatwpOar 992C Wheel
Loader 49Z01901 SghLH SCH (BRIAR HIU-1RH 39 9
C242 1991 Caterpillar 992C Wheel Loader
49Z001316 V. 3? 7 B75 1987
Caterpillar 992C Wheel Loader 4BZO103O Standard UK, Fair
Cond. SCH (BRIAR HILL) RH v 42 12 C245
1985 Catetp3tar 992C Wheel Loader 49200863 Standard Lai
When Available, Rubber Fair-Poor CCC Y 43 13
9IT 1981 Caterpillar 992C Wheel Loader
42X00943 High Lilt TOKO CR 44 14 531
1980 CaterpMar 992C Vlfticel Loader 42X00720
ISLAND DOCK 4S 15 649 1978 CarapHar
992C Wheel Loader 042X00217 Standard Lift ISLAND DOCK
46 C24T 1994 Caterpillar 9888 Wheel Loader
50W05703 REKJESSUP) 48 C248 1988 CaterpMar
988B Wheel Loader 50W09272 SCH (BRIAR HILL) 48
431 1988 CaterpNar 088B Wheel Loader 50W08880
KOMINE 47 432 1977 Cateipillar 988B Wheel
Loader 50W01740 RL 52 857 1996 Cateipiar
950FII Wheel Loader 05SK02637 SCH (BRIAR HILL) 57
BOS 1986 Draeter 5208 Wheat Loader 41966
REI(JESSUP) 50 813 1994 Komatsu WA600
Wheel Loader UA50017 SCH (BRIAR HILL) 55 C212
1978 A4ichigan 4758 Wheel Loader 42U224C ISLAND
DOCK 66 C215 19T7 Michigan 475B Wheel
Loader 42W179C ISLAND DOCK 54 C167 1979
Michigan 380 Wheel Dear 484A107K ISLAND DOCK
51 919 1983 Michigan Clark 275C Wheel Loader
492A2S1 RL 53 918 1997 Volvo 180C
Wheel Loader L180CVB04S5 Coal BM., Smal rubber, SCH (BRIAR
HILL) HAUL TRUC JSS 70 New C720 2009
CaterpWar 777F OffMjrtway 2,419 0JRPO1866
KOMINE 58 New 507 2008 Caterpilar ___
OIF Highway OJRP01082 RL 59 New 508
2008 Caterpilar 777F Of! Highway BJRP01234 RL
60 New 509 2008 CatorpHar 777F Off
Highway 0JRP01305 RL 61 Now 887 2008
CaterpMar 777F Off Highway 4,124 0JRP01367
KOMINE r 62 New 888 2008 Cateipiar
777F Of? Highway 3,796 0JRP01S04 KOMINE r
63 Naw 889 2008 Csterpfflar 777? Off
Highway 3,987 OJRP01506 KOMINE v 68 New
___C718 2008 Catarp&ar 777F Off Highway
2,887 fWRP01612 SCH (BRIAR HILL) RH y 69 Naw
C719 2006 Catarpnar —f OffHhway
2.816 0JRP01613 SCH (BRIAR HILL) RH Y- 71 1
936 1994 Caterpillar 777C Off Highway
4XJ75004 SCH (BKIAH HILL) RH n 2 937 1994
Caterpillar 777C Off Highway 4XJ75003 SCH (BRIAR
HILL)RH Y 73 3 805 1994 CaterpOar
777C Off Highway 4XJ401 SCH (BRIAR HILL) RH t
74 4 801 19S4 CaUrpiar 777C Off
Highway 4X1306 SCH (BRIAR HILL) RH Y 75 5
C710 1989 Caterpilar 7778 Off Highway
4YC00S31 SCH (BRIAR HILL) RH Y 91 21 9507
1985 Caterpllar 777A Off Highway 84A1479 RB
(JESSUP) Y 93 23 402 1985 CaterpMar
777A Off Highway 84A1715 CR y 92 22
403 1984 CaterpMar 777A OffWohway 84A01414
CR Y 89 19 508 1983 Caterpillar
777A Off Highway 84A124S CR Y






 









 












	Hilco Appraisal Services LLC August 10,2009 Phoenix Coal. Inc.
Phoenix Coal, Inc., 1215 Nebo Road, Madisonville, Kentucky HtksoReW
Rar*§ Unit* Year MateA-/ ••
EteaftS0a*bauh36aa!(«Ssfci£;v* Model ;. “ • •iTypoj:”:. tap. -
Order* Fa* Uqiadefton Market VWue Vam» S3 13
505 1981 CaterpBsr 777A CHI Highway S4A909
REI (JESSUP) r m 14 C703 1981
Caterptsar 77TA Off Highway MA009BB RB(JESSUP)
Y 88 18 C705 1981 CaterpSar 777A
Off Highway B4A000987 When Available? CCC N
95 25 401 1981 Caterpiar 777A
OrTHIghway 84A843 No Power, Coat Hauler Only RL Y
78 a C709 1980 Cateipllaf 777A Off
Highway 84A006S9 Cummkn Engine REI (JESSUP) V 85
15 503 1880 CatarpHar 777A Off Highway
84A073S Back Up Truck tor Both Schoated Operations SCH (BRIAR
HILL) Y 86 18 504 I960 Caterpitar
777A Olf Highway 64A00855 RB (JESSUP) Y 87
17 C707 1980 Caterpillar 777A Oil Highway
84A00631 CCC N 94 24 C704 1980
CaterpBar 777A Off Highway 84A0O872 CCC N
90 20 C708 1979 CsnrpHar 777A Off
Highway 84A00487 REI (JESSUP) Y 64 New
895 2008 Komatsu 785-7 Off Highway 8,935
A10079 SCH (BRIAR HIU) Y 65 New 896
2008 Komatsu 785-7 Off Highway 2,112 A10089
SCH (BRIAR WLL) V 66 New 897 2008 Komatsu
785-7 Off Highway 831 A10090 SCH (BRIAR HU.)
V 67 New 898 2008 Komatsu 785-7
Off Highway 1,506 A10D93 SCH (BRIAR HILL) Y 77
7 B54 1997 (Est) Komatsu 330MHaulpak Off
Highway CF2447BBFP41BP Unit being serviced at erne of inspection SCH
(BRIAR HIU) Y 78 8 853 1997 (Esl.)
Komatsu 330MHSUlpak OR Highway CF244798CFP41BP SCH (BRIAR
HU) V BO 10 830 1997 (EM.) Komatsu
330MHaufpak Off Highway CF24480BFP41BW SCH (BRIAR HILL)
Y 79 9 B3E 1996 (Est.) Komatsu 330M
Haulpiik OW Highway CF24418BFP41BW SCH (BRIAR HILL) Y
81 11 828 1998 (Ell.) Komatsu 330MHaulpBll
Off Highway CF24432BFP41Brl Unit in* in use during innpm, Iwifi SCH
(BRIAR HILL) Y 82 12 829 1998 (Est)
Komatsu 330MHaB«ilt Off Highway CF24413BFP41BE SCH (BRIAR
HtLL| Y GRADERS, BRILLS. EX CAVATORS Y
96 890 2008 Volvo (3990 Motor Grader
4,049 42046 SCH (BRIAR HILL} Y 98 956
1988 Catnpllar 16G Motor Grader 93U026S1
KOMINE Y SB 0407 1988 GatapUar 16Q
Motor Grader 93U2S43 REHJESSUP) Y Wl 806
1987 CaterpHar 16G Motor Grader 93002425
rapper RL Y too C405 19B3 CaterpBar
1BG Motor Grader 93U02227 SCH (BRIAR HILL) RH Y
97 C40S 1981 CatorpRer 160 Motor Grader
93U1394 ISLAND DOCK Y 102 466 Drilech
D45KS CMS 731618 KOMINE Y 103 614
DrHtech D40KS Drill 731537 REI (JESSUP) Y
104 C309 Ingereof Rand DMLX1200 DrilJ 7137
SCH (BRIAR HILL) Y 105 9310 DrHtech D45KS
Drill 731850 Machine He during inspection. Right side engine
enotourse mte»ig,FalrCorKl. SCH (BRIAR HILL) Y 106 C308
1999 psL) Ingersol Rand RDM50EXL1200 Dili 2874 SCH
(BRIAR HILL) RH Y 107 C3« 1885 (&t) DrWech
C40K2L Drll 731117 KOMINE Y 108 547
1988 (Est.) Drlstch D40K Orfl 731184 RL
Y 109 546 1988 (Ett.) Driltech D40K
OriB 731089 Machine nee rough appearance, ovaral cond.
rsfr SCH (BRIAR HILL) RH Y ;






 









 












	Hilco Appraisal Services LLC August 10,2009 Phoenix Co«I, Inc.
Phoenix Coal, Inc 1215 Nsba Road, Madisonville, Kentucky rtfcoRr* Rank* UnM
year Make -.y£; \ MsfkMiS*
::IKwSi->*<%4MhifieMi\f[
WB»,;.,w:-,;..J05BaonA “ >. • (nap (Marty Fak UqukJieon
Market Value Value S f 110 541 1894 HRacht ExraT
Hyd. Excavator 172-M88 Rough Apperenee, Sheet ircetel dameae, fcAakte catmks
beat, rigKt akla angina anctounuB / UhrmI htnu pail tad at RL 111
479 2008 Komatsv PC600 Hyd. Excavator 20149
TO MINE * 111 932 1997 HttacM EX7S0 Hyd.
Excavator 17C-508S VefyWaak.No Spare »8 Spread! CCC N
113 C903 3004 LI* Belt 800LX Hyd. Excavator
KBJ49008 RB(J658UP) v 114 846 1995
Hitachi 700H Hyd. Ewsrvator 172-1589 Undotcaniaga
ahoaaig a&jns of reptceemant won, IIC appnac. 20% Ife remaeig 8CH (BRIAR
MIX) Y 115 884 1994 Hitachi EX70OB6
Hyd. Excavator 172-1445 SCH (BRIAR HIU.JRH v 116
894 2007 Komatsu SJaboLol Hyd. Excavator
55024 5CH [BRIAR HILL) v 117 C93S 1896 f£st.)
Unk BeH SOOOQuantam Hyd. Excavator 800Q2-1117 SCH tBRIAR
HILL) RH v 118 834 1990 HitacW EXlBOOLD
Hyd. Front Shovel 182-0185 SCH (BRIAR HILL) RH 1 its
881 2008 Hitachi ExiioaLD Hyd. Front Shovel
5,498 FF018K0001007 SCH (BRIAR HILL) 1 -:






 









 












	001 Phoenix Cod Capontfon MatftHiadAsttRttf-GMPBs* Fort* fscaJyaar ended
Dacarter 31,2009 Anximibt8dDapt«(oncSSpiaascfCunei<ThRjDat& Book* Infernal
FYEMorthxDewrter kite Erf wtt It lllh-l QkBwdf
BnSQ NttaM &IT1TD AnmOkp/ ToUAcan IttBwt
S»fe Co dm*** D* OH in o* Co* ttifUkr*
ItaMM OeH EMp Ewbh TmOJ tap ttk*
Kky vum*Mm*WBMmmm msusaoc MB 00 08 (fl/SVWOO
4%C5i1i m BA) 42£S4j44 Off M»
MO M» 000314 Und-CMon KflSMM W 00 00 O7&1QQ09
on KJ50MO MO SSJSOQJOO 000 040 MO
000 3S#0D0 M.taMMolN»>1«gMMMM( 42*5414 3E£0M0
ADO 79,154.14 aoo aoo MO woo
179,154,14 LMsRerMnmjVUuB HflToW 42#4.14 36,50100
010 71,154.14 aoo aoo 0« aoo 8
79.1S4.14 OlftMAMNe- HMMMMMO DOOM BrikMg-OWqn 03818009 SF
4000 0781fflW MO 83SM0 MO t93#0JIO MO
zone MO 2015*2 IS1.4S438 00081?
Bi*»n(-ai*o(i-ButttteioJ*s vnwm SF ?ooooraiaw (UK
9MSU3 OJOO 9WMS MO 20190 000 201 JO
9§o54vf3 000318 Billing.OMW-BkHciJ ariavm SF 4000
tfKWXS (L00 7171248 W» 7171249 too 1S3J0
aoo 1633* 785*141 000319 ArOpmwHwCtekB D7B1ftO08
SF 19 ffl OTSI/ZOOB 100 2M9B.13 0J0
2S99B>13 Ofl» Z3U1 aoo 23U1 2835942
nra» AOMi-ciunn ormaoM SF 10 00 BTflt/2009 urn
44.48W3 MO 44,40EyS3 MO 3JM5 aoo
S7105 44V03&5S 000371 Pwmwr-aata D7OT2008 SF
tOOOOWSBS aoo Usaoo 000 IM&OO ooo
ItUK aoo mm N.W1.94 00032 CDnDimfan-OHlM
074010001 SF 1000B7fi1ffl)0» OflO Mtisi 000
U11.91 0J0 4126 MO 4926 SJ62B Ql MM tat
No . KNMOWtta OHO 457JBSS9 O00 467,8233 MO
JM08 aoo 3?&tt |464,7«51 LesstenmngViim
NetTou 0J» m<mi 0X0 467.SZ3S9 aoo
30510 aoo 3*0108 f 4«,7liS1 G*Mta*to.K2004»tt«a
00OOM 901 9MCa»rpirD1lflCnrt9fTwto «waw SL »ODO7aW0O9
357,97121 wo aoo x/rpua IMD9.47 jaoia
aoo 10731JB $25Q$79.15 G000C3 52? HKCKBpfcfMLCfwteTrrta
0001/2006 SL 10 00 07/3WS09 aUBIM MO aoo
2Wt34 uasg 1.SSM0 000 mx 18,424* C000M
CflDKOnferDidDr OMIflW Si 10C0 07J91O09 wm m
aoo 9,47508 nx SSU4 MO 20
6*fi» 000005 916 2003C*9KD«ittwTWLl»fcr OWIfiB* a
loooowJiaw 371,7002 aoo aoo 373.7&02 9O,JS06
aim* OM 112,12190 2S1J34.12 000006 917
!MlC*992CftiifterTMljrt* «mm Si 10 00IM100W J3|6M*
on IO0 2MBB21 5,72419 \mm 000
7,106.76 KJ82.4S 000006 91) i9t3CMi275CFWibrrndla«ter 0W1BW
a woooToiais 2OT.M MO aoo 2W4 M0U4
I.3K09 too 8,71193 15JW121 C00009 910
l»7Valwil80CAiM«rrnif|jtwl«r otovano a 10 00 0701/2009
34*17.74 MO on 34,217.74 82&28 1J996JH
MO 102S5J1 235243 Ai«Mii2H« MZ/w PV1






 









 













 









 












	001 Ptioenix Coal Corporation Monty FbriAottl-GAAPBoofe Fore»lical year
trtWDeoeniw 31,2009 AccumAated DepracWon displayed as of Cunwt Thu Data
Book=Internal ITO Won** December kt&e W UN BttWQ
DtfMMf taflpjl MgrAoGUM CurYTO ttamBq/ TeWtam
NrtBoct Sjpffa Co PwafyiM D* DM lit Mi
Coi fcqdUBm TnoMM 04 Dttr Burnt DW4M
Ov VMka Xt* On. AMtnDGtN911 nmvtoWB O00I55
FWKWK* O&W3005 SF 10 00 0X91/2090 vnm OHO
000 277*80 99545 15205 000 1.157a
1520a 000175 IfciiEffiMgencyilMliGilKit Kfll/2096 SF
10 00 07/31/2)09 3,115a 0.00 000 3,11409
157.48 wia 000 1039a 2,078.73 oooie
To* laowoM SF 1009 O7AV20Q9 vm 000
ooo 17*452 716.42 10234 ooo 5H.76
935.76 oxw Ft» TRUCK nffliffloa SF 0500
0791/2803 21/59151 on ooo 21/59901 167455
253154 000 W50649 2593a ooow 1971 immttMStW
0MU2005 SF 05 X 07/31/2009 5/90000 000 000
510040 4/40000 70000 000 5,woa sooa
000219 fCtMS0O3B464K oam/2005 SF WOO O7/SV2009
1«J30 ooo OJOO 1522a 40079 5959 000
450.49 552a 000220 17T Fortf taMmsSEMMl 04010005
SF MOO 07/31/2009 250000 000 ooo 250000
93750 14553 000 1JK133 1,41657 000221
GtvBofbrrSFY KHIfiDOS SF 1000 07/31(2009 409JD
ooo OOO mm 133.19 2350 000 157a
2S2J1 000222 iMr lomaw SF 10 01 07/518009
83QyM 009 000 12O00 26050 47a 000
314a 90567 000281 CariSpnngVibnte-SizaiK-CKff amvmt
SF IflflOOTfllfflDS 173257 ooo 000 173257
25J0S 10106 000 35395 U7152 00(1302
GGDatfKceswnt oajwooa SF 0700 07/310000 34,07500
ooo ooo 3*07500 4,45756 2jo»a ooo
7a?.M 26767a GA.*MAa**> 162OWMMO-80 1999,263a
ooo OOO tflSSSSuB 504727a 119a2.fi 000
sHtwa 11575,14355 UsRennnngVii ues NetToW
1«9»38 ooo 000 1359263a 804727a inas-w
ooo 624,119a 11375,143a Gn.AWrtn6CtNO: =1t3000D404HO
050041 Ploeer 0X010006 SF 05 00 0701/2000
150MO 000 Oft 15D0O0 15000 iTsa 000
iosa 147500 000042 Pwar Retain 0201/2006 SF
0500 0781/2009 99552 ooo ooo 09552 S22a
8H.47 000 626a 25007 000043 CoflhunciWionB
OWWOOS SF 10 00 07SV2009 513J5 ooo 000
513*5 MU2 2557 oa 171.29 342* 000044
IDesk 0*01/2036 SF 10 00 07/11(2009 95254
ooo ooo 55294 xis& ssa ooo 317a
6355) 000O45 Sawing ItBuBmOigUKipa o&maoM SF 05 00
07/31/2009 456« ooo ooo 45650 2432 5357
000 29679 15951 000048 f«t Proal leg* Sin FJing CabM
BSOIfiOOS SF iooo 07/31/2009 1*1.14 ooo ooo
1,»U4 47177 11556 ooo 594a iaeii
ooooso AgatuknSowwtfTvndnalSarw atfSoHMieUcMHa 09JW20O6 SF
05 00 O70WOO9 12JXH.12 003 000 nooi.« M87.18
1516.79 ooo 758357 M17.15 000051 D«IL«»CP
BjnyCoyfc OWV2006 SF 05 oo mum 1532» ooo
000 1*3225 75172 190.42 on 952.14
6B.12 000052 3 Samsung it MortOoW Key* isfeuraocs 0WV2006
SF 10 0) 07flW009 726.H ooo 000 728.16
16145 42a oa Mia 514a 000053
LouoMfltOtlcaFunAm OM1/2006 SF MoooraweB 21564.15
on 0X0 21564.15 5,12451 iau4 on VOU2
15557a 000064 Coptr 9*018006 SF 10 oo mvm
J55S.H w on 3/553,10 09906 22475 ooo
1,12353 272925 kvMimat*m hail






 









 














	001 Phoertx Coal Corporation FfrftifcatjWOTMDeariarSl.aiOg Book «internal FYEMorth*
December klto HI Thy BtgMg Dkfuef Bribe
PfcrfeaB CvYTD AaMtUff -RMAeam tWBnk SfM» Co
Dewwon Mi DM l* Mi CM titpfabn
TomOii Cot Mr TnntOtt Mr Vtbt My
aLtatftect»<1fsaMB4MMri twos F* Catena lOttiaos ST
iowonsiaio9 3269 on on 32BJ9 7354
19.16 on 93.10 235.46 000056 OHct Chili*
(BarrndMm*) 1M0H2006 SF 10 00 0701/2009 43*a 050
on 43436 97J2 2533 on 12105 31123
000057 FingCibNK KWDB006 SF 10 00 07810009
1.12254 0.00 on 1,12254 25256 6547
on 3i«n 60451 0X058 Suiwng1BeuBariOig)lilK«|«t
mum SF 1000 07)3100} 68439 OJJO on
684.90 154.10 3985 on B4K 49055
00OOS8 Bnwemt mvm SF 10 09 0791/2009 23SS
100 on 23922 Hffl as? on «7n
17156 000060 CwnMw «BW006 SF 05 00 0701/2089
3)38909 too on snon 1525JS 3953 on
1429.43 146857 800061 iJptjp/WwiyTjjtrt IMIflOOB
SF 05 00 O7/JU2009 159659 on on HS65J
76347 19783 on 96140 73S.1S 000062
M*FMlM*UMinBl 1WH/B006 SF 70 0017/31/8009 48U0
OjOO on 48550 K&3D 2655 an
13365 35235 000063 PintnjttofOflcioUjiisv* 1WW006
a « OS 07/31/2009 4,106.19 0X0 on 4,mis
68966 Z3SXS2 on 1,12920 257659 Q00O6S
Ott»Fwrture-U)Ur* MW006 SL WOO 07/3020(8 140059
040 on IjUOJB 303.49 8170 on 385.19
i«isn 000066 MetQMr-OidqWgglgn iiftwas SF 1000
07/31/3009 2S2.M on on 23ZM 5029 1359
on 6352 16832 000067 Wot CM-ChiiBUad 11*10X16
SF 10 00 07810009 232.M on on 232.14
son 1353 on 6352 16832 000068 Otca
Strap.laJMb 11/0*2006 SF wooflwiaw 86656 on
on Man 187ffl son on 23639 62847
000069 RlnD Cibint — jfifctfi OfiM IttlOW SF 10 00
07131/2009 4312 on on 43120 9143 are
on mse 31262 000070 MASSOtaMtty Sabot 0WVMO7
a 0300 07/31/WB 26.701.45 on on 26,70145
17,60096 5,191.94 on 22.5S2.90 370855 000072
MCatifiilM KKI1M04 SF 05 00 07/31/2009 5,181*2
on on 5,1*152 4/0453 60454 on smm
172J5 000073 OfcgFumJUt-dMt,r«WvBl Caen* {Tim tOat) 1M1M04
SF 10 00 07/31/2009 IMS on on 2,36263
1/904.11 13751 on 1,14152 122171 000074
Ola Fumftfffar$MMbiy-<l«fc,le atmtM*.* WDM0M SF 1000
077318009 964JS6 on on 96156 40995 5626
on 46621 49w5 WO075 VVMi buifdB IWIfflW
SF 10 00 07/31/2099 1*46.49 on on 1546.49
58*73 107.71 on 69244 1,t545S 000077
n*ont%ilipa OWU2006 SF WOO 07(!JV2O09 394379
on on i&m 1,003.11 19554 on 1.1M-K
2,14555 000078 F*abM 0WV2006 SF 05 00 0M3W009
62959 on on 62939 37800 73M on
45in 17849 000079 total*) 09Q1/2006 SF
1O0O 073W0C8 3511.76 on on 3511.76
(Bk 22225 on • 1,11177 259959 OQOMO
«*m 10B1/2006 SF 1000 07816009 3/noo on
on 3,73m 839.48 217*4 on W7.12 Z573«
0000(1 CttdpuMr tar PfioahK Aooourftn 04/01/2006 SF
B50»07flttW» 1/564.19 on on ISRtJ 11531
194.15 on 1,10946 554J3 000062 GmpifcrbCCC
6OTH2I06 SF 0500 07731/2009 968.97 on on
96&S7 53253 1044 on 64557 32300
000003 DrwWhrPhiKiii&ijhMfinj IWJ1«0S SF SOD
87/31/2009 M8153 on on 1J6153 VB4J5
21951 on JS» 627.17 000064 Mxttrtm
mm* SF 03 00 0741/2009 twos on on
is/tcn 12354 1,121« on O460n on
000085 Boitwinctftttt 0001/2006 SF 10 00 0701/2009
47710 on on 477n mis 2752 on
16655 31055 000066 I4drt66*tafc 62Q1ffiOQ6 SF
W00 07/3W009 SS13 on on ssm 16077
3215 on 19252 35828 000087 BaACM
B2OV2006 SF 10 00 07/310)09 43457 on 050
43457 12661 2552 on 15153 262.14
krmi,m»* Ml PlfH






 









 













	001 Phoerfc Coal Corporation MOREIRieBdAsMtRepad-aWBaris R*t»fyw anted
Deca*ar31,20Q9 Acamiatsd Depreciation displaygd as of Curort Thru Date. BookstntomaJ
FYEMsrfteDttwnber h*e Etf Ttn NWi ftf»*87 r»fcn
FlMtaWB CarYTD taunt* ToOjAfloiB NtfEtt* sytfc
Co ttmum Dm DM Lb Ml cm Aeatfm T1n<M
Ctf Do* Emm TtmOt nm Vital m
<M.AMAttt»< fOaMMfrOMO ooam V IMagnr D«k Md Bwkcm
OUIWOW SF 10 00 07/3M009 UB894 en on 1J0SBUH
W7jS7 MA on 379.43 67951 000091
OdoftDKor OUHC006 SF 1000 0701/2003 SK9S en on
w&96 2SU0 4M3 on 306.73 54923 00009?
BBctony-Gay 12ff1/2O05 SF 0500 07fl1SXS 23160
ftOO on 293tt win SU5 on 21530 7en
0O0(B3 ftmriMFiiriM 0WDU20OS SF OS0O07SW00!
lion on en 1,25309 883.12 W7-S6 on WflMB
2S241 000097 OtbmBmOi 12W2004 SF M 00
0781/2009 58W0 (LOO on SH» 30601 a.42 on
23543 2S9iJ7 000098 “Kunwi-W 0WM0Q5 SF 10
00 0731/2099 i moo aoo en *\m ituo 2191 en 187,91
22248 000099 teEiinggiAen oanaoos SF
raooojOTaw 2*61 SUB on 24&61 9659 M38 aoo
1W37 135*4 000100 DgMCawn KBOIfflOOS SF
05 00 07G1/2D09 36942 0» en 36M2 28837 on on
332*5 3636 000103 CAD-PngonSatam 02S1C00S SF
03 oo WRvuxa snsos 000 on snw M01* 16U1 on
M69J5 on 000118 CvniUir szmsoos SF os oo
OTatan 1«002 180 on inojs 600M mis on
7211)0 309X12 000177 0«hr Cw fcr To* am« OW1C005
SF 10 00 07)31/2009 100763) 000 on 10576*
4290S2 S1M5 on 4*47*7 s&m 900106 ViiBPnteclcnSoftm
1WW005 SF 03 00 07M2009 82* BOO on 8Z£6
8266 on on BUS 000 000224 DacMfaiiin MdHO(ifcriU59S
MftMIt HPpMrtarHckftria 01(01/2007 5F OJ •) 07/31/3009
1422000 aoo on tamoo 12,M6« 154177 en 15*5843
23057 000226 osmaoos SF osooojffltms i*a aoo
on tSSil 7288 ISM on 8879 4782 DOOMS
Compute «xINrt«crtlralaItfon BMIflOOl SF B3 93W3WO
40X04305 BIO on 40843.75 2609482 7,841.81 on
34J03J.-45 6807J0 000250 SMtBuMMSMfctUwrCBa*
ATM»Ue*«»[CALt-SPK(1i><2| 0M1QO07 SF 0300 07015009
732* 000 on 732/16 467.96 M2/B an t«J8
122.00 000251 teomSBSOfmUotmUMt oaoiaoo? SF 03 00
07/317009 U9Q200 099 on inzn 1,15128 35239 on miF
30BJ83 owes Smt SunaSmkt UwCSM taMtUenw(CW)-SPK(70l3 OJ01/2O07
SF 0300 W3V2MS 732.46 aoo on 73W6 467.96
142.42 on inn tzzn 9W8S3 Morinr-OoMRMr-Flni
02OUN07 SF OS 00 07/31/2009 1/602,72 an on 172
61437 tesn on 80135 801J7 ma* HRftafminkCMM
02)010097 SF 10 00 07O1/2D09 1*900 900 on
1J5TM70 303.74 3tM an 396.11 1,18852 000255
Twmiul Stoic* IMrttrtfcMB LcMtcfUgsStatkUHr 02010007 SF 03 00
07/31/2X9 6XL0Q en am 636JXJ 40633 mm en 52939
KK01 D0O2S6 Ogrt«7*5Sys»fn**iftoP»i* Hontir-PR-MMMt 021010007
SF OS 00 07312009 10&72 (J00 on ma* «W37
18638 on 80145 80137 000257 0qifc.7«Sj3taii»*tinilP«id
MDM>-AaiConMr-Dni 024)1/2007 SF OS 00 0781AOO9 \mn
0.00 an 1882.72 61437 196.98 on 80145 80137
0CO2S8 MtF>nci«onij|itopiKs;pM BMWO07 SF 05 OQ
07/31/2009 20974 u» 003 230*74- 88540 269*7 on
1,15487 1,15187 00055S P*o» Splm -Samunj DCS 100
024)1/2087 SF won oTjUtaw aTTSjso on on sjTia
723J0 22022 on 9(382 243141 AuRM&smctCNI
PmS






 









 












	001 Phoenk Coal Corporation MflrthlyfiadAswtFteport-QAAPBwil
ForfielsctIy9arindtdD6ointo31l2009 toaflyDapdifeplapIasrfCumrtThuDato.
Boofce Internal FYEM««i*D«en*er Sw at Tbu BrfMi)
ohmt« **- *»—UWajJ mum CwYTD AcunO-fl TtMAnn
FttBook SpNo Q> Omattn D* DH Ub D*
cat tofg+in IhnKtt CM Dm, <*»
TnrftOit ntir V*m % SMMlMttNo- 18300-80404040
000260 D*k-FranrOffc«-D*a 02OU2007 SF XI00 07OV2009
94970 CUM ooo 94170 19134 $534 on
237.18 71152 oooat Om-FnrtOllEi-iWni oaotaw
SF 1000 07QV2BB 94070 OJO aoo 94170
18134 S534 on 237.78 71132 on262
Dem-AP-SuS 02OM007 SF 10 00 OTOtflOOS 94870
on aoo 94970 18134 5534 an 237.18
71132 tarn Dm-WOffict-K* oaoifflOB? 8F
»O0O7)31SS09 94870 too aoo 949.70 18134
5534 an 237.18 71132 060264 Da* — EmsMtOCcn-
Gng 02010007 SF io oo oroiraoos 94370 OLOO
aoo 94170 18144 5534 an 237.18 7T132
DOQ265 930) Offic*Owr-0fctSarW»33B 02010907 SF
wnwoioos 232.14 aoo aoo 232.1* 4449
1153 an son 174.12 00O266 02O1/8007
ST WOO 07042009 232.14 OuOO ooo 23214
4449 1333 an 3832 174.12 ORBS
OfceChw-OiaSfirWDSSSO 08016007 SF 1000 0701*2009
232.14 OHO an 232.14 44.49 H53 an
8302 17*12 000268 OfeChw-ObStoWKUl! 0M1ffl0O7
SF tonoTO&on 23Z.M an on 232.14 4*49
1331 aoo 5832 174.12 1100269 akMam-(Xc*9*wmi
ozoiiaou7 SF 1000 071310009 232.14 aoo en
23214 Wfl9 1333 on 5832 174.K 000270
Upop-MHMcEMn 02010007 SF OSnOTOIOIB 1,192.49
030 an l.tffljH 457.12 139.12 an
59024 39325 DOQ271 HP Color FiMr- CF4005* Crtr
UwiCHffcrirSiSBiid smaos? SF OSOOOTflffiOOS M13S2
am an 24116 9BS52 29138 on iawo
U06.82 000272 Oatt-EMSSlOIett-OUAl 03O1O007 SF
1000 09315009 96*07 aoo on 9S4W 176.75
3023 on 23238 73m 000273
Dtt&MSlatOftei-CawlMhy OSOIfiOO? SF MnOTfllffOM 94879
aoo on 948,70 17333 5534 an 22127
71943 000274 OrktCtai-OffiMSUfVlDUaO 08018007 SF
«W87S1/2r« 232.M 00) an 232.14 4256
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	002 Sdioate Mining Company McrihfrFMtatffiopat-GMPBHii fate tealyw«WD*»rt>er3t,
2009 AeaiwilstedDeproda&ntSspiayed as of Current Thru Dda Book-Internal
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ma I6.B1U7 2097.53 teMiaMMtasm Pipl






 









 












	OKSchoateMringCorapffliy UdtNyRad Aart Report-QAAPBcls Farft»iKaly88r«niMD«Mb»31,2009
AcamUated Depr«ciafon displayed as of Cure* Thru Dak Book = Internal FYE
Mortis Decwitter klSw a -m Baghfeg Dhtnuf FjiAg
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0300 07fltaw 1X30900 aoo on w&njn 130,424.17
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07/31J2009 3f4J6249 ooo on 31436449 36,733.*
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1,24933400 on 72JS156 on nm m
l,17Sn2.« he*<.agin cam Pigi2






 









 












	002$choate Mning Company MorthlyR«8dA>MtR«port-GAAPBaji5 Forte feoljwffffad Dooombor
31,2009 Bo<*= Internal FYEM«tl«OBCWtar irSk fit -am
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85? KarauOflSMOwtoOoBr oiwaxs SF lonwaiaw 233,10100
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3WW607&S4 GMMtatM»< «00*0MO41 000062 152 K»wlw047SMC!WlK
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07AV2006 SF os 08 0mm wn ODD aoo
!TO00 yoaoo 58133 an 306133 11,91557
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	002 SchoatoMMng Company ManHjf Find KSMtRtpcrtGAAP Bun
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	002 SchoatB MWng Com pany Monthly Rod At«Raport-QAAP Bute
ftfft»isci)ywrBXJBdD9C8i]iber31,2009
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	009 Phoenix Coal Processing Ftctd Asset SumniiyRflport For the fecM yon
ndtdDunto 31,2009 AocumulitedDBprecialfondspbyasrfCaTenlThmDate Books Internal
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	009 Phoenix Coal Processing RttdAwtSumraijfaport
Rr*lllc«Iliwr«l(WDwrtb»31,2009 AmmfaodDepeciaSooclsptyefl” as of Current Thru
Data 8<x* = Internal FYEMwtis Decanter hStt Ert Tin
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an on asnia 58197 W*an on 2«7«
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SJ44JI 5tUl 22428 on gain 3*43.78 OOOOffl
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6,116,181.74 895OT27 362,40627 on 1558,17954
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UTsnon 34020433 mS41J6 on 443.749.B
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	007 OW Uxsty Equipment Compan RxBdA»e(SufflWfyB«port-GMP For the fiwijflarifidsdDwntffJt,
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	007 Old liberty Equipment Compan Find AwtSunwy flaport- GAM*
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	007 CXd Liberty Bpipnwrt Compan RadAwlSiCTMiyRapcxt-QMP For the SsalywrindBdOmnilMf
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	007 OH liberty EqifcwrtCompan FtodAiwtSurminyRaport-GAAP Book= Internal FYEMorti
December S*No Co om Dm M a m
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	007 Old liberty Eqdpmert Corapan Bad Ao* SumwyRifat-GMP For tMhcalywr ended D«8ntw31,2009
AcoriiiatedDeptBciatkxidBplayBdasofCiiiTlwD 8wk=internal FYE Mat**
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	017 Renfro Equipment Far1haftnlya««KMD«o«iiMr31r2008 Accunulaled
Depreciation displayed ss of Curort Thw Data Book* Internal FYE Mo*
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SaiMlir(M«M«aiNp(M«HoM),9»aMflABMiw






 









 
















 









 












	014 C 4 RCoal Company For1htpH{odandBdJulr31,an9 Book=Internal FYE Monti»
December taSw Eft THu BltJaAj Dtemtf Mrtam
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0.00 0.00 30,00000 1»00 1,75000 OjOO
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HaulTtuek $4*01715 0W1J20OB SF 10 CO 07fll/OT8 45,0COJ»
M8 on 4S/WM0 WRflO ?525J>0 000 4S»i»
405COJX 000007 403 1M4CH777*MIH(wl(*UTn«* 14*01414
OMV2006 SF 10 00 07131)5009 4OBX.00 CLflO
OjOO 40,00000 1JKJS? 2£&33 <wo 4jooaoo
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9+ 07J3KB8 WjOOOJM IM» am •vioaoo 41667 37222
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	014 Cifl Coal Company Fortho pariodttiM July 81,2009 Book» Internal
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	014C4RCoalCompany UortNyRndtestRsport-QAAPBads For the period enfcdJiiy 31,2009
Botf=Memal FYE Morth Oeoertftw S*No Co Dm***
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	004 Crtteoden Courty Coal UonWj FtelAwetSummBy- GAAP Basis For
titfccsljfesrsniMDtosfltierSI, 2009 Accumulated DsptBoatJon disptayad as of Current Tlmi
Date. Book=Wsfiial FYEMorth=Decemb« BjJINQ Qj OWtq*PI hS* H
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SBJSt 003 1411.75 ZAZM5 000003 LyiPinspiioBit&resinJoni M41US
MfETS Lest Rowing Vafats 144&00 OflO 000 M440M
147434 IS566 OSS W»* S 1140100 NetTom 1444000 aoo ouo
1444001 W7&34 96SJ6 CO] JS»M $ H40U0 QmtfM
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tssa aoo M3M0 $11501.00 MSnnrfToM ummo
I aoo 14,84085 MW. «sa om in
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	(XMCrittendenCotffyCoal ferity Rnd AmtSumtty-6MP Bail Hi Iwliutpii witlml Dwsrtur 31,2009
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9y*n*.E*<**i






 









 








Schedule 2.1(b)(ii)




AT Coal Leases 


1. See attached list of AT Coal Leases.







5









 












	Schedule 2.1(b)(ti) 5Phoenix Coat Surface and Coal Leases Mine
5lessee/Assignee Lessor Type Date Comments and Recording Info
Star Evergreen Mineral Co., inc. Peabody Development Company, LLC &
Peabody Coal Company, LLC Surface Mining Rights 21-Nov-05 Star
Evergreen Mineral Co., Inc. Peabody Development Company, LLC & Peabody Coal
Company, LLC Partial Assignment of Mining Rights 30-Sep-OS Star
Evergreen Mineral Co., Inc. Peabody Coal Company, LLC/Terteling
Partial Assignment & Assumption of Leasehold Estate 30-Sep-05 Recorded at DB
514/531 Star Evergreen Mineral Co., Inc. Peabody Development
Company, LLC/Terteling Partial Assignment & Assumption of Leasehold Estate
3Q-Sep-05 Recorded at DB 514/506 Vogue North Evergreen Mineral Co.,
Inc. Peabody Development Company, LLC & Peabody Coal Company, LLC Surface
Mining Rights 21-NOV-05 Vogue North Evergreen Mineral Co.,
inc. Peabody Coal Company, LLC/Terteling Partial Assignment & Assumption of
Leasehold Estate 30-Sep-05 Vogue North Evergreen Mineral Co.,
inc. Peabody Coal Company, LLC/Terteling Partial Assignment & Assumption of
Leasehold Estate 3Q-Sep-05 Vogue North Evergreen Mineral Co.,
inc. Peabody Coal Company, LLC Surface Mining Rights 21-Nov-GS
River Queen Evergreen Mineral Co., inc. Peabody Development Company,
LLC & Peabody Coal Company, LLC Grant of Surface Mining Rights 21-Nov~05
Brier Creek Evergreen Mineral Co., . inc. Peabody Development
Company, LLC & Peabody Coal Company, LLC Easement Agreement 21-Nov-OS
Brier Creek Evergreen Mineral Co., Inc. Peabody Development Company,
LLC Martha F. Rogers, widow; Martha R. Poulos & George Poufos, her husband; T.G. Rogers, Jr. & Jean
M. Rogers, his wife; J.l. Rogers, Ml & Gloria Rogers, his wife; Partial Assignment and
Assumption of Leasehold Estate 21-Nov-OS Rogers/Cherry Hill Evergreen
Mineral Co., Inc. Sue R. Grable & William J. GrabEe, her husband Coai
Mining Lease 30-Nov-65 Recorded at DB 252/343 Rogers/Cherry Hill
Evergreen Mineral Co., Inc. Rogers Brothers Coai Mining Lease
(amendment) 26-Oct~02 No confirmation on recording status Rogers/Cherry Hill
Evergreen Mineral Co., Inc. Peabody Development Company, LLC Partial
Assignment & Assumption of Leasehold Estate 21-NQV-G5 Sacramento (McLean)
Evergreen Mineral Co., , Inc. Richard Reno & ieanette Reno, husband and
wife Coal Mining Lease 2-Feb-96 Recorded at D8 135/4 Howard H. Revlett,
Jr. & Elaine J. Reviett, h&w; Dora R. Harris; Larry E. Stewart & Sacramento (McLean)
Evergreen Mineral Co., . inc. Virginia R, Stewart, h&w; Martha fay R.
Anderson Coal Mining Lease 1-Jui~96 Sacramento (McLean)
Evergreen Mineral Co., Inc. R. Douglas Wood and Sandra B. Wood, h&w
James A. Wells and Connie Sue Wetis, his wife (99 Shamrock Dr., Madisonviiie, Coal
Mining Lease l-Jut-96 Memos not recorded to keep private this leasehold area,
until Thompson Creek Evergreen Mineral Co., , Inc. KY
42431) James A. Welis and Connie Sue Welis, his wife (99 Shamrock Dr., Madisonviiie,
Surface & Coat 20-May-09 ready for permitting Memos not recorded to keep
private this leasehold area, until Thompson Creek Evergreen Mineral Co.,
        . Inc. KY 42431) Surface only 20-May-09 ready for permitting
Thompson Creek Renfro Equipment Inc. Kevin Huh (3389 Shady Grove Rd.,
Clarksviite, TN 37043; Surface & mineral 26~Aug-05 Recorded at DB 517/29
Memos not recorded to keep private this leasehold area, until Thompson Creek
Renfro Equipment Inc. Captain and Dana Inc. (515 Gishton Rd., Central City, KY
42330) Sublease Agreement to surface mine coal 21-Aug-07 ready for
permitting Memos not recorded to keep private this leasehold area, until Thompson
Creek Renfro Equipment inc. Captain and Dana Inc. (S15 Gishton Rd., Central City,
KY 42330) Mineral lease agreement 2i-Aug-07 ready
for permitting Memos
not recorded to keep private this leasehold area, until ready for permitting; currently amending to
include surface mineable coai; Lessors still have amendment documents in Covington
Bandy Evergreen Mineral Co., , inc. Howard Covington, Mary Covington,
Morris Bandy, and Carolyn Bandy Coal Lease Agreement (Underground only) 23-Jun-Q9
review at attorneys office Briar Hill/Radio Hili Evergreen Mineral Co.,
inc. Taimage G. Rogers et ai. (aka Rogers Bros) Surface Coal Lease
4-Dec-47 Briar Hill/Radio Hill Evergreen Mineral Co., , inc.
J.L. Rogers Jr. etal. {aka Rogers Bros) Supplemental tease 8-Jan-57
Briar Hilt/Radio Hil) Evergreen Mineral Co., ,lnc. Taimage G. Rogers
Jr. et al. (aka Rogers Bros) Extension of Lease 6-Dec-62 Briar
Hill/Radio Hii Evergreen Mineral Co., , Inc. Martha F. Rogers, etal (aka
Rogers Bros) Supplemental Lease l-Jan-66 Briar Hill/Radio Hill
Evergreen Mineral Co., , Inc. Sentry Royalty Company Strip Coal
Mining Lease 20-Oct-67 Short Form of Lease recorded at DB 261/22S Briar
Hill/Radio Hili Evergreen Mineral Co., , Inc. AMAX Inc. release to
Rogers Bros. Partial Release of Coal Mining Lease 23-Sep-86 Briar
Hill/Radio Hil Evergreen Mineral Co., ,lnc. AMAX inc. assigns to
Meadowlark, inc. Assignment & Assumption Agreement 27-Aug-87 Briar
Hill/Radio Hil Evergreen Mineral Co., ,inc. Meadowiark, Inc.
Surface & Mineral Lease Agreement 16-Nov-99 Memo recorded at DB 481/32 Briar
Hill/Radio Hill Evergreen Mineral Co., , inc. Lynx, Inc.
Assignment & Sublease Agreement 22~Jan-£l Briar Hill/Radio Hili
Evergreen Mineral Co., , Inc. Meadowiark, Inc. Corrected Surface &
Mineral Lease Agreement 5-Apr-01 Memo is recorded at DB 482/213 Briar Hiit/Radio
Hili Evergreen Mineral Co., ,lnc. Meadowlark, Inc. Corrected
Assignment & Sublease Agreement ll-Apr-01 Memo is recorded at DB 482/213 Briar
Hill/Radio Hil! Evergreen Mineral Co., , inc. Meadowiark, inc.
Corrected Memorandum of Assignment & Sublease Agreement 12-Apr-01 Not
recorded; Notarized and copy in fife, but no “prepared by” Briar Hill/Radio Hili
Evergreen Mineral Co., , inc. Lynx, Inc. Amendment to Assignment and
Sublease Agreement I0~Qct-Gl section on this document Briar Hill/Radio Hili
Evergreen Mineral Co., , Inc. Rogers Brothers Settlement St Access
Agreement l~Sep-Gl Briar Hilt/Radio Hil; Evergreen Mineral Co.,
        , inc. Meadowiark, Inc. Amendment No. 1 to Surface and Mineral Lease
Agreement l-Jan-03 Not recorded; incomplete and only have faxed copy Briar
Hill/Radio Hill Evergreen Mineral Co., ,lnc. Rogers Brothers
Notice of Extension of Lease 25-Feb-04 Briar Hill/431 Evergreen
Mineral Co., , Inc. Crescent Coal Company; Justin Potter & Vaiera Blatr Potter,
his wife Royalty Agreement 3Q-Jul-55 In house; not sure if recorded
Briar Hill/431 Evergreen Mineral Co., .Inc. Potter Grandchildren,
LL.C. Modification of Agreement 4-Apr-01 This document was listed as a
reference only; this option was never exercised within the given time period and therefore,
Briar Htil/431 Evergreen Mineral Co., , Inc. Lexington Coal Company,
LLC & its wholly owned subsidiary, LLC Kentucky, LLC Option for Surface and Mineral Lease
and Sublease Agreement 7-Jun-06 lease is not valid. See valid lease below. Briar
Hill/431 Evergreen Mineral Co., , inc. Lexington Coal Company, LLC &
its wholiy owned subsidiary, LLC Kentucky, LLC William Thomas Dockins, individually, and as Sole
Trustee f/b/o Karen Estelte Surface & Mineral Lease & Sublease Agreement
30-Jun-09 Not recorded; no “prepared by” section Back in Black Evergreen
Mineral Co., , inc. Dockins; and Brenda Dockins, his wife Coal Mining
Lease (coai only; no surface ownership) 29-Jun~Q9 Memos fully executed and will be
recorded soon. Back In Black Evergreen Mineral Co., ,lnc.
Florence Jane McPherson, and Virgil McPherson, her husbanc Coal Mining Lease (coal
only; no surface ownership) 29-Jun~09 Memos fully executed and will be recorded soon.
Back
in Black Evergre






 









 












	Mine Lessee/Assigneep Lessor Type Date Comments and
Recording info Re-leasing after preliminary title showed Lessors had partial coal
ownership in leased tracts; will record once new Geibel Evergreen Mineral Co.,
Inc. Lisa f-airchild & John Fairchild Hi (297 Baggett Ln., Greenville, KY 42345}
Surface ONLY 5-Mar-09 documents are executed. H.C. Epley and Betty Epley, h&w
James K. Putman & tlene A. Putman, Trustees of Geibel Evergreen Mineral Co.,
inc. the Putman Family Trust, Linnie Putman (widow) James K. Putman and ilene A.
Putman, Trustees of the Putman Family Trust; Surfaces Minerals 7~Nov-05
Geibel Evergreen Mineral Co., inc. Unnie Putman; Sondra Epiey; Kevin Epley &
Melissa Epley, his wife James K. Putman and flene A. Putman, Trustees of the Putman Family
Trust dayed 09/08/1999; Linnie E. Putman, a widow; Sondra C. Epley, a single woman;
Amendment/Term Extension and Renewal Agreement (#1) 18-Jan-Q8 Ail documents are fully
executed an in-house; however, the orignal lease and 1st amendment were poorly executed by Midsouth
Energy; likewise, we do not want to disclose these Geibel Evergreen Mineral Co.,
inc. Kevin Epley & Melissa Epiey, his wife Amendment to Lease (#2)
l~Jul~09 royalty terms to the public and no memo was executed w/ Geibel
Evergreen Mineral Co., Inc. Midsouth Energy, Inc. Assignment of Coal
Lease 2G~iui-09 Lessors and Midsouth Energy KO Phoenix Coal
Corporation Claude W. Lee & Alicetine Lee, his wife Surface & Minerals
7-Aug-09 Memo recorded at DB 543/956 KO phoenix Coat Corporation Tom
Eubanks (2378 S.R. 189 South, Greenville, KY 42345; Surface & Minerals 31-May~07
pjeetj to execute memos of lease on these two leases and have them recorded. Al! other
leases, with the exception of Simms KO Phoenix Coat Corporation Jeffrey
L. Eubanks (196 Luzeme-Depoy Rd., Greenville, KY 42345) Donald R. Lear & Judy Lear, his
wife (2615 Greens Chapel Rd., White Plains, KY Surface & Minerals 31-May-Q7
tease, have had memos recorded. KO Phoenix Coal Corporation 42464)
(l/4th interest) Ella J. Winn & Donald Wtnn, her husband (11734 State Route 175
South, Surface & Minerals 12-Sep-£5 KO Phoenix Coal
Corporation Greenville, KY 42345) (l/8th interest) Martha L Blass (11650 State
Route 175 South, Greenville, KY 42345} (l/8th Surface & Minerals 12-Sep-05
KO phoenix Coal Corporation interest) Fiowel (William R.) King
(12055 State Route 175 South, Greenvilie, KY 42345) Surface & Minerals
12-Sep-05 KO Phoenix Coal Corporation (l/8th interest)
Surfaces Minerals 12~5ep-05 KO Phoenix Coal Corporation
Ruby M. Smith (4899 State Route 70 E, Drakesboro, KY 42337) (l/8th interest) William L Lear &
Sadie L. Lear, his wife (5993 Hatchett Mill, Spottsvilfe, KY Surface & Minerals
12~Sep-05 KO Phoenix Coai Corporation 42458} (l/Sth interest)
Herbert W. Lear & Ilene L Lear, his wife (11903 State Route 175 South, Surface &
Minerals 12-5ep-05 KO Phoenix Coal Corporation Greenville, KY
42345) (l/8th interest) Surface & Minerals 2Q~Aug-G5 Need to execute
memo of lease and have it recorded. All other leases, with the exception of Eubanks leases, have
had memos KO Phoenix Coal Corporation Jon Simms & Crystal Simms (565
Kennedy Rd., Greenville, KY 42345) Surface & Minerals 9-Oct-06 recorded.
KO Phoenix Coal Corporation Loren R. Lee & Kay Lee, his wife (193 Stoneybrook
Dr., Greenwood, IN 46142) Surfaces Minerals 6-Mar~06 KO Phoenix
Coal Corporation Donald Lee & Ellen Lee, his wife (929 S. 250 W., Hebron, IN 46341
Surface & Minerals 30-Aug-05 Geibel Lumber Co., Lydia Geibel by Jon Geibel,
POA and Jon Geibel, Agent for the Geibel Renfro Equipment inc. Geibel
Family (P.O. Box 200, Greenville, KY 42345) Geibel Lumber Co., James Tardio, Executor of
the Estate of Lydia Geibel, and Jor Surface t 24-Aug-05 Lease recorded at DB
517/35 Amends 08/24/2005 lease; no “prepared by” section; not Geibel
Renfro Equipment Inc. Geibel, Agent for the Geibel Family {P.O. Box 200, Greenville,
KY 42345) Richard T. Williams & Tonya L Williams, his wife (631 Pallet Mill Rd., Greenville,
Amendment to Lease/Sublease Agreement ll-Nov-08 recorded Geibel
Renfro Equipment Inc. KY 42345} Gerald A. tiles & Judith Ann Liles, his wife
(69 Shady Acres Ln., Greenville, KY Surface 25~Jun~G7 One document; only
have a copy in lease file and believed to Geibel Renfro Equipment Inc.
42345) Surface 3-Aug-06 be recorded but no confirmation; no “prepared by”
section on Geibel Renfro Equipment inc. Joseph P. Liles (3111 4th St.,
Apt. 320, Santa Monica, CA 90405! Gerald A. Liles & Judith Ann Sites, his wife (69 Shady
Acres Ln., Greenville, KY Surface 3~Aug-06 this document; One document;
only have a copy in lease file and believed to Geibel Renfro Equipment inc.
42345) Surface & Minerals 13-Sep-06 be recorded but no confirmation; no
“prepared by” section on Geibel Renfro Equipment Inc. Joseph P. Liles
(31114th St., Apt. 320, Santa Monica, CA 90405; Surface & Minerals 13-Sep-06 this
document; No “prepared by” section, but believed to be recorded; Geibel
Renfro Equipment Inc. James H. Edwards (1266 S.R. 831, Greenville, KY 42345}
Surface 7-Sep-06 however, no confirmation on recording No “prepared by”
section, but believed to be recorded; Jessup Renfro Equipment Inc. Terry
Adkins (737 Blame St., Sand Coulee, MT 59472) Surface & Minerals 2-Dec-05
however, no confirmation on recording No “prepared by” section, but believed to be
recorded; Jessup Renfro Equipment Inc. Hilltop Haven, Inc. (P.O. Box
726, Burkesville, KY 42717} (Alma Jessup-President) Surface and Minerals 30-May-01
however, no confirmation on recording Short Form Memo of Lease recorded at DB 543/396;
original lease was 38 pgs and incorrectly leased Anna Lorainne Cundiff as Lessor
(should have been George Rudy Cundiff & wf); Memo corrected this and reaffirmed leasehold
interest in R & L Winn Back in Black R&L Winn, inc. Anna Loraine
Cundiff, an individual Surface and Coal 28-Feb-Q8 (Purvis Tract-92 ac)
Recorded at DB 521/74 & re-recorded at DB 521/237 (Jamison Back in Black R&L
Winn, Inc. Anna Loraine Cundiff, an individual Surface and Coai 7-Jun-06
Tract-144.093 ac} Recorded at DB 521/68 & re-recorded at DB 521/227 Back in
Black R&L Wtnn, Inc. Anna Loraine Cundiff, an individual Surface Lease
only 7~Jun-06 (Kirkpatrtck/Beech Creek Tract-103 ac) Lease in-house but no
confirmation available on recording Back in Black R&L Winn, Inc.
Kirkpatrick-Beech Creek Mining Surface and Coal 10-Sep-01 status
(Kirkpatrick/Beech Creek Tract-103 ac) Back in Black R&l Wtnn, Inc. C&R
Coal Company, inc. Sublease Agreement 20-Oct-06 In house document and was not
recorded Back in Black R&L Winn, Inc. Tom McDonald Heirs etal.
Surface & Coal (reclamation only) 15-Apr~G3 Back in Black R&L Winn,
Inc. Tom McDonald Heirs etal. (Billy & Patsy Kirtley) Surface & Coai (reclamation
only) 31-Juf-04






 









 












	Mine Lessee/Assignee Lessor Type Date Comments and
Recording Info Lease in-house but no confirmation available on recording Back in
Black R&L Winn, Inc. Bobby Dukes & Jonnie Dukes, h&w {see notes for original
Lessor information) Sublease Agreement 23-Qct-03 status Back in
Black R&L Winn, Inc. John Wesley Horn, single Surface Mining Lease
Agreement 24-May-06 Back in Black R&L Winn, Inc. Marjorie
Dukes, unmarried Surface Mining Lease Agreement 23-Oct-03 Lease in-house
but no confirmation available on recording Back in Black R&L Winn, inc.
Glendell Horn and Martha Horn, h&w Surface Mining Lease Agreement 8-Dec~03
status Back in Black R&L Winn, Inc. Kenneth R. Dukes, unmarried
Surface Mining Lease Agreement 13~Jan-G4 Back in Black R&t Winn,
Inc. Bobby Dukes and Jonnie Dukes, his wife Surface Mining Lease Agreement
23-Oct-Q3 Rose France R&L Winn, Inc. Shirley A. Adler (SS#
XXX~XX~6237) Roger A. France (SS# XXX-XX-5217) & Ellen L. France (SS# XXX-XX-2104);
Ellen Surface Lease Option 26-Mar-08 Rose France R&L Winn,
Inc. France signed, but not listed as Lessor at front of lease John K. Vaught,
a/k/a Kenny Vaught & Lisa Michelle Vaught, his wife (1704 S.R. Surface Lease Option
ll-Jan-08 Vaught R&L Winn, Inc. 1379, Central City, KY 42330}
Martha Rodgers Haas, Trustee of the Martha Rogers Haas 1996 Revocable Trust Talmage G. Rogers,
Jr. & Jean M. Rogers, his wife; James L. Rogers, III Surface 4~Nov~08
Vaught R&L Winn, inc. Testamentary Trustee under the Will of James L. Rogers
jr. Coal Mining Lease Agreement 17-JUI-06 R&L Winn; Back in
Black R&L Winn, Inc. W. Edwin Bandy and Exie Bandy, h&w Surface
Mining Lease Agreement 22-Dee-G3 Legal not plottable R&L Winn; Back
in Black R&L Winn, fnc. W. Edwin Bandy and Exie Bandy, h&w
Surface Mining Lease Agreement 22~Dec~G3 Glendell R. Horn Property
(surface) R&L Winn; Sack in Black Phoenix Coal Corporation Rudy
Cundiff, an individual Memorandum/amendment 27-Sep~Q6 reference, coal
lease should be Exhibit B J Rogers & R&6 Leasing assign interest to R L Winn for both
Rose-France & Vaught R&L Winn, inc. R&G Leasing, LLC amd Jonathan L
Rogers 31-Jul-G8 Rose-France and Vaught Rogers/Cherry Hill
Ayrshire Collieries Corp. Martha F. Rogers, widow; Martha R. Poulos & George Poulos,
her husband; T.G. Coal Mining Lease 11/30/1965 1/1/1986 (renewed *05)
reference to Peabody Development Reserves Rogers, Jr. & Jean M. Rogers, his wife;
J.L Rogers, 111 & Gloria Rogers, his wife; Sue R. Grable & William J. Grable, her husband
(effective 01/01/1966} Company on 10/26/2005 extended this tease to 01/01/2019
(DB unknown-unrecorded); assignment of #11 & #12 coal to Charoiais at DB 516/34







 









 








Schedule 2.1(b)(iii)




Real Property Rights


1. See attached list of real property rights.



2. Reference is made to the Fleeting Rights Agreements with each of Doug and Norma Everly and James
and Sue Markwell, as more particularly described on the attachment to Schedule 2.1(b)(vii), which
are incorporated by reference in this Schedule 2.1(b)(iii).






6









 







Schedule 2.1(b)(iii)




	 	 	 
	County	 	Description
	Muhlenberg County KY

	 	Cleaton Shop Property: DB 541/363 — Deed of Conveyance dated 02/05/2009 between Jackie L. Brewer and Cathy L. Brewer, as Co-Trustees of
the Jackie L. and Cathy L. Brewer Trust, U.T.D. March 3, 2004 to Phoenix Coal Company; 5.001 acres located on Hwy. 1380 (also known as the
Cleaton Cut-off Road);
	 
	 	 
	 

	 	Brier Creek Property: DB 516/1 — Deed of Conveyance dated 11/21/2005 between Peabody Development Company, LLC (Grantor) AND
Charolais Corporation (Grantee). All of the Grantor’s right title and interest in the surface estate only on the following: 100% ownership in 497
acres and 50% ownership in 91 acres, as shown on Exhibit A as Brier Creek #11 Ug., and further described in Exhibit B by legal description.
Further assigned to Evergreen Minerals from Charolais Corporation dated 01/01/2007 as shown in our Closing Documents and recorded in DB
525/1;
	 
	 	 
	 

	 	Brier Creek Property: DB 515/790
— Deed of Conveyance dated 11/21/2005 between Peabody
Development Company, LLC & Peabody Coal
Company, LLC (Grantors) AND Charolais Corporation (Grantee). Brier Creek — #11 Seam Only — as conveyed in DB 398/37 as follows: 1/2
interest in the #11 in the following tracts: 61 ac & 109 poles & 12 ac & 16 poles +/-, less 50.25 ac, 35 ac, 5.06 ac, and 2 ac & 22 poles; T5-117
ac +/-; T16- 5.06 ac +/-; T19- 50 ac +/-; T21- 372 ac +/-; 3 ac +/-; Further assigned to Evergreen Minerals from Charolais Corporation dated
01/01/2007 as shown in our Closing Documents and recorded in DB 525/1 in Muhlenberg Co KY
	 
	 	 
	 

	 	Brier Creek Property: DB 516/391 — Deed of Confirmation (and Correction): Dated 12/14/2005 between Peabody Development Company, LLC
& Peabody Coal Company, LLC (Grantors) AND Charolais Corporation (Grantee). Brier Creek — #11 Seam Only — as conveyed in DB 398/37 as
follows: 1/2 interest in the #11 in the following tracts: 61 ac & 109 poles & 12 ac & 16 poles +/-, less 50.25 ac, 35 ac, 5.06 ac, and 2 ac & 22
poles; T5-117 ac +/-; T16- 5.06 ac +/-; T19- 50 ac +/-; T21- 372 ac +/-; 3 ac +/-; Further assigned to Evergreen Minerals from Charolais
Corporation dated 01/01/2007 as shown in our Closing Documents and recorded in DB 525/1 in Muhlenberg Co KY
	 
	 	 
	 

	 	River Queen Property: DB 515/790 — Deed of Conveyance: Dated 11/21/2005 between Peabody Development Company, LLC & Peabody Coal
Company, LLC (Grantors) AND Charolais Corporation (Grantee). All of Grantor’s right title and interest in all of the coal and coal mining rights
and privileges in and to the following lands: River Queen Area — #11 & #12 Seams Only — as conveyed in DB 398/37 as follows: Only that
portion of the following described property that lies south of a
point 50, from the centerline on the ROW of the River Queen RR and only that
portion of the same property lying north of the north ROW of U.S. Hwy. 70: 65 ac +/- Note: Deed of Confirmation & Correction found at DB
516/391, amending legal for River Queen; Further assigned to Evergreen Minerals from Charolais Corporation dated 01/01/2007 as shown in
our Closing Documents and recorded in DB 525/1 in Muhlenberg Co KY
	 
	 	 
	 

	 	River Queen Property: DB 516/391 — Deed of Confirmation (and Correction): Dated 12/14/2005 between Peabody Development Company, LLC
& Peabody Coal Company, LLC (Grantors) AND Charolais Corporation (Grantee). River Queen Area — #11 & #12 Seams Only — as conveyed in DB
398/37 as follows: Only that portion of the following described
properties that lies south of a point 50, from the centerline on the ROW of the
River Queen RR and only that portion of the same property lying north
of the north ROW of U.S. Hwy. 70: Tract1: 65 ac +/-; Tract 4
(Designated as N-23): 59.5 ac +/-; Further assigned to Evergreen Minerals from Charolais Corporation dated 01/01/2007 as shown in our
Closing Documents and recorded in DB 525/1 in Muhlenberg Co KY
	 
	 	 
	 

	 	Vogue North Property: DB 516/391
— Deed of Confirmation (and Correction): Dated 12/14/2005 between Peabody Development Company, LLC & Peabody Coal Company, LLC (Grantors) AND Charolais Corporation (Grantee). An undivided 1/2 interest in the following: 263 acres +/-;
Was
originally supposed to be conveyed in DB 515/790, but was erroneously omitted from that deed, so it was conveyed in this deed.
	 
	 	 
	River Queen

	 	Evergreen Mineral Co. Inc. Deed of
Conveyance (Coal Mining Rights) Nov 12, 1995 Peabody Development Company, LLC & Peabody Coal
Company, LLC
	 
	 	 
	River Queen

	 	Evergreen Mineral Co., Inc. Deed of Confirmation (and Correction) 12/14/2005 Peabody Development Company, LLC & Peabody Coal
Company, LLC
	 
	 	 
	Brier Creek

	 	Evergreen Mineral Co., Inc. Deed of Conveyance (coal mining rights) 11/21/2005 Peabody Development Company, LLC & Peabody Coal
Company, LLC
	 
	 	 
	Brier Creek

	 	Evergreen Mineral Co., Inc. Deed of Conveyance (coal mining rights) 11/21/2005 Peabody Development Company, LLC
	 
	 	 
	Brier Creek

	 	Evergreen Mineral Co., Inc. Deed of Confirmation (and Correction) 12/14/2005 Peabody Development Company, LLC & Peabody Coal
Company, LLC
	 
	 	 
	McLean County KY

	 	Island Dock Property: 56.691 ac +/- as shown in DB 172/310 in closing documents; dated 01/01/2007 from Charolais Corporation to Phoenix
Coal Processing Co., LLC;
	 
	 	 
	 

	 	Island Dock Property: 15.92 ac +/- as shown in DB 172/304 in closing documents; dated 01/01/2007 from Donald & Betty Bowles, h&w to
Phoenix Coal Processing Co., LLC;
	 
	 	 
	 

	 	Island Dock Property: Assignment of Powerline Easement as shown in DB 172/324 in closing documents; dated 01/01/2007 from Charolais
Corporation to Phoenix Coal Processing Co., LLC;
	 
	 	 
	 

	 	Island Dock Property: Assignment of Fleeting Rights as shown in DB 172/328 in closing documents; dated 01/01/2007 from Charolais
Corporation to Phoenix Coal Processing Co., LLC.






 









 






Schedule 2.1(b)(iv)




AT Other Leases


1. See attached list of AT Other Leases.




7









 












	AT Other Leases TypDotlmm Lessor lassM Term
Lass* Date Renewal Data Gross Acres Notas Tenant — Rentier
Lab Chatharine Fowler Carol Brown Uiry Brown Mary&reenwatt Oarreft Qmmmak DawdCrow*
ftaglna Crowe Phoenix Coat Prootiiing 3yn l-Jul-07
1-Jul-1G EtuMnj & sa acres SCQ-DQ/month Tenant — Rent for
Office Ron Sanders Phoenix Coat Corporation 1 yr* Htto renwttal
l-Jan-07 Baiting office spates 460000/1*100*






 









 








Schedule 2.1(b)(v)




AT Coal Sales Agreements


1. See attached list of AT Coal Sales Agreements.





8









 









	Oxford Mining Company, LLC, Phoenix Coal Inc., Phoenix Coal Corporation, and Phoenix
Newco, LLC
Acquisition Agreement Schedule
Schedule 2.1 (b) (v)
AT Coai Sales Agreements
Original Contract Date Contract
Amendment Date
(if applicable) Termination Date Seller Buyer
12/31/2007 12/31/2011 Phoenix Coal Corporation and Charolais Coal
Sales, LLC Western Kentucky Energy Corp.
3/1/2006 12/31/2009 R & L Winn, Inc. Western Kentucky
Energy Corp. and WKE Station Two Inc.
9/5/2007 7/28/2009 12/31/2012 Charolais Coal Sales,
LLC Duke Energy Kentucky, Inc.
1/1/2008 2/27/2009 12/31/2009 Phoenix Coal
Corporation Duke Energy Ohio, Inc.
I 8/1/2007 1/1/2009 12/31/2010 Phoenix Coal Corporation and
Charolais Coal Sales, LLC Kentucky Utilities Company
i 1/1/2007 12/31/2010 Charolais Coal Sales, LLC, Charolais
Coal No. 1, LLC, and Charolais Coal Resources, LLC Louisville Gas & Electric Company and
Kentucky Utilities Company








 









 








Schedule 2.1(b)(vi)




AT Coal Purchase Agreements


1. See attached list of AT Coal Purchase Agreements.






9









 












	Oxford Mining Company, LLC, Phoenix Coal Inc., Phoenix Coal Corporation, and Phoenix Newco, LLC
Acquisition Agreement Schedule
Schedule 2.1 (b) (vi)
AT Coal Purchase Agreements
Original Contract Date Contract Amendment Date Termination Date
Seller Purchaser
11/30/2007 7/6/2009 Life of Covol Reserves Covol Fuels No. 2, LLC
Charolais Coal Sales, LLC
6/23/2009 12/31/09, extension available to 12/31/10 The American Coal
Company Charolais Coal Sales, LLC





 









 








Schedule 2.1(b)(vii)




AT Other Contracts


1. See attached list of AT Other Contracts.



2. Reference is made to Item 2 on Schedule 4.7(e) relating to the Option for Purchase of Surface
Rights, which is incorporated by reference in this Schedule 2.1(b)(vii).



3. The following agreements shall also be AT Other Contracts:




     (a) Coal Representation Agreement dated March 30, 2006, by and between Edmonson Fuels, LLC
and R&L Winn, Inc.



     (b) Overriding Royalty Agreement dated August 26, 2005, by and between Edge River Farms, LLC
and Renfro Equipment, Inc.



     (c) Overriding Royalty Agreement dated July 31, 2008, by and among R&L Winn, Inc., Randy
Garris and Jonathan L. Rogers.



     (d) Overriding Royalty Agreement dated July 31, 2008, by and among C&R Coal, Inc., Howard
Covington and Jonathan L. Rogers (which is also referenced on Schedule 2.1(c)(vi)).



     (e) Cooperative Agreement, dated May 27, 2009, between the Department of Highways,
Transportation Cabinet, Commonwealth of Kentucky and Phoenix Coal Corporation.



10









 









	Oxford Mining Company, LLC, Phoenix Coai Inc., Phoenix Coal Corporation, and
Phoenix Newco, LLC Acquisition Agreement Schedule Schedule 2.1 (b) (vii) AT
Other Contracts
Original Contract Date Termination Date Phoenix Party
Second Party Description
10/31/2007 10/31/2012 Phoenix Coal Processing, LLC Doug Everly and
Norma Everly Fleeting Rights Agreement at Island Dock — Additional space for barge
fleeting at dock
9/12/1995 Until dock is no longer used Phoenix Coal Processing, LLC
James Markwell and Sue Markwell Fleeting Rights Agreement at Island Dock — monthly
wheelage paid of $0.05 per ton of coal loaded at dock
1/1/2008 12/31/2010-
automatically
renewing for 1 year
terms, unless
terminated Phoenix Coal Corp. Heritage Petroleum LLC Diesel Fuel Supply
Agreement
2/27/2009 02/27/2010-month to month thereafter,
unless terminated Phoenix Coal Corp. Allied Security LLC Security
Service Agreement
4/15/2009 10/15/2009 Phoenix Coal Corp. John Hedges Independent
Contractor Agreement -Landman Services
Heritage Petroleum Fuel Purchase Contracts, entered into with Phoenl Ix Coal Corporation
Description Contract Dates Gallons Rate per Gallon
Heritage Contract 1 AUG — DEC 2009 210,000 $ 3.2080
Heritage Contract 2 #
111808 (ULS Dyed) AUG — DEC 2009 420,000 2.2660
Heritage Contract 7 AUG — DEC 2009 420,000 1.6600
Heritage Contract 1 JAN-MAR 2010 126,000 1.8980
Heritage Contract 2 JAN 2010 42,000 2.2620
Heritage Contract 2 FEB2010 42,000 2.2700
Heritage Contract 2 MAR 2010 42,000 2.2890
Heritage Contract 2 APR 2010 42,000 2.3150
Heritage Contract 2 MAY 2010 42,000 2.2900
Heritage Contract 2 JUN2010 42,000 2.3420
Heritage Contract 3 APR 2010 42,000 2.3300
Heritage Contract 3 MAY 2010 42,000 2.3390
Heritage Contract 3 JUN2010 42,000 2.3490
Heritage Contract 4 JAN 2010 42,000 2.1350
Heritage Contract 4 FEB 2010 42,000 2.1740
Heritage Contract 4 MAR 2010 42,000 2.1790
Heritage Contract 4 APR 2010 42,000 2.2360
Heritage Contract 4 MAY 2010 42,000 2.2450
Heritage Contract 4 JUN2010 42,000 2.2590
Heritage Contract 4 JUL2010 42,000 2.3080
Heritage Contract 4 AUG 2010 42,000 2.2950
Heritage Contract 4 SEP 2010 42,000 2.3390
Heritage Contract 4 OCT2010 42,000 Z3200
Heritage Contract 4 NOV2010 42,000 2.3320
Heritage Contract 4 DEC 2010 42,000 2.3380
Heritage Contract 5 JUL2010 42,000 2.1750
Heritage Contract 5 AUG 2010 42,000 2.2030
Heritage Contract 5 SEP 2010 42,000 2.2280
Heritage Contract 5 OCT2010 42,000 2.2320
Heritage Contract 5 NOV-DEC2010 84,000 2.2430






 











 





Schedule 2.1(b)(viii)




AT Governmental Authorizations


1. See attached lists of AT Governmental Authorizations.



2. Work-in-process with respect to all AT Governmental Authorizations which are being or are
planned to be secured with respect to the Surface Mining Business as conducted by the Phoenix
Group Entities.





11









 












	DSMRE & KPDES Permit Information
SCh.dulll2.1(bl(vil~
DSMRE f!l!!!II Stale ,”,ploye. Coal Severan”
Company Name Pmyloys Pad No Plumll NI!mbor l!!!W ~
E2lPlratfon DatI ~ EffeW.. [)ate Stat! File No. ~ QJ1I ~
lncorpOQlled l!il!!l. :w.ti9.
Ken
669-0112 889-01:14 Iv:AAio 012964 10l3I2011 15-18134 9/1112002 18367 ·1 0904-5-001 li:l3l2009
KYG046704 61 ·1332297 62664
889-0112 66ll-0134Al Activo 012954 10l3I2011 15-18134 9/1112002 18367 ·1 lJII04.S.OOl
112312009 KYG045704 61 ·1332297 62664
Ken
669-0112 889-01:w.2 Iv:AAio 012954 101312011 15-18134 9/1112002 18367 ·1 0904-$-001 li:l3l2OO9
KYG045704 61 ·1332297 62664
869-0112 889-0134A3 Prolim 01 10l3I2011 16018134 9/1112002 7 · lJII04.S.OO1 112312009 KYG045704
61 ·1332297 82664
Kentu
889-0127 889-0136 Iv:AAio 013506 111l512011 16018622 3/1 O9()4.S.O()t 211312009
KYG045755 61 ·1 394 63102
669-0127 135Al Activo 01350S 1115121111 1601 3/1 1&430-1 0904-S-009 1312009
KYG045755 61 ·1332394 63102
Kent.
889-0127 66ll-0135A2 Activo 01350S 111112011 16018622 3/1J2003 O9()4.S.O()t
2/1312009 G0457 61 ·1332394 63102
l&Il,’ ‘I:C6l1I ‘·“lne: ;...: 5~W Hiii:. ~i1ij Ken ...·tln D” • UU
iil 889-0149 Prelim 013240
61 ·1387393 62997
Kentu
889-0153 P10Ilm 01 61 ·1 7383 99
Renfro E u mentlnc.. Ken
JUIU ine 889-0116 889-01<16 Activo 012752 61612010 15-1ll905 811___16613.1
~ lJ29121lO9 G045525 31 ·1539559 63092
Renfro E nllne. Kent. eos. ine 669-0116 869-01461\1 Activo 012152
61612010 15-18905 12005 1661ll.1 ~ 112912009 KYG045a25 31 ·1 63062
Kenlu<l<
66W116 146A2 Activo 012752 61612010 1601ll905 811___16613.1 lJli04-S.OO2
1129i:lOO9 KYG045625 31-1639559 63062





 









 









	404 & 401 Permit Information
Schedule 2.1 (b)(vill)
DSMRE USACOE Water Quality
Company Nam. Pennlt Number permit 10 Effective Date permit IP Effective Date
889-0134 N1A
889-0134A2 1213112009 889-{)134A2-WOG-1 1211512008 889 ·0134A3 LRL2oo81437
889-{)134A3-waC-1 andin 889-0135 NlA N1A
889-o135A1 LRl.2oo5-125 11/1/2005 N1A
889-0135A2 lRL-2oo8-309 1/3012009 889-0135-waG-1 1212312008





 









 









	Air Quality Permit Information
Schedule 2.1 (b)(viii)
AQ
Company Name Permit Number Effective Date Expiratalon Date
Schoate Mining Co., LLC
Briar Hill — crushin S-07-023 21212007 21212017
Schoate Mining Co., LLC
Briar Hill — washin S-07-o24 21212007 21212017
Schoate Mining Co., LLC
Briar Hill — washing 8-07-060 91912004 2/212014





 









 









	Extended Weight Program — Road Bonds
Schedule 2. 1(b)(viii)
Bond # Permit # Route County 1m! Begin End BondAmt
88850240 02-089175189-08 Hwy 175 Muhlenberg road 0 1.1 $200.000 88850240 02-089175189-08 Hwy
189 Muhlenberg bridge 5.38 88850240 02-089175189-08 Hwy 189 Muhlenberg bridge 9.987 88850240
02-089175189-08 Hwy 189 Muhlenberg bridge 10.174 88850240 02-089175189-08 Hwy 189 Muhlenberg bridge
11.042 88850240 02-089175189-08 Hwy 189 Muhlenberg bridge 11.373
1208979 02-0621752693-09 US62 Muhlenberg road 8.78 3.178 $ 300.000 1208979
02-0621752693-09 Hwy 175 MUhlenberg road 5.804 6.281 1208979 02-0621752693-09 Hwy 2693 MUhlenberg
road 0 0.56 1208979 02-0621752693-09 US 62 Muhlenberg bridge 3.677 1208979 02-0621752693-09 US62
Muhlenberg bridge 4.702 1208979 02-0621752693-09 US 62 Muhlenberg bridge 4.865 1208979
02-0621752693-09 US 62 Muhlenberg bridge 5.402 1208979 02-0621752693-09 Hwy 175 Muhlenberg bridge
6.259
88850239 02-043150331-2008 US 431 McClean road 2.8 11.573 $200,000 88850239 02-043150331-2008 US
431 McClean road 0 12.451 88850239 02-043150331-2008 US 60 8P Davies road 0 0.7 88850239
02-043150331-2008 US 60 Davies road 10.179 10.615 88850239 02-043150331-2008 Hwy 331 Davies road 0
1.555








 









 








Schedule 2.1(b)(x)




AT Technology Assets


1. See attached list of AT Technology Assets, but excluding any AT Technology Asset utilized by
employees at their work stations (and in some cases elsewhere as well) who will remain employees of
the Remaining Phoenix Entities after the Closing. In this regard, to the extent that (i) any
Phoenix Group Entity is a party to any software license agreement and (ii) software licenses
derived from any such software license agreement are applicable to software installed on both
computers constituting AT Assets and computers that will remain with employees of the Remaining
Phoenix Entities after the Closing, the Sellers shall use their best reasonable efforts to ensure
that such software licenses remain applicable to, and in full force and effect for, the software on
such computers constituting AT Assets following the Closing.







12









 








Oxford Mining Company, LLC, Phoenix Coal Inc., Phoenix Coal Corporation, and Phoenix Newco, LLC

Acquisition Agreement Schedule

Schedule 2.1 (b) (x)

AT Technology Assets




	 	 	 
	Software Licenses	 	Renewal Date
	Microsoft Small Business Server 2003 (45 user licenses)
	 	 
	Software assurance Server and 5 user licenses

	 	8/31/2010
	Software assurance and 10 user licenses

	 	8/31/2010
	Software assurance and 20 user licenses

	 	9/30/2010
	Software assurance and 10 user licenses

	 	2/28/2011






	 	 	 	 	 

	MAS90

	 	15 licenses	 	 
	FRx

	 	4 licenses	 	 
	F9

	 	5 licenses	 	 
	FAS

	 	3 licenses	 	 
	Coal Software and Systems, Inc.

	 	V6.0.123
	 	Only utilizing scale and coal tracking modules






AutoCAD 2006 344-10085946

SurvCad 2006 1572991-4F27ACO-65481-XXXXX

AutoCAD 2008 347-34026750

AutoCAD 2008 347-34026552



HP Designjet 4000/4500 Plotter, Model # Q1273A, Serial No. SG6AQH900G




IT Support Contracts





 




On April 27, 2009, Phoenix Coal Corporation executed an On-site Support Contract with Keller
Schroeder and Associates to provide monthly network administration and support through December 31,
2009. Cost is based on time and materials, estimated at $800 per month. Phoenix can terminate the
contract “if expectations are not being met or other circumstances require the termination of
contract”.




Technology Hardware

Primary technology hardware consists of:

Dell PowerEdge 1800 Server — Main Data and Application Server

Purchase Date:       8/7/2006

Original Warranty Expires:       8/6/2009

Backup Tape Drive

80gb Hard drives (3 ea)

3.0 Ghz Processor

Cd Rom read/write

2gb In line Memory Originally

15” Flat Panel Monitor

UPGRADES

250gb Harddrives (3 ea) to be installed third quarter 2009

Added 2gb additional memory (maximum capacity)

Warranty Extended-Expires:       8/7/2011




Dell PowerEdge SC1420 Server—Terminal Server

Purchase Date:       8/8/2006

Original Warranty Expires:       8/7/2009

80gb Hard drive (1 ea)

3.0 Ghz Processor

Cd Rom Read/write




 









 





Oxford Mining Company, LLC, Phoenix Coal Inc., Phoenix Coal Corporation, and Phoenix Newco, LLC

Acquisition Agreement Schedule

Schedule 2.1 (b) (x)

AT Technology Assets




1gb In Line Memory

UPGRADES

Warranty Extended—Expires:       8/8/2011




Other Peripherals and Workstations

LS500 gl Buffalo Link Station Pro 500 gb data backup drive (2 ea)

Smart UPS 1500 Uninterrupted Power Supply (2ea)

Netopia Router (Bell South)

LinkSys WRT54G Wireless G Router with Switch

Dell 2324 PowerConnect 24 port Switch-10/100 + 2ea 10/10/1000 ports

Dell 2216 PowerConnect 16 port Switch—1 0/1 00

Dell 5448 PowerConnect 48 port Switch—10/100/1000

Zonet ZFS3008P 10/100 8 port switches (3 ea)

Approximately 25 Dell workstations/notebooks

3 Hewlett Packard network printers




 









 





Schedule 2.1(b)(xii)




Other Assets


1. Only to the extent assignable (or to the extent they reside in a Phoenix Reorganization Entity
which is an Acquired Phoenix Entity) and relating to the AT Assets or AT Liabilities, all
contractual rights (but not obligations, other than the obligations set forth on Schedule
2.1(c)(vi)) of the Phoenix Reorganization Entities under the following and all documents executed
pursuant thereto and/or in connection therewith:




     (a) Stock Purchase Agreement dated April 8, 2006, by and among Phoenix Coal Corporation,
Evergreen Mineral Co., Inc., Old Liberty Equipment Co., Inc., P. Ron Siler and Emma Siler;



     (b) Stock Purchase Agreement dated July 6, 2006, by and among Phoenix Coal Corporation, R&L
Winn, Inc. and Randy Winn;



     (c) Asset Purchase Agreement dated July 14, 2006, by and among Phoenix Coal Corporation,
Pennyrile Coal Co., Inc., Black Diamond Resources, Inc., Cardinal River Resources, Inc., No. 1
Contractor, Inc., K.O. Mining Co., Inc., Kenneth O. Taylor, Jr., Kenwyn Riddle, Estate of Kenneth
O. Taylor, Estate of Dorothy Taylor and Tama Taylor;



     (d) Asset and Purchase Agreement dated November 17, 2006, by and among Phoenix Coal
Corporation, Charolais Corporation, Charolais Coal No. 1 LLC, Charolais Coal Resources LLC, Mark
Energy, Inc., Mark One, Inc., and Donald Bowles;



     (e) Stock Purchase Agreement dated July 29, 2008, by and among R&L Winn, Inc., C&R Coal, Inc.,
Howard Covington and Jonathan L. Rogers;



     (f) Stock Purchase Agreement dated July 31, 2008, by and among Phoenix Coal Corporation,
Stuart K. Renfro and Robin R. Renfro;



     (g) Noncompetition Agreement, dated July 31, 2008, between R&L Winn, Inc. and Jonathan L.
Rogers;



     (h) Non-Competition Agreement, dated January 1, 2007, between Phoenix Coal Corporation and
Donald Bowles;



     (i) Non-Competition Agreement dated July 31, 2008, by and among Phoenix Coal Corporation,
Stuart K. Renfro and Robin R. Renfro;



     (j) Non-Competition Agreement dated June 8, 2006, by and among Phoenix Coal Corporation, P.
Ron Siler and Emma Siler;



     (k) Employment Agreement, dated July 6, 2006, between Phoenix Coal Corporation and Randy Winn;



13









 





     (l) Non-Competition Agreement dated July 26, 2006, between Phoenix Coal Corporation and
Kenneth O. Taylor, Jr; and



     (m) Non-Competition Agreement dated July 24, 2006, between Phoenix Coal Corporation and Kenwyn
Riddle.



14









 





Schedule 2.1(c)(i)




AT Fixed Assets Debt


1. See attached list of AT Fixed Assets Debt.







15









 












	Oxford Mlnftig Company, LLC, Phoenix Coal Inc., Phoenix Coal Corporation, and Phoenix Newco,
LLC Acquisition Agreement Schedule Schedule Z.1 (e) (I) AT Fixed Assets Debt
Company TotalsSchoate Schoate SchoateSchoate Schoete
Schoate Schoate Schoate SchoateSchoateSchoateSchoate
Lender CAT CAT CAT Deere CAT CAT Volvo Komatsu Komatsu Komatsu CAT Komatsu
Note Number 496985 496996 499935 80067 529232 536249 7581867 131717-000 131717-004 133586 541558
133588-007
JRP01812
Phoenix Note #/Serial# ABJ00602 7PZB1450 KPZ02495 QO01007 7PZ75010 JRP01613 2048 55024 A10079 10743
JRP01888 A100B9
Proceeds Used For Equipment Equipment Equipment Equipment Equipment Equipment Equipment Equipment
Equipment Equipment Equipment Equipment
EX1900LD-8 PC800 Komatsu HD785 Komatsu D475A Komatsu HD785
Collateral D7RTractor DURTractor DBTTractor Shovel D11RTractor 777FTrucks(2) G990Qrader Excavator
7Truck 3Dozer 777FTruck 7Truck
NeworUsed Used New Used New Used New New New New Used-off lease New New
Original note amount 314,862.49 1532,725.00 539,009.00 2588,078.00 1,163,350.00 2,497,418.00
338,895.00 555,900.00 1,129,200.00 239,100.00 1,248.884.00 1.129,200.00
Original note date Nov-07 Nov-07 Dec-07 Apr-08 Aug-08 0*08 Sep-08 Oct-08 Oct-08 Dec-08 Dec-08
Feb-09
Maturity Date Nov-12 Nov-12 Deo-12 Oct-10 Aug-12 Ocl-11 Sep-12 0ct-11 Nov-12 Oec-10 Dec-11 Feb-13
Term (months) 606060304836483848 24 3648
Finance Rate 7.50% 6.03% 8.18% 8.41% 5.75% 730% 6.45% 8.75% 7,50% 6.75% 8.75% 8.50%
Down payment 6,270.01 108,242.50 10,411.54 250,000.00 110,260.66 824,267.00 85,000.00 — 112,900,00
- 312,133.50 112,900.00
Monthly Payment Amount 6,270.01 28,437.73 10.411.54 86,687.62 23,009.41 58,266.64 6,015.25
17,101.10 24.573.01 10,678.05 29,679.54 25,050.07
G/L Account 24500-02 24500-03 24500-04 24500-05 24500-06 24500-07 2450008 24500-09 24500-10
24500-11 24500-12 24500-13
Estimated Debt Balance
07/31/09 22,774,187.41 216.41Z47 934,265 24 376,799.13 1230,21858 759,16627 1,443,485.90 20624824
427.265.32 873,078.49 173,626.55 773,26543 925,770.18
08/31/09 21,988,829.09 211,495,04 912519.09 388,291.64 1,152,15051 739,794.53 1,394241.05 201,34157
412,567.59 853,698.00 163565.09 749224.28 907.277.63
09/30/09 21505,457.77 206,546.87 890,683.74 359,740.35 1,073,53754 720,329.87 1544,688.42
196,408.53 397,787.18 834201.37 154,048.72 725,007.83 888,654.11
10/31/09 20,638203.39 201587.78 868,698.64 351,145.04 994.373.84 700,772.14 1294,826.08 191,448.98
382,923.83 814,587.91 144,177.13 700,614.81 889,898.67
11/30/09 19,987,068.40 196,557.57 846,62324 342,505.48 914,654.92 681,120.60 1244,652.10 188,46277
367576.48 794,85652 134,250.02 676,043.92 851,010.38
12131/09 19,292,002.86 191,516.04 824,436.98 333.821.44 834,37751 661,374.89 1,194,184.54
181,449.76 35254525 775,007.69 124,267.07 651,293.87 831,98830
01/31/10 18,613.00635 188,443.01 802,139.31 325,092.69 753,537.49 641,53457 1,143,361.43 176,409.80
337,829.47 755,039.52 114227.96 628563.35 812.831.48
02/28710 17,930,044.52 181,338.27 779,729.67 316,319.02 672,130.92 621.599.18 1,092240.80
171,342.75 322,628.66 734,951.70 104.132.38 601251.04 793538.97
03/31/10 17,243,083.07 176201.62 757,207.49 307,500.17 590,153.82 601,56827 1,040,800.66 168,248.47
307,342.35 714,743.50 93,980.02 575,955.62 774,109.80
04/30/10 16,552,344.58 171,032.87 734,57221 298,63552 507,602.19 581,441.37 989,039.02 161,126.81
291,970.05 694,41420 83,770.55 550,475.76 754,543.01
05/31/10 15,864,391.03 165,831.82 711.82327 289,72854 424,472.03 561,218.03 936,953.87 155,977.82
278.511.28 673,963.10 73,503.65 524,810.11 734,837.62
06/30/10 15,172,430.40 160,598.28 688,960.08 280,770.29 340,75925 540.897.79 884,543.19 150,800.75
260.98556 653,389,43 63,179.00 498,957.31 714.992.65
07/31/10 14,467.792.44 155531.99 665,982.10 271,78844 256,459.78 520,480.18 831,804.94 145,598
..05
245,33259 632,692.48 52,79628 472,916.00 695,007.11
08/31/10 13,776591.55 150.032.80 642.888.72 262,720.24 171,589.52 499,964.74 778,737.08 140,363.38
229,611.28 611571.51 42.355.15 448,684.81 674580.01
09/30/10 13,080,972.06 144,700.49 619,879.37 253,625.46 86,084.33 479,350.99 725537,55 135,102.58
213,801.74 590,925.78 31,855.29 420,262.35 654,610.34
1001/10 12,381,509.88 139,334.86 696,35347 244,483.87 — 458,638.47 671,604.27 129,813.51 197,903.27
569,854.53 21,29657 393,647.22 634,197.09
11/30/10 11,764,86855 133,935.69 572,910.43 235,295.21 437,826.70 817,535.18 124,496.01 181,915.38
548,657.01 10,678.04 366,838.02 613,63925
12/31/10 11,144,343.07 128502.78 549,349.67 226,059.25 418.915.21 583,128.11 119,149.93 165,837.55
527,332.47 — 339,833.34 592,935.79
01/31/11 10,531251.76 123,03551 525,670.60 218,776.74 395,903.52 508.381.02 113,775.11 149.86929
505,880,15 312531.75 572,085,68
02/28711 9,914,696.37 117,53457 501,872.62 207,444.44 374,791.15 453,291.78 108,371.40 133,410.08
484299.28 285,231.82 551,087.88
03/31/11 9294,656.67 111,999.45 477,955.13 198,065.10 353,57751 397,858.19 102538.85 117.059.41
462,589.09 257,632.10 529,941.35
04/30/11 8,671,112.32 106,429.44 453,917.54 188,63747 332,262.43 342,078.16 97.478.70 100.616,77
440,748.80 229531.13 508,645.03
05/31/11 8,044,042.92 100,824.61 429,75924 179,161.32 310,845.11 285,949.51 91.985.39 84,081.64
418,777.64 201.827.44 487,197.86
06730/11 7,413,427.85 95,184.75 405,479.62 189,636,38 289.325.17 229,470.05 86,464.56 67,453.50
396,874,82 173,81958 465.598.77
07/31/11 6,779246.45 89,509.64 381,078,08 160,082.40 267,702.11 172,837.60 80,914.05 50,731.83
374,439,55 145,206.00 443,846.69
08/31/11 8,141,477.91 B3.799.07 356,554,00 150,439.14 245,975.44 115,449.94 75,333.72 33,918.10
352.071.05 116,585.25 421,940.53
09/30/11 5,500,10126 78,052.80 331,906.77 140,76853 224,144.66 57,904.86 69,723.39 17,00578
329,568.50 87,755.81 399,879.21
10/31/11 4,855,095.03 72270.62 307,135.77 131,043.73 202.209.28 — 64,082.90 — 306,931.11 58,716.16
377,661.62
11/30/11 4281,806.73 66,452.30 282240.38 121,271.07 180,168.79 58,412.10 284,158.07 29,464.76
355286.65
12/31/11 3,777,344.37 60,597.82 257,219.97 111,448.11 158,022.68 52,710.82 281,248.58 — 332.753.19
01/31/12 3,299,646.75 54,706.34 232,073.91 101,574.57 135,770.47 46,978.89 238,201.77 310,060.12
02/29/12 2,889.04158 48,77824 206,801.58 91,650.21 113,411.63 41216.15 215,016.88 287.206.31
03/31/12 2,435.923.58 42,813.09 181,402.34 81,674.76 90,945,65 35,422.44 191,693.06 264,190.82
04/30/12 2,091,058.09 36,810.86 155.875.55 71,847.96 68572.02 29,597.59 168229.47 241,011.90
05/31/12 1,744205.84 30,770.72 130,220.58 61,569.54 45,69023 23,741.43 144,62529 217,669.00
06/30/12 1,413,879.92 24,893.03 104,436.77 51,43923 22,899.75 17,853.79 120.879.65 194,160.75
07/31/12 1,081,671.17 18,577.35 78523.49 41,258.77 — 11,934.50 96,991.73 170,485.99
08/31/12 795,933.51 12,423.45 52,480.08 31,021.90 5,983.40 72,960.68 148,643.53
09O0/12 572,807.63 6231.09 26,305.69 20,734.33 — 48,785,59 122,632.19
10/31/12 354,393.16 — - 10593.78 24,465.66 98,450.76
11/30/12 246,646.86 — 74,098.05
12/31/12 173,243.73 49,572.84
01/31/13 99,320.66 24,873.91
02/28/13 24,873.91 03/31/13






 









 













	Oxford Mining Company, LLC, Pti Acquisition Agreement Schedule Schedule 2.1(c)(1) AT Fixed Assets
Debt
Company Schoate Schoate Schoate Schoate Schoate R & L Winn R1L Winn R & L Winn R&LWinn R & LWInn
R&L Winn PCP PCP
Lender Komatsu CAT Komatsu Komatsu Komatsu CAT CAT CAT CAT CAT CAT CAT CAT
Note Number 133586-008 544935 133586-009 133586-010 133586-XXX 497416 501540 508533 510382 518288
516458 498200 500789
Phoenix Note #/Serial# A10090 H4C00345 A10093 20063 20104 7PZ01448 AZX00629 JRP01082 JRP01234
7PZ75009 JRP01305 7PZ01493 AZX00623
Proceeds Used For Equipment Equipment Equipment Equipment Equipment Equipment Equipment Equipment
Equipment Equipment Equipment Equipment Equipment
Komatsu HD785 CAT 992K Komatsu HD785 Komatsu D475A Komatsu 0475A
Collateral 7Truck Loader 7Trudt 5Dozer SDozer 011RTroctor D92G Loader 777FTruck 777FTiucx
DURTractor 777FTrucK DURTraclor 992G Loader
NeworUsed New New New Used Used — off lease New New New New Rebuild New New New
Original note amount 1,129,200.00 1,699,690.00 1,129,200.00 734,000.00 808523.85 1,532,725.00
1,656,484.00 1,145574.00 1,145,374.00 1,084,436.00 1,145,375.00 1,528,367.00 1,658,484.00
Original note date Feb-09 Mar-09 Apr-09 May-09 Aug-09 Nov-07 Dec-07 Feb-08 Feb-08 Apr-08 Apr-08
Nov-07 Dec-07
Mature Date Feb-13 Mar-12 Mar-13 May-12 Aug-12 Nov-12 Dec-11 Feb-12 Feb-12 Apr-12 Apr-12 Nov-12
Deo-11
Term (monlhs) 48 38 48 38 36 60 48 48 48 48 48 60 48
Finance Rate 8.50% 8.75% 550% 8.25% 7.99% 8.03% 525% 5.25% 525% 8.25% 625% 653% 525%
Down payment 112,900.00 424,835.00 112,900.00 146,760.00 161,864.73 106,24252 82.806.70 57288.70
57.268.70 24,966.86 56,767.78 105,940.42 82,806.70
Monthly Payment Amount 25,050.07 40,391.88 25,050.07 18,469.78 20,260.95 26,437.73 36,018.71
4,904.06 24,904.08 24,966.86 25,42259 26,362.58 36,018.71
G/L Account 24500-14 24500-15 24500-16 24500-17 24500-18 24500-01 24500-02 24500-03 24500-04
24500-05 24500-08 24500-02 24500-03
Estimated Debt Balance
07/31/09 925,770.18 1.149,103.68 944,132.62 559,938.97 808,32355 93426524 947225.39 688,726.01
898,726.01 734,155.56 747556.07 931,608.82 947225.39
08/31/09 907,277.63 1,117,090,68 925,770.18 545,263.75 646,658.92 912518.09 915552.70 676,879.75
676,879.75 713,012.43 728,027.00 909,924.50 915,352.70
09/30/09 888554.11 1,084,84425 907277.63 530,487.64 630,703.64 890,663.74 883540.50 654,937.88
54,937.88 691.759.18 704,385.80 888,131.29 883,340.50
10/31/09 869598.67 1,052,36£69 888,654.11 515.609.95 614,642.13 868,698.84 851,188.18 632,899,89
632599.99 670585.23 682,631.89 866,228.64 851,188.18
11/30/09 851510.38 1,019,844.29 869,898.67 500.62957 598.473.67 848.82324 818,895.13 610,785.66
610,765.68 648,920.01 660,764.67 844,218.00 818,895.13
12/31/09 831.988.30 986,687.32 851,010.38 485547.00 582.197.58 824,436.98 788.460.73 588534.48
588,534,46 627,332.94 638,783.56 822,092.82 786,460.73
01/31/10 812.831.48 953,490.04 831,988.30 470,360.34 585,813.08 802,13951 753,884.37 566205.97
566205.97 805,633.44 616,687.97 799,858.55 753,884.37
02/28/10 793,538.97 920,050.69 812531.48 455,06928 549519.50 779,729.67 721,165.42 543,779.77
543,779.77 583,820.92 594,477.30 777.512.62 721,165.42
03/31/10 774,109.80 886,36751 793.538.97 439,673.08 532,718.10 757,207.49 88850328 521,255.42
521255.42 561,894.79 572,150.95 755,054.48 688,303.26
04/30/10 754543.01 852,438.73 774,10950 424,171.04 516,002.15 734,57221 65529728 498,632.50
498,632.50 539,854.47 549,708.31 732,483.56 655,29728
05/31/10 734,837.62 618262.55 754,543.01 408,582.41 499,176.91 711523.27 822,146.79 475,910.58
475,910.58 517,699.35 527,148.78 709,79950 622,146.79
06730/10 714,992.65 783,837.17 734,837.62 392546.49 482239.85 688.960.09 588,85122 453,089.22
453,089,22 495.428.84 504,471.76 687,001.12 588,85122
07/31/10 695,007.11 749,160.77 714,992.85 377,022,51 465,189.61 665,982.10 855,409.92 430,167.99
430.167.99 473,042.34 481,676.63 884,088,46 555,409.92
08/31/10 674,880
..01 71423152 895,007.11 361,089.75 448,026.05 642,888.72 521,822.25 407,148.45
407,146.45 45053924 458.762.77 641,060.74 52152225
09/30710 654,61054 879,047,58 674,880.01 345,047.45 430,74821 819,879.37 488.087,58 384,024.18
384,024.16 427,918.94 435,729.57 617,917.38 488,087.56
10/31/10 634,197.09 643,807.09 654,610.34 328,89458 413,35553 596,353.47 45420521 360,800.68
360,800.68 405,180.82 412,576.41 594.657,80 454205.21
11/30/10 813,639.25 607,908.18 634,197.09 312,631.22 395,846.64 572,910.43 420,174.58 337,475.57
337,475.57 382,32428 389,302.66 571281.42 420,174.58
12/31/10 592,935.79 571,948.96 813,63925 298255,77 375221.37 549.34987 385,994.96 314548.39
314,048.39 359,348,69 385,907.89 547,787.65 385,994.96
01/31/11 572,085.68 535,727.54 592,93579 279,787.73 360,478.74 625570.60 351,665.75 290518.88
290,518,68 338253.44 342,390.87 524,175.90 351,665.75
02/28/11 551,087.88 499242.01 572,085.68 263,16655 342,617.98 501,872.62 317,188,28 268,886.00
286,886.00 313,037.90 318,751.57 500,445.58 317,18828
0301/11 529,94155 462,490.44 551.087.88 246,450.82 324.63828 477,955.13 282555.90 243,14850
243,149,90 289,701.45 294,989.15 476,598.10 282.555.90
04O0/11 508,845.03 425,47059 529,941.35 229,620.38 306538.89 453,91754 247,773.94 21950952
219509,92 266,243.45 271,102.96 452526.85 247,773.94
0501/11 487.197.88 388,181.40 508,845.03 212,67423 288,318.98 429,75924 212,839.74 195,36551
195,385.61 242,86327 247,09257 428.53724 212,839.74
06O0/11 465598.77 350,62051 487,19758 195,61158 269,977.75 405,479.62 177,752.63 171,316.52
171,318.52 218,98028 222,956.72 404,326.66 177,752.63
0701/11 443,846.89 312,784.73 465598.77 178,431.62 251,514.40 381,078.08 142.511.95 147,162.18
147,162.18 195,13354 198,69556 379,994.50 142,511.95
08/31/11 421,94053 274,673.57 443,846.69 161.133,55 232,928.12 358,554,00 107,117.02 122,902.14
122,902.14 171,18350 174,307.64 355,540.16 107,11752
09O0/11 399.87821 236284.52 421,940.53 143,716,55 214218.08 331,906.77 71,567.18 98535.83 98,535.93
147,108.02 149,792.90 330,963.00 71,567.16
1001/11 377,661.62 197,815.55 399,87921 128,179.81 195,383.47 307,135.77 35,881.70 74,083.09
74,063.09 122,907.35 125,150.48 306,262.43 35,861.70
1100/11 355,288.65 158,664,62 377.661.62 108,52251 176,423.45 282240.38 — 49,483.15 49,483.15
98,580.63 100,379.72 281,437.82
1201/11 332,753.19 119,429.67 35528855 90,743.82 157537.19 257219.97 24,795.64 24,795.64 74,12721
75,479.94 256,488.55
01O1/12 310,080.12 79,908.63 332,753.19 72,842.90 138,123.84 232,073.91 — 49,548.43 60,450.48
231,413.99
02/29/12 28720651 40.099.42 310,060.12 54,818.91 118,782.56 206,80158 24,837.62 25290.65 206,213.52
0301/12 264,190.62 — 287,208.31 36,671.00 99,312.50 181,402.34 — - 180,886.50
0400/12 241,011.90 284,190.62 18,398.31 79,71251 155,87555 155,432.29
05/31/12 217,869.00 241,011.90 — 59,982.61 130220.58 129,85026
06730/12 194,160.75 21758950 40,121.04 104,436.77 104,139.77
07/31/12 170,485.99 194,160.75 20,12723 78,523.49 78,300.17
08O1/12 146,643.53 170,485.99 — 52,480.08 52,330.81
09/30/12 122,632,19 146,643.53 26,305.89 26231.04
1001/12 98,450.76 122,632.19
11/30/12 74,098.05 98,450.76
1201/12 49,572,84 74,098.05
01/31/13 24,87351 49,572.84
02/28713 — 24,873.91 0301/13






 









 












	Oxford Mining Company, LLC, Ph Acquisition Agreement Schedule Schedule 2.1 (c) (I) AT Fixed Assets
Debt
Company CMC CMC CMC CMC CSJJ C&R RENFRO
Lender CAT CAT CAT CAT 1ST KY 1ST KY CAT
Note Number 497012 529238 533033 533032 43682 49401 480677
Phoenix Note #/Serfal# 7PZ01449 JRP01367 JRP01504 JRP01506
Proceeds Used For Equipment Equipment Equipment Equipment Equipment Equipment Equipment
Collateral D11R Tractor 777F Truck 777FTru<* 777F Track None None D11R
New or Used New New New New
Original note amount 1,532,725,00 1,286,282.00 1,248,884.00 1,248,884.00 S0.180.31 200,070.00
274,000.00
Original note date Nov-07 Aug-OS Sep-08 Sep-08 Apr-07 Apr-05 Auo-07
Maturity Date Nov-12 Aug-12 Sep-12 Sep-12 Apr-10 Apr-10 Aufl-10
Term (months) 60 48 48 48 36 60 36
Finance Rate 6.03% 625% 8.38% 6.39% 850% 5.50% 849%
Down payment 106,242.50 120,487.63 178,557.45 178,657.45
Monthly Payment Amount 26,437.73 25,269.81 22,049.62 22,049.62 2,869.51 4,057.71 8,648.24
GIL Account 24500-01 24500-02 24500-03 24500-04 24500-03 24500-04 24500-00
Estimated Debt Balance
07/31/09 934,265.24 827,559.42 738,880.95 738,680.95 24,855.00 35.885.93 107,782,79
08/31/09 912,519.09 808,599.82 720,564.81 720,564,81 22,175.98 32,091.53 89,837.97
09/30/09 890,683.74 785,531.05 702,352.20 702,352.20 19,478.42 28,186.54 91336.95
10/31/09 868,898.64 764,352.55 684,042.81 684.042.61 18,751.36 24.203.57 83,779.31
11/30/09 846,623.24 743,063.74 665,635.52 665,635.52 14,010,23 20,218.61 75,684.88
12O1/09 824,436.98 721,864.05 847,130.41 847,130.41 11,244.63 18,19320 87,492.60
01/31/10 802,139.31 700,152.91 628,526.76 828,526.76 8,481.30 12,14331 59,282.73
02/28/10 779,729.67 878,529.73 609.824.04 609,824,04 5,656.64 8,081,60 50,974.63
03/31/10 757207.49 656,793.93 591,021.73 591,021.73 2,82629 3,941.69 42.627,89
04/30/10 734,572.21 634,944.92 572,119.30 572,119.30 — - 34,222.09
05/31/10 711,823.27 612,982.11 553,11622 553,11822 25,756.83
06/30/10 688,960.09 590,90452 534,011.94 534,011.84 17,231,67
07/31/10 665,982.10 568,712.74 514,805.83 514,805.93
08O1/10 642,888.72 546,404.98 495,497.65 495,497.65
09/30/10 819,679.37 523,981.03 478,08635 478,088.55
10/31/10 598,353.47 501,440.29 456,572.09 456,572.09
11/30/10 572,910.43 478,782.15 436,853.72 436,953.72
12/31/10 549,349.67 456,006.00 417230.88 417,230.88
01/31/11 325.670.60 433,11122 397,403.01 397,403.01
02/28/11 501.872.62 410,09720 377/189.58 377.469.66
03/31/11 477,955.13 388,983.31 357,429.97 357,429.97
04/30/11 453,917.54 383,708.83 337,283.66 337283.88
05/31/11 429,75924 340,333.44 317,030.08 317,030.08
06/30/11 405,479.62 316,83820 296.668.85 296,668.65
07/31/11 381,078,08 293,216.58 278,198.79 276,198.79
08/31/11 356.554.00 269,473.94 255,619.93 255,619.93
09/30/11 331,906.77 245,607.64 234,931.49 234,931.49
10/31/11 307,135.77 221,817,04 214,132.88 214.132.88
11/30/11 282,240.38 197,501.49 193,223.52 193,22332
12/31/11 267,219.97 173,280.33 172202.82 17Z202.82
01/31/12 232,073.91 148,892.92 151,070,18 151,070.18
02*29/12 206,801.58 124,398.59 129,825.01 129,825.01
03/31/12 181,402.34 99,776.69 108,488.71 108,468.71
04/30/12 155,87535 75,026.55 86,994.68 86,994.68
05/31/12 130,220.58 50,147.50 65,408.31 65,408.31
06/30/12 104,436.77 25,138.87 43,706.99 43,708.99
07/31/12 78,523.49 — 21,890.11 21.890.11
08/31/12 52.480.08
09/30/12 26,305 89
10/31/12
11/30/12
12/31/12
01/31/13
02/28/13
03/31/13





 









 








Schedule 2.1(c)(iii)-1




AT Reclamation Obligations


1. See attached list of AT Reclamation Obligations.






16









 








Phoenix Coal, Inc.

8/26/2009


PHOENIX COAL INC.

Reclamation Obligation




Schedule 2.1(c)(iii)-1




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Outstanding
	Company	 	Project/Mine	 	Permit No.	 	Acres	 	Bond Amount
	 
	R&L Winn, Inc.
	 	Back In Black	 	 	889-0135	 	 	 	429.7	 	 	$	1,205,400	 
	Schoate Mining Co., LLC
	 	Briar Hill	 	 	889-0134	 	 	 	1,655.1	 	 	$	3,164,100	 
	Phoenix Coal Corporation
	 	K.O. Mine	 	 	889-0141	 	 	 	224.0	 	 	$	654,200	 
	Renfro Equipment Inc. **
	 	Jessup Mine	 	 	889-0146	 	 	 	190.0	 	 	$	771,300	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	TOTALS
	 	 	 	 	 	 	 	 	2,498.8	 	 	$	5,795,000	 








 




			
	**	 	MIS shows $671,300 which does not include (2) $50,000 supplemental assurance bonds,




 









 










Schedule 2.1(c)(iii)-2




Excluded Governmental Authorizations


1. See attached lists of Excluded Governmental Authorizations.







17









 












	DSMRE & KPDES Permit Information
_ul.2.1 (c)(iii)-2
DSMRE fmJlU Slale Employer Coal Severance
Permit NumlJer §lIlus Expiration Data Iif1UtjylI PlI!lI S!lIt!!EII,No · ~ Il!tIl ~ ~ Jll.N9.,
IIlUl2.
Companv Name Pmlous Permil No l!l1MBUl ~ oelaware
854-6038 014259 NlA 15—18968 2I2l2OO6 18&15 None NlA 20-1372167 63210 854-5019 Idle
Crittendan Coun eoa Inc. ft28..OOO1 Tax ~ Mine 82B-0001 82B-0002 _mation 013332 112512010 15—18630
12/1512004 18616 None KY 959 30.0053027 63170
Crittenden Coun coal Inc. Kenlucl<
Prov. No. 1 854-5019 854- Reclamation 013332 6/1112009 15—02156 11/1212001 18256 N ....
KYGIl449211 3ll-0053O27 63170
Charulals Mlnln Com n LLC Oelawarr
GrallrmtlS 88&-0129 88&-0136 ReclilmaliOn 014319 411812010 15—18882 7/1812005 10915-21 None
KYG046112 20-8013656 63296
Phoenix coal Pro.....ln LLC Qelawanl
Rock Crusher I\lIlI.Ol ecIII 1 1& 51 15—1 311512004 10915-20 None NlA 20-8013611 63297
Ph......lx Coal_. LLC DeIawwe
Point Min! 854-0211 854-0253 Red.mation 014918 711012013 15- 8080 1111811998 18276- None KYO 11
13611 63297
Pael Rllou”,,, lLC
Joe Allen 917-5021 II...... 014157 13 15-1ll2ll4 7/1812008 KY0107191 37-1495296 63398
C&RCoa Inc. Kenlucl<
Boe<1le.-Soufh 88Il-0122 88Il-0150 Roclomatian 0132<10 121312011 15-18377 5/112001 18152.2
09IJ4..S.008 2/1312009 KYOl00781 61-1357393 062997
C&RCoa Inc. Ke
EbrnrenrMine 88~124 88Il-0151 Reclamatian 013240 1111l121l12 15-18377 51112001 18152.2 09IJ4..S.008
2/1312009 61-1387393 62997
C&RCoa Inc. Ke al_C_Mine 88&-0120 88Il-0152 Roclomatian 0132<10 Ill1212OO8 15-18377
6/112001 18162.2 0904-s-008 2/131201lll KYG046020S 61-1387393 62997
JPhoenlx Goal Inc. 014617 Eorelgn E!l!!lign
lellOllI”‘” MinrraI Co., Inc. 013010 Kettluc!cy 61-1332209
~ 61-1332300 Inc. Maroon Redamallon LLC
IMarcon Roclamatlon, lLC I ~
ll54-5026 r:::::::=l





 









 









	404 & 401 Permit Information
Schedule 2.1 (c)(iii)-2
DSMRE USACOE Water Quality
Company Name Permit Number permitlQ Effective Date permit 10 Effective Date 828-0002
LRL ·2005-131 ·GJD 3/1312009 1211512004 854-5038 N/A N/A
889-0136 LRL-2004-527 7/1812005 2006 ·0198-3 51112005
LLC
889-0123 N/A NlA
LLC
854-0253 N/A N/A
917-5021 7/1/2008 917 ·5021-WQC ·1 512712008
889-0150 NlA N/A
889-0151 N/A Rahall
889-0152 N/A N/A






 









 












	Extended Weight Program — Road Bonds
Schedule 2.1{c){lii)-2
Bond # Permit # Route County 1m! Begin End BondAmt
88850237 02-02911508-07 Hwy 291 Hopkins road 5.313 6.302 $50,000 88850237 02-02911508-07 Hwy
1508 Union bridge 1.432





 









 





Schedule 2.1(c)(vi)




Other Liabilities 


1. See attached list of other liabilities.



2. The royalty payment obligations of R&L Winn, Inc. and Renfro Equipment Inc., as applicable,
under the following agreements:




     (a) Overriding Royalty Agreement, dated as of August 26, 2005, by and between Edge River
Farms, LLC and Renfro Equipment Inc.



     (b) Overriding Royalty Agreement, dated as of July 31, 2008, by and between R&L Winn, Inc. and
Randy Garris and Jonathan L. Rogers.


3. Liability for all payments payable to the Renfros under Section 7.4 of the Stock Purchase
Agreement between Phoenix Coal Corporation and Stuart and Robin Renfro, dated as of July 31, 2008,
if and when such payments become due, notwithstanding the fact that a portion of the 1.5 million
reserve tons described therein (the “Additional Reserves”) were acquired prior to the Closing, so
that following the Closing in no event shall the Sellers or any of the other Remaining Phoenix
Entities be liable for any portion of the payments owing to the Renfros with respect to the
acquisition of the Additional Reserves.





18









 












	Oxford Mining Company, LLC, Phoenix Coal Inc., Phoenix Coal Corporation, and Phoenix
Newco, LLC Acquisition Agreement Schedule Schedule 2.1 (c) (vi) AT other Liabilities Not Previously
Described
Agreement
Type of Aareement Date Termination Date Phoenix Company Second Party
Until all coal is mined from property
Overriding Royalty 7/3112008 specified In overriding royalty C&R Coallne. Howard Covinoton and
Jonathan Rogers
This is an overriding royalty agreement created by the C&R acquisition on July 31, 2008. The
Second Parties receive a total of $0.60 per ton for coal mined and sold from two leased properties.
The leased properties are Dart of the C&R Beech Creek reserves and the Back in Black reserves.
Reserve Payments I 7/31/2008 I 7/3112010 IPhoenix Coal Corporation IStuart and Robin Renfro
This is a condition of the Stock Purchase Agreement with Stuart and Robin Renfro. As part of the
Renfro Equipment inc. acquisition in July 2008, the Company agreed that if, by July 31, 2010,It
acquires at least 1.5 minion reserve tons (“Additional Reserves”) as defined by National Instrument
43-101 (“NI43-101”) due to the direct efforts of the sellers (Stuart and Robin Renfro), the Company
will pay the sellers $1,000,000 for the first 1.5 million tons of reserves, plus $0.50 per ton for
each reserve ton in excess of 1.5 million. The acquisition closing documents define a specific
territory from which the Additional Reserves can be acquired. The acouisition of the Additional
Reserves must be on terms and conditions acceptable to the Company in its sale, reasonable
discretion.





 









 





Schedule 2.5(a)




June 30th Balance Sheet and Working Capital


1. See attached. In addition to the attached being limited to the AT Assets and the AT
Liabilities, there are other differences with the Interim Financial Statements (which are also as
of June 30, 2009) given that with the Interim Financial Statements accounting in accordance with
GAAP (Canada) requires Phoenix Coal Inc. to treat as current assets and current liabilities all of
the assets and liabilities (essentially the AT Assets and AT Liabilities) of the Surface Mining
Business of the Phoenix Group Entities due to their being assets held for sale and liabilities
associated with assets held for sale. As provided in the Agreement, all determinations under
Section 2.5 with respect to Working Capital are to be made in a manner consistent with the
calculation of the June 30 Working Capital in accordance with GAAP (U.S.) and not as “Working
Capital” would be determined in accordance with the Interim Financial Statements, provided that,
while not reflected in the June 30 Working Capital, the spare parts equipment out for repair will
be reflected in Working Capital for all determinations under Section 2.5 through offsetting entries
for spare parts inventory and current liabilities for repair costs.





19











 







Phoenix Coal

AT Assets and AT Liabilities as of June 30, 2009

Schedule 2.5(a)




	 	 	 	 	 	 	 	 	 
	 	 	AT Assets &	 	 	Working	 
	 	 	AT Liabilities	 	 	Capital	 
	Assets
	 	 	 	 	 	 	 	 
	Current Assets
	 	 	 	 	 	 	 	 
	Receivables
	 	 	3,288,714	 	 	 	3,288,714	 
	Coal Inventory
	 	 	877,841	 	 	 	877,841	 
	Other Inventory
	 	 	168,266	 	 	 	168,266	 
	Prepaid Expenses
	 	 	 	 	 	 	 	 
	Advance Payments on Purchased Coal
	 	 	374,400	 	 	 	374,400	 
	Heritage Oil Deposit
	 	 	200,000	 	 	 	200,000	 
	Island Dock Fleeting Rights
	 	 	15,000	 	 	 	15,000	 
	Wash Plant Utilities Deposit
	 	 	12,825	 	 	 	12,825	 
	 
	 	 	 	 	 	 	 
	Total Current Assets
	 	 	4,937,046	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Fixed Assets
	 	 	 	 	 	 	 	 
	Land
	 	 	631,747	 	 	 	 	 
	Buildings and Improvements
	 	 	490,236	 	 	 	 	 
	Preparation Plant
	 	 	3,683,996	 	 	 	 	 
	Mining Equipment
	 	 	30,182,428	 	 	 	 	 
	Loading and Marine Transport Equipment
	 	 	1,775,000	 	 	 	 	 
	Vehicles
	 	 	65,965	 	 	 	 	 
	Office Equipment
	 	 	319,870	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Total Property, Plant and Equipment
	 	 	37,149,242	 	 	 	—	 
	Accumulated Depreciation
	 	 	(9,430,209	)	 	 	 	 
	 
	 	 	 	 	 	 	 
	Net Fixed Assets
	 	 	27,719,033	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Other Non Current Assets
	 	 	 	 	 	 	 	 
	Advance
Royalties Surface
	 	 	121,325	 	 	 	121,325	 
	 	 	 
	Total Non Current Assets
	 	 	121,325	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 	 	 
	Total Assets
	 	 	32,777,404	 	 	 	5,068,371	 
	 	 	 
	 
	 	 	 	 	 	 	 	 
	Liabilities and Stockholders Equity
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Current Liabilities
	 	 	 	 	 	 	 	 
	Current Portion Long Term Debt
	 	 	7,915,623	 	 	 	 	 
	Accounts payable — general
	 	 	4,387,154	 	 	 	4,387,154	 
	Accounts payable — Komatsu lease buyout
	 	 	495,000	 	 	 	—	 
	Royalites and taxes
	 	 	678,130	 	 	 	678,130	 
	Accrued commissions
	 	 	8,475	 	 	 	8,475	 
	Accrued property tax
	 	 	331,565	 	 	 	331,565	 
	 
	 	 	 	 	 	 	 
	Total Current Liabilities
	 	 	13,815,947	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Long Term Liabilities
	 	 	 	 	 	 	 	 
	Notes Payable
	 	 	22,596,234	 	 	 	 	 
	Less Current Portion of Long Term Debt
	 	 	(7,915,623	)	 	 	 	 
	Asset Retirement Obligations
	 	 	2,587,981	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Total Long Term Liabilities
	 	 	17,268,592	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Stockholders Equity
	 	 	 	 	 	 	 	 
	Total Stockholders Equity
	 	 	1,692,865	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Total Liabilities and Stockholders Equity
	 	$	32,777,404	 	 	 	5,405,324	 
	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	(346,963	)
	 
	 	 	 	 	 	 	 






 









 





Schedule 4.1(b)




Organization and Good Standing; Power


1. Charolais Coal Sales, LLC, a Delaware limited liability company, is qualified to do business as
a foreign limited liability company in the Commonwealth of Kentucky.



2. Charolais Mining Company, LLC, a Delaware limited liability company, is qualified to do business
as a foreign limited liability company in the Commonwealth of Kentucky.



3. Phoenix Coal Processing Company, LLC, a Delaware limited liability company, is qualified to do
business as a foreign limited liability company in the Commonwealth of Kentucky.








20









 










Schedule 4.2(c)




Notices and Consents


The agreements listed below require the written consent of the other party thereto, or written
notice delivered to the other party thereto, in order for a Phoenix Reorganization Entity to
transfer its rights under such agreement to the Acquired Company or another Affiliate of such
Phoenix Reorganization Entity prior to Buyer’s acquisition of the Acquired Company Membership
Interests.



Notwithstanding the foregoing, the parties acknowledge that (i) a consent listed in Item I(a) below
shall not be required to be obtained for an agreement if the debt subject to such agreement is paid
off, in its entirety, prior to or at the Closing and (ii) a notice listed in Item II(a) below shall
not be required to be given for an agreement if the debt subject to such agreement is paid off, in
its entirety, prior to or at the Closing, and none of such agreements to which (i) or (ii) above
applies shall constitute part of the AT Assets or the AT Liabilities unless the Buyer elects
otherwise.




I. WRITTEN CONSENT REQUIRED




(a) Agreements and Guarantees in Connection with Equipment Financing




	 	 	 
	Security Agreement and Promissory Note #480677, dated July 17, 2007
	Parties:

	 	Renfro Equipment, Inc. (Debtor) and
Caterpillar Financial Services
Corporation






	 	 	 
	Guaranty of Payment (to Security Agreement and Promissory Note #480677)
	Parties:

	 	Phoenix Coal Corporation (guarantor),
Renfro Equipment, Inc. (Obligor), and
Caterpillar Financial Services
Corporation (Seller)






	 	 	 
	Installment Sales Contract #508533, dated February 4, 2008
	Parties:

	 	R&L Winn, Inc. (Buyer) and Whayne Supply Company (Seller)






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #508533), dated February 4, 2008
	Parties:

	 	Phoenix Coal Corporation (guarantor), R&L Winn, Inc.
(Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Collateralized Guaranty of
Payment (to Installment Sales Contract #508533), dated February 4, 2008
	Parties:
	 	Phoenix  Coal Corporation (guarantor),
R&L Winn, Inc., (Obligor) and Whayne Supply Company (Seller)






	 	 	 
	Installment Sales Contract #510382, dated February 27, 2008
	Parties:

	 	R&L Winn, Inc. (Buyer) and Whayne Supply Company (Seller)






21









 






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #510382), dated February 27, 2008
	Parties:

	 	Phoenix Coal Corporation (guarantor), R&L Winn, Inc.
(Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Collateralized Guaranty of Payment (to Installment Sales Contract #510382), dated
	February 27, 2008
	Parties:

	 	Phoenix Coal Corporation (guarantor), R&L Winn, Inc.
(Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Installment Sales Contract #516288, dated April 25, 2008
	Parties:

	 	R&L Winn, Inc. (Buyer) and Whayne Supply Company (Seller)






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #516288), dated April 25, 2008
	Parties:

	 	Phoenix Coal Corporation (guarantor), R&L Winn, Inc.
(Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Collateralized Guaranty of Payment (to Installment Sales Contract #516288), dated
	April 25, 2008
	Parties:

	 	Phoenix Coal Corporation (guarantor), R&L Winn, Inc.
(Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Installment Sales Contract #516458, dated April 28, 2008
	Parties:

	 	R&L Winn, Inc. (Buyer) and Whayne Supply Company (Seller)






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #516458), dated April 28, 2008
	Parties:

	 	Phoenix Coal Corporation (guarantor), R&L Winn, Inc.
(Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Collateralized Guaranty of Payment (to Installment Sales Contract #516458), dated
	April 28, 2008
	Parties:

	 	Phoenix Coal Corporation (guarantor), R&L Winn, Inc.
(Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Installment Sales Contract #529232, dated August 13, 2008
	Parties:

	 	Schoate Mining Co., LLC (Buyer) and Whayne
Supply Company (Seller)






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #529232), dated August 13, 2008
	Parties:

	 	Phoenix Coal Corporation (guarantor), Schoate Mining Co.,
LLC (Obligor), and Whayne Supply Company (Seller)






22









 





	 	 	 
	Installment Sales Contract #529236, dated August 13, 2008
	Parties:

	 	Charolais Mining Company, LLC (Buyer) and
Whayne Supply Company (Seller)






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #529236), dated August 13, 2008
	Parties:

	 	Phoenix Coal Corporation (guarantor), Charolais Mining
Company., LLC (Obligor), and Whayne Supply Company
(Seller)






	 	 	 
	Installment Sales Contract #533032, dated September 19, 2008
	Parties:

	 	Charolais Mining Company, LLC (Buyer)
and Whayne Supply Company (Seller)






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #533032), dated September 19, 2008
	Parties:

	 	Phoenix Coal Corporation (guarantor), Charolais Mining
Company., LLC (Obligor), and Whayne Supply Company
(Seller)






	 	 	 
	Limited Guarantee (to Installment Sales Contract #533032), dated September 19, 2008
	Parties:

	 	Phoenix Coal Corporation (guarantor), Charolais Mining
Company., LLC (Obligor), and Caterpillar Financial
Services Corporation






	 	 	 
	Installment Sales Contract #533033, dated September 19, 2008
	Parties:

	 	Charolais Mining Company, LLC (Buyer)
and Whayne Supply Company (Seller)






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #533033), dated
	September 19, 2008
	Parties:

	 	Phoenix Coal Corporation (guarantor), Charolais Mining
Company., LLC (Obligor), and Whayne Supply Company
(Seller)






	 	 	 
	Installment Sales Contract #536249, dated October 20, 2008
	Parties:

	 	Schoate Mining Co., LLC (Buyer) and
Whayne Supply Company (Seller)






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #529232), dated October 30, 2008
	Parties:

	 	Phoenix Coal Corporation (guarantor), Schoate Mining Co.,
LLC (Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Installment Sales Contract #496985, dated November 20, 2007
	Parties:

	 	Schoate Mining Co., LLC (Buyer) and
Whayne Supply Company (Seller)






23









 






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #496985), dated November 20, 2007
	Parties:

	 	Phoenix Coal Corporation (guarantor), Schoate Mining Co.,
LLC (Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Collateralized Guaranty of Payment (to Installment Sales Contract #496985), dated
	November 20, 2007
	Parties:

	 	Phoenix Coal Corporation (guarantor), R&L Winn, Inc.
(Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Installment Sales Contract #496996, dated November 20, 2007
	Parties:

	 	Schoate Mining Co., LLC (Buyer) and
Whayne Supply Company (Seller)






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #496996), dated November 20, 2007
	Parties:

	 	Phoenix Coal Corporation (guarantor), Schoate Mining Co.,
LLC (Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Collateralized Guaranty of Payment (to Installment Sales Contract #496996), dated
	November 20, 2007
	Parties:

	 	Phoenix Coal Corporation (guarantor), Schoate Mining Co.,
LLC (Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Installment Sales Contract #497012, dated November 20, 2007
	Parties:

	 	Charolais Mining Company, LLC (Buyer) and
Whayne Supply Company (Seller)






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #497012), dated November 20, 2007
	Parties:

	 	Phoenix Coal Corporation (guarantor), Charolais Mining
Company, LLC (Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Collateralized Guaranty of Payment (to Installment Sales Contract #497012), dated
	November 20, 2007
	Parties:

	 	Phoenix Coal Corporation (guarantor), Charolais Mining
Company, LLC (Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Installment Sales Contract #497416, dated November 26, 2007
	Parties:

	 	R&L Winn, Inc. (Buyer) and Whayne Supply Company (Seller)






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #497416), dated November 26, 2007
	Parties:

	 	Phoenix Coal Corporation (guarantor), R&L Winn, Inc.
(Obligor), and Whayne Supply Company (Seller)






24









 






	 	 	 
	Installment Sales Contract #498200, dated November 30, 2007
	Parties:

	 	Phoenix Coal Processing Company, LLC
(Buyer) and Whayne Supply Company
(Seller)






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #498200), dated November 30, 2007
	Parties:

	 	Phoenix Coal Corporation (guarantor), Phoenix Coal
Processing Company, LLC (Obligor), and Whayne Supply
Company (Seller)






	 	 	 
	Installment Sales Contract #499935, dated December 11, 2007 (as amended)
	Parties:

	 	Schoate Mining Co., LLC (Buyer) and
Whayne Supply Company (Seller)






	 	 	 
	Installment Sales Contract #500789, dated December 18, 2007 (as amended)
	Parties:

	 	Phoenix Coal Processing Company, LLC
(Buyer) and Whayne Supply Company
(Seller)






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #500789), dated November 20, 2007
	Parties:

	 	Phoenix Coal Corporation (guarantor), Phoenix Coal
Processing Company, LLC (Obligor), and Whayne Supply
Company (Seller)






	 	 	 
	Collateralized Guaranty of Payment (to Installment Sales Contract #500789), dated November 20, 2007
	Parties:

	 	Phoenix Coal Corporation (guarantor), Phoenix Coal
Processing Company, LLC (Obligor), and Whayne Supply
Company (Seller)






	 	 	 
	Installment Sales Contract #501540, dated December 21, 2007 (as amended)
	Parties:

	 	R&L Winn, Inc. (Buyer) and Whayne Supply Company (Seller)






	 	 	 
	Guaranty of Payment (to Installment Sales Contract #501540), dated December 21, 2007
	Parties:

	 	Phoenix Coal Corporation (guarantor), R&L Winn, Inc.
(Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Collateralized Guaranty of Payment (to Installment Sales Contract #501540), dated
	December 21, 2007
	Parties:

	 	Phoenix Coal Corporation (guarantor), R&L Winn, Inc.
(Obligor), and Whayne Supply Company (Seller)






	 	 	 
	Term Loan Note, dated April 1, 2008
	Parties:

	 	Schoate Mining Co., LLC. and Deere
Credit, Inc..






	 	 	 
	Security Agreement - Equipment, dated April 1, 2008
	Parties:

	 	Schoate Mining Co., LLC. and Deere
Credit, Inc..






25









 






	 	 	 
	Guarantee, dated April 1, 2008
	Parties:

	 	Schoate Mining Co., LLC., Phoenix Coal Corporation and
Deere Credit, Inc..






(b) Coal Sale Agreements




	 	 	 
	Agreement for the Sale and Purchase of Coal, dated September 5, 2007
	Parties:

	 	Charolais Coal Sales Company, LLC and Duke Energy Kentucky, Inc.






	 	 	 
	Coal Supply Agreement, dated January 1, 2007
	Parties:

	 	Charolais Coal No. 1, LLC, Charolais Coal
Resources, LLC, Charolais Coal Sales Company, LLC
and Louisville Gas & Electric Company, Kentucky
Utilities Company






	 	 	 
	Coal Supply Agreement, dated June 23, 2009
	Parties:

	 	American Coal Company and Charolais Coal Sales LLC






	 	 	 
	Restated and Amended Coal Supply Agreement, dated August 1, 2007
	Parties:

	 	Charolais Coal Sales Company, LLC
Phoenix Coal Corporation and Kentucky
Utilities Company






	 	 	 
	Coal Supply Agreement, dated December 31, 2007
	Parties:

	 	Western Kentucky Energy Corp. and Phoenix Coal
Corporation, Charolais Coal Sales, LLC






	 	 	 
	Coal Supply Agreement, dated March 16, 2006
	Parties:

	 	Western Kentucky Energy Corp. and WKE Station Two
Inc., R&L Winn, Inc.






	 	 	 
	Coal Supply Agreement, dated January 1, 2008
	Parties:

	 	Phoenix Coal Corporation and Duke Energy Ohio, Inc.






	 	 	 
	Master Coal Purchase and Sale Agreement, dated November 30, 2007
	Parties:

	 	Charolais Coal Sales, LLC (buyer) and Covol Fuels No.2, LLC (seller)
	 
	 	 
	Transfers/Assignments:

	 	Neither party may assign without the prior written consent of the
other party, which consent shall not be unreasonably withheld or
denied; except a transfer of the agreement may be made without
consent in connection with a financing arrangement OR to any person
or entity acquiring all or substantially all of the assets of the
Party where the acquiring party is equally creditworthy as the
assigning party.






26









 






(c) Coal Lease Agreements




	 	 	 
	Coal Mining Lease Agreement, dated November 4, 2008
	Parties:

	 	John K. (“Kenny”) Vaught, Lisa Michelle Vaught
and R&G Leasing, LLC






	 	 	 
	Surface Coal Mining Lease Agreement, dated May 31, 2007
	Parties:

	 	Tom Eubanks, Jeff Eubanks and Phoenix Coal Corporation






	 	 	 
	Surface Coal Mining Lease/Sublease Agreement, dated January 26, 2006
	Parties:

	 	Tom Eubanks, Jeff Eubanks and Phoenix Coal Corporation






	 	 	 
	Coal Representation Agreement, dated March 30, 2006
	Parties:

	 	Edmonson Fuels, LLC and R&L Winn, Inc.






	 	 	 
	Coal Lease Agreement, dated June 7, 2006
	Parties:

	 	Anna Loraine Cundiff and R&L Winn, Inc.






	 	 	 
	Coal Lease Agreement, dated February 28, 2008
	Parties:

	 	Anna Loraine Cundiff and R&L Winn, Inc.






	 	 	 
	Strip Coal Mining Lease, dated October 20, 1967
	Parties:

	 	Sentry Royalty Company and Ayershire Collieries Corporation
	 
	 	 
	Transfers/Assignments:

	 	Section 21 — permits assignment, but the lessee will not
be released unless written consent of the lessor is
obtained.






	 	 	 
	Mineral Lease, dated December 4, 1947
	Parties:

	 	Talmage Rogers, et al. and Ayershire Collieries Corporation






	 	 	 
	Assignment and Sublease Agreement, dated January 22, 2001
	Parties:

	 	Lynx, Inc. and Evergreen Mineral Company, Inc.






	 	 	 
	Surface & Coal Lease Agreement, dated
	Parties:

	 	Tom McDonald Heirs et al. and R&L Winn, Inc.






	 	 	 
	Surface Mining Lease Agreement, dated July 31, 2004
	Parties:

	 	Billy & Patsy Kirtley and R&L Winn, Inc.






	 	 	 
	Minerals Agreement, dated September 13, 2006
	Parties:

	 	Gerald A. Liles & Judith Ann Liles and Renfro Equipment, Inc.






27









 





	 	 	 
	Surface Agreement, dated August 3, 2006
	Parties:

	 	Gerald A. Liles & Judith Ann Liles and Renfro Equipment, Inc.






	 	 	 
	Coal Mining Lease Agreement, dated July 17, 2006
	Parties:

	 	Martha Rogers Haas, et al. and R&G Leasing, LLC






	 	 	 
	Surface Coal Mining Lease/Sublease Agreement, dated September 7, 2006
	Parties:

	 	James H. Edwards and Renfro Equipment, Inc.






	 	 	 
	Surface Coal Mining Lease/Sublease Agreement, dated August 3, 2006
	Parties:

	 	Gerald A. and Judith Ann Liles,
Joseph P. Lilies and Renfro
Equipment, Inc.






	 	 	 
	Surface Coal Mining Lease/Sublease Agreement, dated August 24, 2005
	Parties:

	 	Geibel Lumber Co., Lydia Geibel by
Jon Geibel and Jon Geibel’s Agent for
the Geibel family and Renfro
Equipment, Inc.






	 	 	 
	Amendment to Surface Coal Mining Lease/Sublease Agreement, dated November 11, 2008
	Parties:

	 	Geibel Lumber Co., Lydia Geibel by Jon Geibel and Jon
Geibel as Agent for the Geibel Family and Renfro
Equipment, Inc.






	 	 	 
	Mineral Coal Mining Lease, dated September 13, 2006
	Parties:

	 	Gerald A. and Judith Ann Liles, Joseph P.
Liles and Renfro Equipment, Inc.






	 	 	 
	Coal Mining Lease, dated April 15, 2003
	Parties:

	 	Virginia Avaneil McDonald, Douglas W. McDonald, Pam
and Tommy Davidson, Pam Davidson, Keith and Mya
McDonald, Greg and Suzie McDonald, Ron and Mona
McDonald, Corinne Knight, Gary and Adelia McDonald,
Jolene and James Walker, Jane and Doug Galyen,
Brenda and Frank L. Coomer, Bobby D and Jennifer
Whitson, Deborah W. and Joe Whitson, Bruce and
Marilyn McDonald, Roger Neal and Donna McDonald,
Barbara and Ray Newman, Peggy and Danny Grissom,
Kevin and Sandra McDonald, Donald and Joanna
McDonald, Wanda and Gene Luckett, Phillis A. and
Yost Newman, Billy W. and Patsy Kirtley, and R&L
Winn, Inc.






II. NOTICE REQUIRED




(a) Agreements and Guarantees in Connection with Equipment Financing




	 	 	 
	Security Agreement, dated October 20, 2008
	Parties:

	 	Phoenix Coal Corporation and Brandeis Machinery &
Supply Company (as assigned to Komatsu)






28









 





	 	 	 
	Security Agreement, dated October 20, 2008
	Parties:

	 	Phoenix Coal Corporation and Brandeis Machinery &
Supply Company (as assigned to Komatsu)






	 	 	 
	Security Agreement, dated December 1, 2008
	Parties:

	 	Schoate Mining Co., LLC and Komatsu Financial Limited Partnership






	 	 	 
	Security Agreement, dated February 16, 2009
	Parties:

	 	Schoate Mining Co., LLC and Brandeis Machinery &
Supply Company (as assigned to Komatsu)






	 	 	 
	Security Agreement, dated February 16, 2009
	Parties:

	 	Schoate Mining Co., LLC and Brandeis Machinery &
Supply Company (as assigned to Komatsu)






(b) Coal Lease Agreements




	 	 	 
	Coal Lease and Mining Agreement, dated December 2, 2005
	Parties:

	 	Terry Adkins and Renfro Equipment, Inc.






	 	 	 
	Surface Coal Mining Lease/Sublease Agreement, dated May 30, 2001
	Parties:

	 	Hilltop Haven, Inc. and Renfro Equipment, Inc.






	 	 	 
	Coal Lease and Mining Agreement, dated August 26, 2005
	Parties:

	 	Gon “Kevin” Huh and Renfro Equipment, Inc.






	 	 	 
	Surface Coal Mining Lease/Sublease Agreement, dated June 25, 2007
	Parties:

	 	Richard T. and Tonya L. Williams and Renfro Equipment, Inc.






	 	 	 
	Surface Mining Lease Agreement, dated October 23, 2003
	Parties:

	 	Bobby and Jonnie Dukes and R&L Winn, Inc.






	 	 	 
	Surface Mining Sublease Agreement (of Taylor Lease to the Dukes), dated October 20, 2006
	Parties:

	 	Bobby and Jonnie Dukes and R&L Winn, Inc.






	 	 	 
	Surface Mining Lease Agreement, dated May 24, 2006
	Parties:

	 	John Wesley Horn and R&L Winn, Inc.






	 	 	 
	Surface Mining Lease Agreement (Multiple Leases for Various Properties), dated
	October 23, 2003
	Parties:

	 	Majorie Dukes and R&L Winn, Inc.






29









 





	 	 	 
	Surface Mining Lease Agreement (Multiple Leases for Various Properties), dated
	December 22, 2003
	Parties:

	 	W. Edwin and Exie Bandy and R&L Winn, Inc.






	 	 	 
	Surface Mining Lease Agreement, dated January 13, 2004
	Parties:

	 	Kenneth R. Dukes and R&L Winn, Inc.










30









 








Schedule 4.3-1




Ownership


1. C&R Coal Company, Inc. (“C&R”). R&L Winn, Inc. owns 2,000 shares of common stock of C&R,
representing 100% of the issued and outstanding common stock of C&R.



2. Charolais Coal Sales, LLC (“CCS”). PCC owns 100% of the membership interests of CCS.



3. Charolais Mining Company, LLC (“CMC”). PCC owns 100% of the membership interests of CMC.



4. Evergreen Mineral Co., Inc. (“Evergreen”). PCC owns 200 shares of common stock of Evergreen,
representing 100% of the issued and outstanding common stock of Evergreen.



5. Old Liberty Equipment Co., Inc. (“Old Liberty”). PCC owns 200 shares of common stock of Old
Liberty, representing 100% of the issued and outstanding common stock of Old Liberty.



6. Phoenix Coal Processing Company, LLC (“PCP”). PCC owns 100% of the membership interests of PCP.



7. R&L Winn, Inc. (“Winn”). PCC owns 1,000 shares of common stock of Winn, representing 100% of
the issued and outstanding common stock of Winn.



8. Renfro Equipment Inc. (“Renfro”). PCC owns 100 shares of common stock of Renfro, representing
100% of the issued and outstanding common stock of Renfro.



9. Schoate Mining Co., LLC (“Schoate”). Evergreen owns one (1) unit of Schoate and Old Liberty
owns one (1) unit of Schoate, which units together represent 100% of the issued and outstanding
membership units of Schoate.



10. Phoenix Newco, LLC. PCC owns 100% of the membership interests of Phoenix Newco, LLC.







31









 








Schedule 4.3-2




Ownership


1. None at Closing, provided that the Buyer may designate Phoenix Reorganization Entities after the
Closing pursuant to Section 6.12 of the Agreement and entities so designated shall conform to the
requirements for Phoenix Reorganization Entities contained in Section 4.3 of the Agreement.








32









 








Schedule 4.5




Financial Statements


1. See attached Financial Statements.





33












 










	CONSOLIDATED FINANCIAL STATEMENTS PHOENIX COAL CORPORATION 4 SUBSIDIARY December 31,2006





 









 









	PHOENIX COAL CORPORATION & AFFILIATES Table of Contents December 31,2006 Independent Auditort
Report 1 Consolidated Financial Statements Balance Sheet 2 Statement of Operations 3
Statement of Stockholdera’ Equity 4 Statement of Cash Flows — 5 Notes to Financial Statement 6








 









 












	Mountjcy & Bressler INDEPENDENT AUDITOR’S REPORT To the Board of Directors Phoenix Cod Corporation
& Subsidiaries We have audited the accompanying consolidated balance sheet of Phcsnfic Coal
Corporation & Subsidiaries aj of December 31, 2006 and the related consolidated statements of
operations, stockholders’ equity and cash flows for the year then ended. The consolidated financial
statements are the responsibility of the Company’s management Our responsibility Is to express an
opinion on the consolidated financial statements based on our audit We conducted our audit In
accordance with auditing standards generafly accepted In the United States of America Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also Includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the overall financial statement
presentation. We befievo that our audit provides a reasonable basis for our opinion. in our
opinion, the consoldatad financial statements referred to above present fairly. In ai material
respects, the financial position of Phoenix Coal Corporation & Subsidiaries as of December 31,2008
and the results of their operations and cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America Louisvlle, Kentucky April
30,2007 mountjoybr*” ktr.com 2300 WMartomt Pta« 175 East Main Street, SuMe 200 Th« trim Mansion
ISOflynn Avenue, SuHalOO 335 W Main S«r**» Loington, Kentucky 40507 «0S Citrard Stiaat P.O. Bwittt
loulnlVc. Xcfltucky 40202 Covinpon, Kentucky 41411 Frankfort, Kentucky 40601 1502) 992-1700
(859)155-4950 (459)431-1975 (502)227-9000 (502) 992-4700 fire (859) 2SS-2S7S fu UBS) 431-7771 fix
(502) 227-9400 fa* An tndewndtnl Member of Bator TIty intwntficoal





 









 









	PHOENIX COAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31,2008 ASSETS
Current Assets Cash and equivalents $8,307,088 Restricted cash 1,697,038 Investments 713,077 Trade
accounts recefvable 1,582,136 Accounts receivable — other 203,365 Coal Inventories 256,383 Prepaid
expanses and other current assets 246.119 Total current assets 13,005,214 Property, Plant and
Equipment, net 13,397,672 Goodwill 9,927,059 Other Intangible Assets, net of accumulated
amortization of $26,272 462,787 Other Assets 1.623.240 S 38.415.972 See accompanying Independent
auditor’s report and notes to balance sheet





 









 









	LIABILITIES AND STOCKHOLDER’S EQUITY Current Liabilities Trade accounts payable and accrued
liabilities $3,505,762 Current portion of long-term debt — 3.31 Mg2, Total current liabilities
3,821,184 Reclamation liability 1,538,948 Lons-Term Debt, less current portion $3,315.422
14,044,163 Cthertong4erm liabilities 2,188,271 Stockholder’s Equity Common stock, $.001 stated
value per share, 55,000,000 shares euthorized, 38,392,687 shares Issued and outstanding 38,393
Additional paid-in capital 21,051,649 Accumulated otter comprehensive loss (143,858) Accumulated
deficit (7,118,7781 13,328,406 ?, 36,415,978





 









 









	PHOENIX COAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS Year ended December
31,2006 Coal sales $16,276,283 Cost and Expenses: Cost of coal sales 14,348,085 Selling, general
and administrative expenses 5,132,864 Depreciation and amortization 677.825 Loss from operations
(3, B82,301) Other Income (Expense) Interest expense (1,102,999) Interest Income 30,960 Other, net
(66.4381 ... (1.138,475) Loss before income tax expense {5,020,776) Income Tax (Benefit) Zm___See
accompanying independent auditor’s report and notes to consolidated financial statements





 









 









	PHOENIX COAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY For the
year ended December 31,2006 Accumulated Additional Other Common Stock Paid-in Comprehensive
Accumulated Shares Dollars Capital Income Deficit Total December 31,2003 14,190,000 $14,190
$3,360,310 $ — $ (2.098,002)3 1,276,498 Capital contribution 22,202,667 22,203 t7,044,115 — -
17,658,318 interest rate swap — • — (143,858) • (143,858) Share-based Compensation — - 47,224 — -
47,224 Netloas : ^___= -___(§,020,776) ($.02,0,771?) December31,2006 36,332,667 I 3MM «1.051.648 £
CL&S221 ¥ (7,113,778) m«ff.4W See accompanying Independent auditor’s report and notes to
consolidated financial statements





 









 









	PHOENIX COAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS . Year ended
December 31,2006 Cash Flow From Operating Activities Net I0SS $ (5,020,778) Adjustments to
reconcile net loss to net cash used In operating activities: Depreciation and amortization 677,625
Loss on sale of property and equipment 148,686 Deferred tax provision Share-based compensation
47,224 In-kind Interest 179,192 Write off on license agreement 187,500 Changes in operating assets
and liabilities: Accounts receivable (163,267) Inventories (266,383) Prepaid expenses and other
assets 20,464 Trade accounts payable, accrued liabilities and other liabilities 741.623 Net cash
used In operating activities (3,438,232) Cash Flow From Investing Activities Restricted cash
(1,697,038) Investments (713,077) Payments for other assets principally mine development
(1.433,147) Payments for property and equ^sment (1,024,018) Acquisition (13.610.1381 Net cash used
In Investing activities (18,477,419) Cash Flow From Financing Activities Principle payments on
long-term debt (3,147,149) Proceeds from long-term debt 15,839,958 Financing fees (489,059) Net
proceeds from capital contributions 17.666.31 a Nat cash provided by financing activities
28.870.068 Net Increase In Cash and Equivalents 7,954.417 Cash and Equivalents, Beginning of Year
352.679 Cash and Equivalents, End of Year s fi.307.P9B Supplemental Disclosure: Interest paid * 91Q
797 See accompanying independent auditor’s report and notes to consolidated financial statements





 









 











	PHOENIX COAL CORPORATION & AFFILIATES NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE A-NATURE
OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Qperatlona: Phoenix is
headquartered in Madisorwille, Kentucky with satellite offices in Champaign, Hinds and Louisville,
Kentucky. The Company is engaged in the production and sale of steam coal to utilities and
Industrial fuel consumers. Formed in July 2004 as a Delaware C corporation, the Company was
originally named Dynamic Separations, Inc. (“DSP). Principles of Combination: The Consolidated
Company’s consolidated financial statements include Phoenix Coal Corporation and its affiliates,
Schoate Mining Company, LLC, Crittanden County Coal, Inc. and R & L Winn, Inc. and Old Liberty
Equipment Company and Evergreen Mineral Company, inc. AJ significant intercompany transactions have
been elimfoated. Use of Estimates: The preparation of the consolidated financial statements in
conformity with accounting principles generaly accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liaMWea
and disclosure of contingent assets and liabilities at the date of the consoOdated financial
statements and the reported amounts of revenues and expenses during Ihe reporting period. Actual
results could differ from those estimates. Cash and Equivalents: For purposes of reporting cash
flows, the Company considers all cash accounts that are not subject to withdrawal restrictions or
penalties to be cash or cash equivalents. Accounts Receivable: Trade accounts receivables are
recorded at the invoiced amount and do not bear interest. Customers are primarily Investment grade
companies and quasi-governmental agencies. As a result, we have not experienced any instances of
non-payment and do not currently maintain an allowance for doubtful accounts. Management monitors
customers closely and will record an allowance if trade account balances become potentially
uncoltectfble. Inventory: Inventory Is maintained on a perpetual basis. The Company uses an average
cost per ton ranging from $21.85 to $25.22 on a “clean” coal basis. The Company accounts for parts
inventory using the original cost on a first-in-first-out basis. Parts Inventory Is Included In
other current assets. Property and Equipment: Purchased property and equipment are stated at cost.
The Company provides for depreciation of the purchased depreciable assets on the straight-line
basis with useful lives that range from 5 to 10 years. Depredation expense was $602,723 for the
year ended December 31,2008. The cost of assets sold, retired or otherwise disposed of and the
related allowance for depreciation are eliminated from the accounts and any resulting gafei or loss
is included in operations. Expenditures for maintenance and repairs are charged to expense as
incurred. Expenditures for major renewals and betterments that extend the useful lives of property
and equipment are capitalized. Interest cost fs capitalized for qualifying assets during the period
In which the asset Is being installed and prepared for its Intended use. Capitalized interest cost
is amortized on the same basis as the related depredation. Interest costs capitalized were $48,082
in 2006. Consistent with Statement of Financial Accounting Standards (SFAS> No 144, Accounting
for We Impairment or Disposal of Long-Lived Assets, the Company evaluates long-lived assets for
Impairment and assesses their recoverabilfty based upon anticipated future cash flows. If facts ami
circumstances lead the Company’s management to believe that the cost of one of Its assets may be
Impaired, the Company will reduce the carrying amount to fair value to the extent necessary.
Continued





 









 









	PHOENIX COAL CORPORATION & AFFILIATES NOTES TO FINANCIAL STATEMENTS December 31,2006 NOTE A -
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Deferred Mine Coats:
Deferred mine costs represent the costs incurred to prepare future mine sites for mining and are
amortized over the Ufa of the mine sila Deferred mine expense for the year ended December 31,2008
was $471,825. Asset Retirement Costa: The Company follows Statement of Financial Accounting
Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations,” which addresses
accounting and reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. For the Company, asset retirement obligation
expense represents the systematic accretion and depredation of future mine reclamation costs, which
Includes the costs to reclaim the land disturbed during the mining process and the removal of mine
facilities, equipment, transportation and other support facilities. Asset retirement obligation
expense is the depreciation of future mine reclamation costs as described above. Goodwin and Other
Intangible Assets: Goodwill Is tested at least annually for Impairment in accordance with SFAS No.
142, GoodwW and Other Intangible Assets. Intangible assets are amortized over their respective
useful fives on a straighWIne baslB. Deferred Financing. Fees: Deferred financing fees are
amortized to interest expense over the life of the related loan. Unamorflzed deferred financing
fees were $462,787 at December 31,2008. Prepaid Royalties Rights to leased coal lands are often
acquired through royalty payments. Where royalty payments represent prepayments recoupable against
production, they are recorded as a prepaid asset, and amounts expected to be recouped within one
year are classified as a current asset. As mining occurs on these leases, the prepayment is charged
to cost of coal sales. Revenue Recognition: Under SEC Staff Accounting Bulletin No. 104, Revenue
Recognition, we recognize revenue when all of the following criteria are met: (1) persuasive
evidence of an arrangement exists, (2} delivery has occurred or services have been rendered, (3}
the seller’s price to the buyer Is fixed or determinable, and (4) collectibiHty Is reasonably
assured. In the case of coal we mine and sell, we negotiate a specific sales contract with each
customer, which Includes a fixed-price per ton, a delivery schedule, and terms for payment Royalty
Expense: The coat that the Company mines belongs to other entitles. The Company acquires the right
to mine and sell the coal through various leases. These leases require the Company to pay a royalty
to the owners of the land and the minerals being mined. Royalty expense for the year ended December
31, 2008 was $1,579,355. income Taxes: Deferred Income taxes are provided for temporary differences
arising from differences between the financial statement and tax basis of assets and liabilities
existing at each balance sheet date using enacted tax rates expected to be in effect when the
related taxes are expected to oe paid or recovered. Continued





 









 









	PHOENIX COAL CORPORATION & AFFILIATES NOTES TO FINANCIAL STATEMENTS December 31,2006 NOTE A -
NATURE OP OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Accounting
Pronouncements: On January 1,2008, the Company adopted the Emerging Issues Task Force Issue No.
04-6, Accounting tor Stripping Costs to the Mining Industry (“EfTF 04-6”). EITF 04-8 appOes to
stripping costs Incurred in tha production phase of a mine for the removal of overburden or waste
materials for the purpose of obtaining access to coal that wiB be extracted. Under EITF 04-8,
stripping costs incurred during the production phase of the mine are variable production costs that
are included In the cost of inventory extracted during the period tie stripping costs are Incurred,
As of January 1,2006, the Company adopted Statement of Financial Accounting Standards No. 123
(revised 2004), Shars«Based Payment (“Statement No. 123R”), which requires companies to measure
compensation cost In the statement of Income for all share-based payments (Including employe* stock
options) at fair value. Prior to the adoption of Statement No. 123R, the Company accounted for is
stock options under the Intrinsic value method prescribed by Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employes* CAPB25”) and related interpretations, as permitted
by Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ,
as amended by Statement of Financial Accounting Standards No. 148, Accounting, for Stack-Based
Compensation -Transition and Disclosure (“Statement No. 123*). The Company adopted Statement No.
123R using the prospective method. Under this method, compensation cost for share-based payments to
employees Is based on their grant-date fair value from the beginning of the fiscal period in which
the recognition provisions are first applied. Measurement and recognition of compensation cost for
awards that ware granted prior to, but not vested as of, tha date Statement No. 123R was adopted
are based on the same estimate of the grant-date fair value and the same recognition method used
previously under Statement No. 123. The Company uses the Btacfc-Scholas option pricing model for
its options to determine tha fair value. Statement No. 123R also requires the benefits of tax
deductions In excess of recognized compensation cost to be reported as a financing cash flew,
rather man as an operating cash flow. Prior to the adoption of Statement No. 123R, the Company
accounted for its stock options under the intrinsic value method prescribed by APB 25 and related
interpretations bs permitted by Statement No. 123.





 









 









	PHOENIX COAL CORPORATION 4 AFFILIATES NOTES TO FINANCIAL STATEMENTS December 31,2006 NOTE
B-ACQUISITIONS In 2006, the Company made a series of acquisitions of coal production and reserves
as follows: » Sohoate Mining Company — Company acquired stock of Evergreen Mineral Co. and Old
Liberty Equipment Co., each of which owned 50% of Schoate, in June 2006. Consideration included
cash, assumption of liabilities and $400,000 in common stock of ttie Company. • R&L Winn — Company
acquired stock and R&L Wlrwi in July 2006. Consideration included cash and assumption of ffabiRUes.
* Taylor famify assets — Company acquired stock and assets of Taylor family holdings Including
Crrttenden County Coal in July 2008. Consideration Included cash and assumption of UabSftles. The
fair values of assets acquired and nabrfibes assumed at the acquisition date are as follows:
Schoate R&L Taylor Mining Wing Property Total Current assets $3,417.202 3 131,387 $6,674 5
3.555,733 Property and Equipment 8,071,115 1,289.200 2,604,207 9,844,522 Reserves • 250,000 150,000
400,000 Goodwill 8,150,421 673.322 2,873,055 9,696,798 Assumed Liabilities t3.S88.7551 (528,156)
(3,860.934) r7.977.835t ? 12.049.gg3 ? 1,796,233 1 1,773,013 S 15,612,2,19 The accompanying
consolidated financial statements induce operations of the subsidiaries from the date of
acquisition through December 31,2006. NOTE C—PROPERTY AND EQUIPMENT, NET Property and equipment
consists of the following as of December 31,2006: Land $2,026,968 Building and Improvements 25,424
Preparation plant 1,214,697 Mining equipment 10,564,757 Office equipment 195,962 Vehicles 91.36 ft
14,119,173 Less accumulated depreciation and amortization (721.601) $13,397672





 









 









	PHOENIX COAL CORPORATION & AFFILIATES NOTES TO FINANCIAL STATEMENTS December 31,2006 NOTE D-DEBT
Tha Company has a 52 million secured rfne-of-credlt agreement with Fifth Third Bank for working
capital purposes. The line-of-credit Is collaterallzed by all general business assets of Phoanix
Coal Corporation, including but not limited to aD equipment now owned and hereafter acquired,
accounts receivables and inventory. The line bears Interest at he Libor rate plus 2.72%. The
Company had no outstanding balance on the llne-of-credit at December 31, 2006. Under the debt
agreement, the Company Is subject to certain debt covenants. As of December 31,2006. the Company
was in compliance with all debt covenants or received a waiver, in April 2007, the line of credit
was amended to Increase the available Una to $3.4 million and increase interest to libor to 4%. In
December 2006, the Company received a $500,000 advance as part of a bridge financing agreement
associated with an acquisition completed in January 2007. The advance was repaid In January 2007
and reissued as part of the full bridge financing of $3.5 milKon (See Note K). Long-term debt at
December 31,2006 consisted of the fotfowlng; Note payable to bank of $41,667 plus Interest starting
January 2007 with interest at Libor plus 2.75% (8,1% at December 31, 2006}. Payments are made In
monthly installments. The loan is collaterallzed by all assets and has a maturity date of December
2011. $1,339,058 Equipment notes payable, interest at 6.22%. Payments are made in monthly
Installments. The loan is coBateraBzed by related assets and has maturity dates through June 2008.
1,157,017 Note payable to bank with interest at Libor plus 2.75%, Monthly payments of $116,667 plus
interest beginning January 2007. Loan is collaterallzed by substantially all assets and has a
maturity date of December 2011. 7,000.000 Subordinated note payable — MVC Capital with Interest
payable quarterly at 15% per annum. Interest in excess of 10% to be rolled into principal Holder
has option on June 8, 2007 to convert Interest to shares or common stock at defined value with same
option June 2008. 7,179,192 Advance on bridge financing (see above) 500,000 Advanced coal purchase,
repayable monthly through December 31,2007, interest at 2.8% 183.418 17,369,583 Less: current
maturities f3.3lS.42ft IHW.1W Expected maturities of notes payable are as follows: 2007 $3,315,422
2.325,017 1,739,950 1,400,000 8,679,199 ill7 i?ngi5u3 Continued





 









 









	PHOENIX COAL CORPORATION & AFFILIATES NOTES TO FINANCIAL STATEMENTS December 31.2008 NOTE D-DEBT -
Continued in 2006,the Company entered into an Interest rate swap transaction whereby the interest
payments on a notional dollar amount of $7 million are converted to a fixed rate of 8.10% compared
to a variable rate of UBOR remeasured on a quarterly basis. The swap agreement Is tor 6 years
expiring December 2011. The Company has designated this agreement as a cash flow hedge. The value
of the derivative as of December 31, 2005 amounted to $143,858 and the related liability Is
included in accounts payable and accrued liabilities. NOTE E-4NCOME TAXES The components of the
Income tax expense are: Current $ Deferred s___S i— A reconciliation of differences between the
statutory U.S. federal Income tax expense (benefit) and the Company1 s effective tax benefit
follows: U.S. statutory rate $ (1,691,532) State taxes, net of federal benefit Permanent items
(94,178) Valuation allowance 1.785.71Q Income tax expense t The income tax expense attributable to
discontinued operations presented on the consolidated statement of operations Is reflective of
statutory tax rate as differences noted above were attributable to continuing operations. The
expense for Income taxes includes federal and state income taxes currently payable or receivable
and those deferred or prepaid because of temporary differences between the financial statement and
the tax basis of assets and liabilities. The Company records income taxes under the liability
method. Under this method, deferred income taxes are recognized for the estimated future tax
effects of differences between the tax basis of assets and liabilities and their financial
reporting amounts based on enacted laws. The deferred tax assets and liabilities recognized in the
consolidated balance sheet are comprised of the following: Deferred tax assets: Net operating loss
carry forwards and tax credits $2,977,666 Share based cmmpensat’on 18,900 Other 31.371
3,028,237 Deferred tax liabilities: Tax over book depreciation (1,228.559) 1,801,878 Valuation
allowance fl.aoi.878i Net deferred tax ft Continued





 









 









	PHOENIX COAL CORPORATION & AFFILIATES NOTES TO FINANCIAL STATEMENTS December 31,2006 NOTE B-4NCOME
TAXES — Continued As a result of losses from operations, management has recorded a valuation
allowance against the total deferred tax asset as they do not believe Ft Is more likely tfian not
these assets will be realized. At December 31, 2006, the Company had available net operating loss
carryforwards, to reduce future taxable income, of approximately $7,000,000. NOTE F-C0NCENTRAT1ONS
For Ova year ended December 31, 2008, the Company’s two primary customers comprised approximately
93% of coal sales. Accounts receivables due from the two primary customers were $960,795 at
December 31,2006. NOTE C-COMIUUTMENTS AND CONTINGENT LIABILITIES In the normal course of business,
the Company makes various commitments and Incurs certain contingent liabilities including
Eabflltlea related to reclamation costs and financial obligations in connection w»» mining permits
that are not reflected in the accompanying balance sheet The Company does not anticipate any
material losses as a result of these transactions. According to KRS Chapter 350, the Company is
required to post reclamation bonds to assure the reclamation work la completed Outstanding
reclamation bonds totaled approximately $8 million at December 31,2006. The Company leases certain
office space and mining equipment over long-term operating leases running through 2009. The office
lease contains an automatic renewal on a monthly basis for an additional two years after the
Initial term which has bean Included In the summary. Future minimum lease commitments as of
December 31 under noncancalable operating leases are as follows: 2007 $1,154,640 2008 1,126,880
2009 334,620 2010 34.320 3 2,650,470 A significant amount of the Company’s coal reserves are
controlled ftrough leasing arrangements and non-cancellable royalty lease agreements under which
future minimum lease payments are due.





 









 









	PHOENIX COAL CORPORATION * AFFILIATES NOTES TO FINANCIAL STATEMENTS December 31.2006 NOTE H—COM
MON STOCK The Company has conducted four separate equity transactions (n which It issued common
stock. Although each transaction was designated as a new series, the stock issued for each series
was all common stock with the same rights and privileges. A summary of the transactions follows:
Per Common Paid-in Shares Share Stock Caplt?) ipJa! Inittaf-Common 12,750,000 $ .19 $12,750
12,641,763 9 2,654,513 Series A 8,370,000 .50 8,370 4,176,630 4,185,000 Series B 9,170,000 .75
9,170 8,868,330 8,877,500 Series C 6.102.6B7 125 6.103 ,.7,622,231 7,628,334 3g.392.gg7 3 36383
21,308,954 21,345,347 Expenses (304,5291 (3Q4,g29) 821004.425 S2j.ft4Q.a-f 8, In January 2007, the
Company completed the Series C transaction resulting In the issuance of an additional 831,440
shares and $1,039,300 fri proceeds. NOTE l-STOCK INCENTIVE PLAN The Company’s Stock Incentive Man
(the “Incentive Plan”) reserved 3,057,000 shares of the Company’s common stock for awards to
officers, other selected key management employees and members of the Board of Directors of the
Company. The Incentive Plan provides the Board of Directors with the flexibility to grant either
incentive or nonstatutory stock options (“Awards”). The Incentive Plan calls for the adjustment of
shares awarded under the plan in the event of a split Stock options are generally subject to
vesting provisions of 25% at the end-of-year one from the date of grant and then evenly over 48
months. The options are granted at a price equal to 100% of the fair value of the Company’s common
stock on the date of grant and have a ten year term. Information regarding stock option activity
under the Incentive Plan follows for the year ended December 31,2006; Option Average Common
Exercise Contract Shares Price , Ufo Options outstanding at January 1 2,250,000 $ .25 10 Granted
820,000 .50 10 Exercised Cancelled f25.0001 .50 Options outstanding at December 31 3.045.000
Options exercisable at December 31 1-383.628 8 .25, Continued





 









 









	PHOENIX COAL CORPORATION & AFFILIATES NOTES TO FINANCIAL STATEMENTS December 31,2006 NOTE 1-STOCK
INCENTIVE PLAN — Continued Compensation cost of stock option grants is recognized straight-line
over the options’ vesting periods. Compensation expense related to stock options for the ysar ended
December 31,2006 was $47,224. As of December 31, 2006, there was approximately $207,000 of
unrecognized compensation cost related to the unvested stock options. The options’ fair value was
determined using the Black-Schcles option pricing model. Expected vdafih’Ues are based on
comparable company historical stock movement, and other factors. The cost relating to the
stock-based compenaatton plans !s Included in selling, general and administrative expenses in the
accompanying Consolidated Statement of Operations. Weighted average fair value per share of options
granted $ .28 per share Assumptions (weighted average): Risk free interest rate 4.52% Expected
dividend yield 0.0 Expected volatility 0.40 Expected life (in years) 10.0 NOTe J-RELATED PARTY
TRANSACTIONS The Company regularly enters Into transactions with shareholders and/or affiliated
entities that have some level of common ownership with the Company. A summary of the related party
transactions and balances for the year ended and as of December 31,2006 follows; Sales $2,466
Expenses: Consulting fees 766,000 Rent 27,230 Miscellaneous 5,393 Accounts receivable 57,655
Accounts payable 16,464





 









 









	PHOENIX COAL CORPORATION & AFFILIATES NOTES TO FINANCIAL STATEMENTS December 31,2006 NOTE
K-SUBSEQUENT EVENTS In January 2007, the Company completed the following transactions; • On January
2,2007, the Company completed an asset and stock acquisition agreement related to CharWais
Corporation and related entities for a total consideration of $21.7 million principally allocated
as follows: Real property $600,000 Plant and equipment 14,000,000 Minerals 1,500,000 Goodwill
5,gCQ,pQQ, As part of the purchase transaction, the sailer provided financing amounting to $3.5
mfflton. The note accrued Interest at 8.75% and matured January 31,2007. The note was repaid
through the proceeds of the bridge financing noted below. The Company also entered into a note with
the seller amounting to $9.2 million with fixed rate of interest at 8.75%. The note matures June
30, 2007. The seller also received 434,640 common shares of Company stock at a $1.25 per share
value as part of the transaction. • In connection with the above acquisition, the Company entered
into a new credit agreement on January 25, 2007 amounting to $4,135,600 denominated in Canadian
dollars (approximately $3.5 minion in U.S. dollars). The note payable accrues interest at 12% per
annum and is repayable on or before June 29,2007. In addition to the interest, the Company paid a
bonus to the creditor of $262,500 which was payable with 210,000 shares of common stock at a value
of $1.26 per share.





 









 









	INDEPENDENT AUDITOR’S REPORT lb the Board of Directors Phoenix Coal Corporation & Subsidiaries We
have audited the accompanying consolidated balance sheets of Phoenix Coal Corporation &
Subsidiaries (the Company) as of December 31, 2007 and 2006 and the related consolidated statements
of operations, stockholders’ equity and cash flows tor the years ended December 31, 2007, 2006 and
2005. (See Note A), The financial statements are the responsibility of the Company’s management Our
responsibility is to express an opinion on the financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States
of America. Those standards require that we plan and perform die audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial statements, assessing
the accounting principles used and significant estimates made by management, as weU as evaluating
the overall financial statement presentation. We believe tiiat our audits provide a reasonable
basis for our opinion. In our opinion, the financial statements referred to above present fairly,
in all material respects, die financial position of Phoenix Coal Corporation & Subsidiaries as of
December 31,2007 and 2006 and die results of then- operations and cash flows for the years ended
December 31, 2007, 2006 and 2005 in conformity with accounting principles generally accepted in die
United States of America. The accompanying financial statements have been prepared assuming that
die Company will continue as a going concern. As discussed in Mote A to die consolidated financial
statements, the Company has incurred a net Loss for fiscal years 2007,2006 and 2005 and had a
working capital deficiency of $18,636,258 as of December 31, 2007. These conditions raise
substantial doubt about its ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty. “Mounrjoy &
Bressler lAP” Louisville, Kentucky May 2, 2008 except for Note L as to which the date is June
13,2008.





 









 









	PHOENIX COAL CORPORATION & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31 2007 2006 ASSETS
Current Assets Cash and equivalents $381,374 $8,307,095 Investments 153,100 713,077 Trade
accounts receivable ‘. 4314,385 1,582,136 Accounts receivable —other 16,858 203,365 Coal
inventories 1,072,697 256383 Prepaid expenses and other current assets 526,664 246,119 Total
current assets 6,465,078 11,308,176 Property, Plant and Equipment, net 29,028382 13,397,672
Restricted Cash 2,312,500 1,697,038 Goodwill 32,393,227 9,927,059 Mine Development Costs, net of
accumulated amortization of $210,658 in 2007 and $0 in 2006 1,464,831 471,825 Deferred Financing
Flees, net of accumulated amortization of $54,545 in 2007 and $26,272 ul 2006 545,455 462,787 Other
Assets 1,116,838 1,151,415 S 73,326,511 $38,415,972 UABHXTXES AND STOCKHOLDERS’ EQUITY Current
Liabilities trade accounts payable and accrued liabilities ,,... $8,896,898 $3,505,762 Seller
provided financing 7,794,000 — Notes payable 6,072,240 — Current portion of long-term debt 2338,198
3,315,422 Total current liabilities 25,101,336 6,821,184 Reclamation liability , 3,757353 1,536,948
Long-Term Debt, less current porlion 7,348,915 14,044,163 Other long-term liabilities 707,796
2,188371 Stockholders1 Equity Preferred stock, cumulative and convertible $.001 stated value per
share, 40,000,000 shares authorized, 37,190,267 shares issued and outstanding 37,191 — Common
stock, $.001 stated value per share, 105,000,000 shares authorized, 37,701,440 shares in 2007 and
345392,667 shares in 2006 issued and outstanding 37,701 36,393 Additional paid-in capital
67,984,236 21,051,649 Accumulated other comprehensive loss — (143358) Accumulated deficit
(31,648,017) (7,118,778) 36,411,111 13,825,406 $73326^11 $38,415,972 See accompanying independent
auditor’s report and notes to consolidated financial statements





 









 









	PHOENIX COAL CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended
December 31 2007 2006 2005 Coal sales $67,184,104 $16,276,283 $92^40 Cost and Expenses: Cost of
coal sales 62,175,073 14,348,095 849,473 Selling, general aad administrative expenses 14,920,851
5,132,864 970,660 Depreciation and amortization 3,143,365 677,625 55,353 Goodwill impairment
2,873,055 —¦ — 83,112344 20,158,584 1,875,486 Loss from operations , (15,928,240) (3,882^01)
(1,782,646) Other Income (Expense) Interest expense, including financing Eee amortization
(5,044,174) (1,102^99) (1,599) Interest income 106,692 30,960 2^511 Foreign currency adjustment
(498,794) — — Other, net.. .’ (1,816,730) (66,436) 12JK5 (7,253,006) (1,138,475) 12,967 Loss before
income tax expense (23,181,246) (5,020,776) (1,769,679) Income Tax 70,155 — — Net loss
3(23,251,401) $(5,020,776) (1,769,679) Basic net loss per share $ (.63) $ (.20) $ (.14) Weighted
average common shares outstanding 37,141,490 25,358,789 12,787,041 See accompanying independent
auditor’s report ami notes to consolidated financial statements





 









 









	PHOENIX COAL COBPOHATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS” EQUITY For the
years ended December 31, 2007,2006, and 2005 Accumulated ,, ^f^”?” ****. P“foari Stock ru,,^1
Com^aivi Accumulated Sharea Dalian Sharei Dalian Capital Intonn Deficit Ibtal December 31, 2004
6,111,684 $6,112 — $ — $1,181388 $ — $ (328323) $85*177 Capital contribution— common stock 8,078316
8,078 .— — 2,178,922 — — 2,187,000 Net low — — — — ___— — (1,769,679) (1,769379) December 31, 2005
14,190,000 14,190 — — 3,360,310 — (2398302) 1,276.498 Capital contribution — common stock 22302,667
22,203 — — 17,6*4,115 — — 17,666318 Interest rate swap — — — — — (143,558) — (14X858) Share-based
camperoarioii. . — — — — 47,224 — — 47,224 Net loss — — — — — — (5,020,776) (5.020,776) December
31,2006 35392,667 $36,393 — — 21,051^49 (143358) (7,118,778) l332Sj406 Capital contribution— common
stock 1,591,440 1,591 — — 1,987,696 — — 1.989.2B7 Capital contribution — preferred stock — —
36,207,600 36,208 43371,732 — — 43,407,940 Common sharei converted to preferred share* (982,667)
(983) 982,667 983 — — — — Exercfceot stock options... 300,000 300 — — 124,700 — — 125300 Interest
rate swap — — — — — 143,858 — 143,858 Share-fcased compensation— option* .. — — — — 948359 — —
948^59 Share-based compensation — restricted sock 400,000 400 — — 499,600 — — 500300 OMdend» — — —
- — — (U77338) (1.277,838) Net low — — — — — — (23351,401) (23,251,401) December 31,2007 37,701,440
$37,701 37,1901267 $37,191 $67,584,236 $ — $(313*8317) $36,411,111 See accompanying independent
auditor’s report and notes to consolidated financial statements





 









 









	PHOENIX COAL CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Far the Years Ended
December 31 2007 2006 2005 Cash Flow Prom Operating Activities Net toss $(23051,401) $(5,020,776)
J(l,769,679) Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortteation •. 4,145,230 677,625 55053 Loss tm sale of property and equipment
1,810,138 148,686 — Interest rate swap 224,686 — — Rsreign currency lass .. 81,227 Share-based
compensation 1,448,859 47,224 — Goodwill impairment 2073055 — — In-kind interest 350^300 179,192 —
Vfttte off on license agreement — 187,500 — Reclamation liability 1,244,438 — — Changes in
operating assets sod liabilities: Accounts receivable (2045,742) (163,287) (117,524) Inventories
(816,314) (256083) — Prepaid expense* and other assets (280045) 20,464 (345) Trade accounts
payable, accrued liabilities and other liabilities 5010,299 741,523 274,407 Net cash used in
operating activities (9,406,060) (3,438032) (1057,788) Cash Flow Vtam Investing Activities
Restricted cash (615,462) (1,697,038) — Payments for investments 559,977 — — Proceeds from sales of
investments — (713,077) — Payments tor Other assets principally mine development and mineral rights
(1039042) (1,433,147) (250093) Proceeds from sale of property and equipment 6006073 — (733,110)
Payments for properly and equipment (1,549,511) (1,024,018) — Acquisitions (31092,433) (13010039) —
Net cash used in invatin| tctbitla* (28030098) (18,477,419) (983003) Cash How From Financing
Activities Principal payments on long-term debt (21,618,644) (3,147,149) (T6*3*7) Proceeds from
long-terra debt 4,660,042 15039058 — Proceeds from short terra nates 5,991,013 — 220,000 Payments
on equipment financing (1,007,250) — — Financing toes (222032) (489059) — Decrease in other long
terra liabilities (580/482) — — Net proceeds from capital contributions 42,488,589 17,666318
2,187000 Net cash provided bj financing activities 29,711036 29,870068 2030,653 Net (Decrease)
Increase In Cash and Equivalents (7,925,722) 7,954^17 (210338) Cash and Equivalents, Beginning
<rf Kar 8007,096 352079 S63017 Cash and Equivalents, End of Year $381074 $8007096 $352079
Supplemental Dlsdcrans Intcrcstpaid $3,708,418 $910,797 $ t,599 Non-Cash Investing and financing
Activities! ScOer provided financing of acquisition $7,794000 $ — $ — Seller provided financing
for equipment purchases $10093081 $ — $ — Stock issued in connection with acquisition t S430QO $ —
$ — Stock issued for financing fees , i 862000 $ — S — See accompanying independent auditor’s
report and notes to consolidated financial statanents





 









 









	PHOENIX COAL CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 3%
2007,2006* and 2005 NOTE A— NATURE OF OPERATIONS AND SUMMARY O* SIGNIFICANT ACCOUNTING POLICIES
Natum of Qpemtleru? Phoenix Cod Corporation & Subsidiaries (the “Company”) ii headquartered in
Madlsoiwule, Kentucky with satellite offices in Ouunpaigb, Illinois and Loufsvflie, Kentucky. The
Company is engaged in tho production and sale of steam coal to utUftiea and industrial fuel
consumers. Formed en July 2004 at a Delaware C corporation, the Company was originally named
Dynamic Separation*, Inc. (“DST*). Principles of Consolidation; The Company’s consolidated
financial statements Include Phoenix Coal Corporation and its affiliates Scaoate Mining Company,
(XQ R & L Winrt, Btcj Crtttenden County Coal, lie; Evergreen Mineral Company, lac; Old liberty
Equipment Company, Inc; Maroon Sedamadoo IXC; Phoenix Coal Processing Company, LLQ Dynamic
Separations, 1XQ Oiaralais Mining Company, LLQ Charolaia Coal Sale*, IXC and Pact Resources, IXC.
Basis of Presentation: The Company’s consolidated financial statements have been prepared on the
going concern basis which contemplate* the realization of assets and liquidation of liabilities in
the normal coarse of business. As shown in the accompanying financial statements, the Company ha*
incurred net losses of $23,251,401, $5,020,776, and $1,769,679 for the year* ceding December 31,
2007,2006, and 200% respectively. The 03nroairy%curxoi«liab^ continue as a going concern Is
dependent on management’s ability to raise required funding through future equity issuances, asset
sale* or a combination thereof and increase cash flow through improved operating results. Thtj»
consoJidated fimTM^l stalenKntj tiq not iodude ajiy adjustments to the recoveiabUity and
classification of recorded asset amount* and classification of liabilities that slight be
necessary, should the Company be unable to continue a* a going concern. All monetary referent*!
expressed herein are references to United States dollars. Use of Estimate* The preparation of the
consolidated financial statements in conformity wit* accounting principles generally accepted in
the United States of America requires management to reake estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and lUbmties at the
dato rf the conMlidated financUl Jtaten^nB and ti»e report^ anwunta of revenues and expenses during
the reporting period. Actual results could differ from those estimates. Cash and Equivakna: Ror
purposes of reporting cash flows, the Company considers aU auh accounts that are not subject to
withdrawal restrictions or penalties to be cash or cash equivalents. Account! Receivable: Trade
accounts receivables are recorded at the Invoiced amount and do not bear Interest Customers are
primarily investment grade companies and quasi-gOTommenlal agencies. As a result, the Company has
not experienced any instances of non-payment and do not currently maintain an allowance tor
doubtful accounts. Management monitors customers closely and will record an allowance if trade
account balances become potentially uncollectible. hmtnlory; Inventory is maiatataed on a perpetual
basis. The Company value* inventory at the lower of cost or market with cost determined using
average cost per ton. Inventory values ranged from $21.99 to $29.02 and $2135 to $23XL In 2007 and
2006; respectively. These ranges are stated on a “dean” coal baste. The Company accounts for parts
inventory using the original cost on a flrst-in-flrst-out basis. Parts inventory Is Included in
other current assets. Properly and Equipment: Purchased property and equipment are stated at coat
The Company provides tor depreciation of the purchased depreciable assets on the straight-line
basis with useful lives that range from 3 to 10 years. Depredation expense for th
e years ended
December 31, 2007,2006, and 2003 were $2,652,542, $602,723, and $47,920, respectively. The cost of
assets sold, retired, or otherwise disposed of and the reliited *Uowan« tor deprmation is
eliminated frorn the accounts arid any resulting gain or loss is included in operations.
Expenditures for maintenance and repairs are charged to expense as incurred. Expenditures for major
renewals and beltermenta that extend the useful live* of property ami equipment are capitalized.
Interest cost is capitalized for qualifying assets during the period In which the asset is being
installed and prepared for its intended use. Capitalized interest cost is amortized on the same
basis as the related depredation. Interest costs capitalized far the periods ended December
31,2007,2006 and 2005 were $0, $46,682 and $0, respectively. Consistent with Statement of Financial
Accounting Standards (SFAS) No. 144, Accounting fir the Impairment or Disposal of Leng-ZJvcd
Assets, the Company evaluates long-lived assets for impairment and assesses their reeoverabiUty
based upon anticipated future cash flows. If tacts and circumstance! lead the Company’s management
to believe that the coat of one of its assets may be impaired, the Company will reduce the carrying
amount to lair value to the extent necessary. Mine Development Costs Mine development costs
represent the costs incurred to prepare future mine sites for mining and are amortized over the
life of the mine site. Aa of December 31,2007 and 2006, the net book value of mine development
costs included $882396 and $471,323, respectivery, attributable to properties where the Company was
not currently mining and, therefore, the mine development costs were currently not being amortized.
Mineral Reserves and Mining Righto: Mineral reserves and mining rights, which an included in Other
Assets, are recorded at cost, or at fair value in the case of acquired businesses. As of December
31, 2007, the net book value of mineral reserves totaled S$89,434. This entire





 









 









	PHOENIX COAL C0RFOKATI0N & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2007, 2006, and 2005 NOTE A— NATURE 0* OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued) amount is attributable to properties when the Company was not
current]; engaged In mining operations and, therefore, the assets-were not currently being
depleted. There were no mineral reserves recorded on the balance sheet at December 31,2006.
Goodwill and Other faumgjbk Assets: Goodwill Is tested at least annually for impairment to
accordance with SPAS No. 142, Goodwill and Other Intangible Assets. Intangible assets are amortized
over their respective useful lives on a straight-line basis, to June 2007, the Company dosed itl
OMteoden County Coal mining operation due to uneconomical mining conditions. As a result of the
dosing, the Company deducted from its operating results goodwill impairment of 12373,(03 and
unamortued mine development costs of $244,849.” Deferred Financing Fees: Deferred financing fees
are amortized to interest expense over the lire of the related loan. Unamortized deferred financing
fees at December 31,3007 and 2006 were $545,453 and $462,787, respectively. Interest paid, as a
supplemental disclosure on the Consolidated Statement of Cash Flows, includes cash paid for
deferred financing fees. Prepaid Royalties Rights to leased coal lands are often acquired through
royalty payments. Where royalty payments represent prepayments recoBpable against production, they
are recorded as a prepaid asset, and amcnrnti effected to be recOTrwd within one year are
classified a» a current asset. As mining occurs on these leases, the prepayment is charged to cost
of coal safes. Ami Statement Obligation!: SH4S No. 143, “Aecountrnj *» Asset Retirement ObRgattens”
(“S7AS No. 14}”) addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived asset! and the associated asset retirement costs, fhe Company’s
asset retirement obligation (“AKO”) liabilities primarily consist of spending estimates related to
reclaiming surface bad and support faculties at both, surface and underground mioes in acconiaiwe
widi fede^ and state redaraation Jaws as defined by each mining permit The Company estimates Its
ARO liabilities fee final reclamation and mtae closure based upon detailed engineering calculations
of the amount and tuning of the future cash spending for g third parry to pcrfonn the required
work. Spending estimates are escalated for inflation and then discounted at the credit-adjusted
risl-free rate. The Company records an ARO asset associated vdeh the discounted liability for fins!
reclamation and nine closure. The obligation and corresponding asset are recognized in the period
in which the liability is incurred. The ARO asset is amortized on the units-of-production method
over its expected life and the ARO liability is accreted to the projected spending date. As changes
m estimates occur (such as mine plan revisions, changes in estimated costs or changes hi timing of
the performance of reclamation activities), the revisions to the obligation and asset are
recognized at the appropriate credit-adjusted risk-free rate. The Company alio recognizes an
obligation for contemporaneous reclamation uobUWes Incurred as a result of surface mining.
Contemporaneous reclamation consists primarily of grading, topsoil replacement, and rovegetation of
backfilled pit areas, A progression of the reclamation liability recorded on the balance sheet is
as follows: 2007 2006 Balance at beginning of year $1,536,948 $ — Acquisitions 821,000 1,514,443
Accruals 1,339,052 22^00 Accretion , 60,353 — Balance at end of year $3,757,353 $1.536.948 Revtnus
Recognition: The Company recognizes revenue when all of the following criteria an met (1}
persuasive evidence of an arrangement exists, (2) delivery h
as occurred or services have been
rendered, (3) the seller’s price to the buyer Is fixed or deterrnuiable, and (4) CQllcctability la
reasonably assured. In the case of coal that Is mined and sold, a specific sales contract is
negotiated with cash customer, which includes < feed-price per fern, a delivery schedule, and
terms for payment Royalty Expense: The coal that the Company mines belongs to other entitle*. The
Company acquires the right to mine and sell the coal through various leases, These leases require
the Company to pay a royalty to the owners of the land and the minerals being mined. Royalty
expense for the years ended December 31, 2007, 2006, and 2005 were $331,015, $841,391, and $0,
respectively. Income Ttuet: Deferred income taxes are provided for temporary differences arising
front differences between the financial statement and tax basis of assets and liabilities existing
at each balance sheet date using enacted tax rates expected to Iwta effect when the related taxes
are expected to be paid or recovered. Accounting Pronouncements On January 1, 2006, the Company
adopted the Emerging Issues Task Force Issue No. 04-6, Accounting for
        .W«a^Ce^«iite.Ml»«i^.liiAuiry{“EOT removal of overburden or waste materials for the purpose of
obtaining access to coal that will be extracted. Under B3TF 04-6, stripping ousts incurred during
the production phase of the mine are variable production costs that are included in the cost of
inventory extracted during the period the stripping costs are incurred.





 









 









	PHOENIX COAL CORK>HATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2007, 2006, and 2005 NOTE A—NATURE OF OPERATIONS AND SUMMARY OT SIGN1IJCANT ACCOUNTING
FOUCIES (Cwrtfautd) As of January 1,2006, the Company adopted Statement of Financial Accounting
Standards No, 123 (revised 2004), Share-Based Payment (“Statement No. 123R”), which required
companies to measure compensation cost in the statement of income for all share-based payment
(including employee stock options) at fair value. Prior to tbs adoption of Statement No. 123R, the
Company accounted for its stock optioni under the intrinsic value method prescribed by Accounting
Principle* Board Opinion Ha. 25, Accounting for Stock. Issued to Employees (“AFB 25”) and related
interpretation!, ax permitted by Statement of Financial Accounting Standard? No. 123, Accounting
for Stock-Based Compensation, as amended by Statement of Financial Accounting Standard* No. 148,
Accounting for Stock-Based Compensation. In June 2006, [be Financial Accounting Standards Board
issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of
FAS109, Accounting for Income taxes (FIN 46% to create a angle model to address accounting for
uncertainty in tax positions. HN 4S clarifies the accounting for irtfx>meuxes\ representing a
nunimn^ before beu^ reeojprfzed in Ihe finandal statements and penalties, accounting in Interim
periods, dactosure and transidoaFm 48 is efeetivefw fiscal yeara The Company wm adopt FIN 48 m
erf January l,2rx& as required Ttec^ earnings and other accounts as applicable. The Company
does not expect the adoption of FIN 48 to materially impact the Company’s financial positfon and
results of operations. In September 2006, the FASB issued SEAS No. 157 — Fair Value
Measurements—which enhances existing guidance for measuring assent and liabilities using tair value
and requires additional disclosure about die use of fair value for measurement. The Stair ment is
effective for financial statements Issued for fiscal yean beginning after November IS, 2007, and
interim periods within those fiscal years. The Company has not yet evaluated the impact of SEAS No.
157. SPAS No. 159, The Fair value Option for Financial Assets and financial liabilities—an
anKsidmerit of SFAS Na 115 permits, but does not require, entities to measure many financial
instrument* at fair value. The objective it to provide entitles with an opportunity to mitigate
volatility In reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions. Entities electing this option will
apply it when the entity first recognizes art eltgible instrument and will report unrealized gains
and losses on such instruments in current earnings. This statement 1) applies to aD entitles, 2)
specifies certain election dates, 3) can be applied on an inslrument-by-inslmment basis with some
exceptions, 4) Is Irrevocable and 5} applies only to entire instruments. Demand deposit liabilities
are explicitly excluded as qualifying for fata value. SFAS No. 159 is effective for financial
statements issued fc* fiscal yeaisoeginuing after Nw^ election option that -would allow the Company
to elect the fair value option for existing eligible items as of the beginning of a fiscal year
that begins on or before November IS, 2007. The Company hat not early adopted SFAS 159 and does not
expect the adoption of SFAS 159 to materially impact the Company’s consolidated financial
statements. In December 2007, the EASE issued Statement on Financial Accounting Standards No. 160,
NoncontsvUing Interests in Consolidated Ftnanciai Statements, an amendment ofARB No. SI (“Statement
No. 160”). Statement No. 160 requires that a Eonctmtroliing Interest’ (minority inte
rest) in a
consolidated subsidiary be displayed in the consolidated balance sheet as a separate component of
equity. The amount of net income attributable to the noncatitroUing interest wDI be included in
consolidated net income cm the face of the consolidated statement of income. Statement No. MO also
Includes expanded disclosure requirements regarding the interests of die parent and its
noncontroliftig interest. Statement No. 160 is effective for fiscal years beginning on or after
December IS, 2008. Early adoption is not allowed. The Company is still analyzing Statement No, 160
to determine what the Impact of adoption will be. In December 2007, the FASB issued SFAS No.
141(R),’“ftafce» Combinations,” which replaces SFAS No. 141. SFAS No. 141(R) significantly changes
the principles and requirements for bow the acquirer of a business recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the aequiree. This statement also provides) guidance for the recognition
and measures^ c^goodwul acquired fo a mnune^ that will enable users of the financial statements to
evaluate the nature and financial effects of the business combination. This statement applies
prospectively to business combinations for which the aexjuisidan date ii on or after tx« r»ginmng
of the flrit annual rcrwiting period beginning on or after December IS, 2008. The Company is in the
processof dcteririmm|uie effect, n* any, the adoption of SFAS No. 141(R) will have on its financial
statements. In March 2008, the FASB issued FAS No. 161, “Discloturcs about Derivative Iwtmmtm and
Htdging Activities”, (“JAS 161”) which is intended to Improve financial reporting about derivative
instruments and hedging activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity’s financial position, financial performance, and cash flows.
FAS 161 is effective for financial statements issued for fiscal years and interim r^riods begiiming
after November 15, Z003. The Cornpany is currentry e^luattag the impact of FAS 161 on its
consolidated financial statements. Redasttpcmiara: Certain amounts in 2006 and 2005 have been
reclassifled to conform with current year presentation. The reclissiflcations had no impact on net
loss or stockholder’s equity.





 









 









	PHOENIX COAL CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 20Q7, 2006, and 2005 NOTE B — ACQUISITIONS In January 2007, the Company acquired
assets and stock of die Charolais Corporation and related entities for a total cortsideratton of
$21,924,000 principally allocated as follows: Real property $557,000 Plant and equipment ,
13,483,000 Mineral* , l,542/)00 Goodwill W3C000 Redamatton Habffity (488/100) The purchase price
paW to the seller was $21,735,000, including 434,6+0 common shares of the Company*! stock valued at
$543/300. la addition, the Company incurred $189,000 of transaction costs related to the purchase.
The purchase both expanded the Company’s reserve base in the v&stem Kentucky markets, and increased
sales volume with avail established utility. la October 2007, the Compare acquired the membership
interests in Fact Rescourccs IXC (“FACT”) upon exercising its option in September 2007 pursuant to
the option agreements dated September 7,2006 (the “Option Agreements”). Through the acquisition of
FACE the Company controls the leases for the proposed Pratt Mine widiintheai^of interest as defined
m the Option Agrocmcnts. The rtfOposed Pratt Mine contains both underground and surface coal
totaling 33,833,000 tons of measured and indicated resources, 670/100 tons of inferred resources
and 28,933,000 torts of proven and probable reserves. The Company has been carrying out development
work on the proposed Pratt Mine since the fourth quarter of 2006 and is in the process of
permitting the reserve. In addition to die leases for the proposed Pratt Mine, the selieri of FACT
delivered to the Company the Sease for the Panama South property and, as a result, the in-place
tons associated with the Panama South property are included in the calculation of the Scheduled
Payment (as described below). The Panama Sooth property contains both underground and surface coal
totaling 76^87,000 tons of measured and indicated resources. A further discussion of the Panama
South property follows in thai Note. Per the Option Agreements, in addition to the scheduled
payment for In-place tons of coal delivered by the sellers (the “Scheduled Payment”), which payment
terms would be subsequently modified, the Company agreed to pay $300,000 (the “Option Bee’*) »t the
effective date of the Option Agreements, an overriding royalty no greaterthan3%of the gros»sa!ra
price per ton sold from the proposed Pfatt Mine (the “Ofoxiding Royalty”) and expenses related to
the development of the proposed Pratt Mine during the option period (the “Pratt Expense*”)- Prior
n> the closing of the acquisition, the Company and the seflen of PACT modified the original
Option Agreements and entered into modificatlba of option EgrcementJ (the “Modlflcatiun of Option
Agreements”). The Modification of Option Agreements stipulated that the Scheduled Payment was
$15,000,009 payable in three instaUments, $10/100,000 of which was paid in 2007, plus a true-up
payment of $0,10 per in-place ton on September 7,2008 for airy nd ditio^ tons of CoJ greater
truml50XXXl,(XlOin-^ce tons that the sellers deliver. As of December 31,2007, the Company estimated
that the sells* had already delivered 177,940,000 In-place tons of coal for a total Scheduled
Payment of $17,794,000. As such, the Company recorded an additional $7,794,000 of Seller Provided
Financing on the balance sheet due the former owners of PACT. Of this amoanr, $$£00/300 it payable
in April 2008, with the balance due in September 200& As of December 31,2007, the Company’s
acquisition cost in EACT was comprised of the Option Fee, Pratt Expenses and the Scheduled Payment,
which totaled $18#»/>00 (the “Purchase Price”). Option Fee $300,000 Pratt Expenses , 815/100
Scheduled Payment 17,794,000 $18,909,000 The Purchase Price was
 allocated as follows: Cash $3/X»
Advance royalties 42,000 Land purchase option 75/300 Mine development 713,000 Qoodwai 18.076,000
$18,909,000 masmmmmmm





 









 









	PHOENIX COAL CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31,2007,2006, and 2005 NOTE B — ACQUISITIONS COwUnDtd) Subsequent to December 31,2007, in
Mitch 2008, the Company renegotiated certain mum of the Modification of Options Agreement
and entered into a buy-out agreement with the farmer owner* of PACT (the “Buy-oat Agttemear”)-
Pursuant to * public offering of the OoMpany"* shares or a private tale of more than 50ft of the
Company’s issued and outstanding stock or more than 50% of its asses (the “MtrnttlsaflraEvwrl”),
the Company shall pay the former owner* of BftCT $25,000,000 within thirty days after the
hfonetrzatioa Event (the “Buy-out Payment”), Bex the Buy-out Agreement, the Company’s obligation to
make a $3,000,000 payment is April 2003 and Ule balance of $2,794,000 in September 2008 shall be
suspended until the occurrence of a Monetization Event Upon receipt of the Buy-out Payment, all
obligations of the Company to make any additional payments, including the accrued amount of
57,794,000 on the balance sheet as of December 31,2007 and the Ovorridtag realty, shall cease and
terminate. In lime, 2008, the Corop&ny and the former owners of PACT entered into an agreement to
clarify and amend certain terms of the Buy-out Agreement The parties acknowledged and agreed that
the reverse triangular merger shall qualify as and constitute a Moradmtion Event under the Buy-out
Agreement. The parties a bo agreed to extend the data by which [he MoiwtteBUan Event must bo
oonsummated under the Buy-out Agreement to a date that it fifty (SO) days from the dosing date rf
tlwoffoing, so long as the Offering is closed on or before July 1, 2008. in die event the
Monetization Event is the Reverse Triangular Merger, -die Buy-out Payment must be paid by the
Company to the former owners of PACT within three (3) days of Marimba Capital Corp.’* receipt of
the escrowed proceeds (after deducting the agents’fee). If the Offering h not closed on or before
July 1, 2QD8, then all obligations of the Company to make additional payments to the former owneis
of PACT for the PACT properties shall be reinstated at that tune. Tn addition, if the Offering is
closed on or before July 1,2008 but the Reverse Triangular Merger is not consummated on or before
rtie^dayfoUowi^ the closing date of the Offering, then all obligations of the Company to make
additional payments to the former owners of FACT for (he PACT properties shall be reinstated at
that tine. At the acquisition date, the owners of PACT owned less than 1% of the total outstanding
shares of the Company and also held 300,000 options to purchase common shares of the Company. The
PACT purchase price was negotiated by members of senior management that had no financial ownership
in PACT and was considered to be as arms4eagth transaction. The Company is currently fa the process
of finalizing its valuation of the assets acquired and liabilities Hjoumed for tMa acquisition. In
September 2007, the Company entered into a management and administrative services agreement with
C&R Coal Inc. (“CUT). Under the agreement, the Company operates and manages C&R’s Beech Creek South
and Ebeneexer mines (the “CSB. Mines”). In consideration tor providing the sendees. Phoenix is
entitled to retain ill revenues baa expenses generated by the operations of C&R at the C&R Mines,
less $aw per ton paid to the owners of OfcR for each ton of coal sold from the CeaiMineSbSuwe the
Cc«paBy does not own CAR, It does not consolidate its operating results, and records funds invested
and services provided in other assets and accoontsreceiviiblo on it» balance sheet, which totaled
$612,751 at December 31,2007. In December 2007, the Company entered into a lease with Peon Virginia
Operating Go, IiX for the right to min
e its Panama South property, located is Webster County,
Kentucky, which contains both underground and surface coat totaling 76*287,000 tons of measured and
indicated resources. In connection therewith, the Company paid s non-recoupsble fee of 5500,000.
The lease outlines three terms: (1) the development term (the “Development Term”), from the
effective date of the (ease until December 31, 2011; (2) the primary term (the “Primary Tana”),
from the end of the Development Tkrm until the earlier of: (j) December 31, 2021, (if) the time at
which the Company has mined and removed all leased coal, or (iff) termination of the lease; and (3)
the remainder term, from the end of the Primary Term until the Company has completed reclamation,
environmental and other obligations under the lease. The Primary Term can be renewed twice for a
period of five years each. The Company Is required to pay a tonnage royalty for each ton of leased
coal mined and sold, and a monthly minimum rental fee. Each month’s tonnage royalty w3l be credited
against die monthly minimum remtal fee such that no minimum rental payment shall be due in any
month when tonnage royalties equal or exceed die minimum rental The Company us also requited to pay
a wheelaga fee for any coal mined from advene lands and transported through die leased premises.
The Company must produce and ship no less than 500,000 toot of leased coal from the leased premise*
during the calendar year ending December 31,2014 and during each calendar year thereafter, failure
to da so will result in the payment of additional fees under the lease. In 2006, the Company made a
series of acquisitions of coal production and reserves as follows: Scnoate Mining Company—Company
acquired stock of Evergreen Mineral Co. and Old Liberty Equipment Co, each of which owned 50% of
Scnoate, hi June 2006. Consideration included cash, assumption of liabilities and $400,000 in
common stock of the Company. R&L Wmn—Company acquired stock of R&L Wnn in July 2006. Consideration
included cadi and asiumpttofl of liabilities. Taylor family assets—Company acquired stock and
assets of Taylor family holdings Including Crittenden County Coal in July 2006. Consideration
included cash and assumption of liabilities.





 









 









	PHOENIX COAL CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL S1&TEMENTS (Continued)
December 31, 2007, 2006, and 2005 NOTE B—ACQUISITIONS (Continued) The fair values of assets
acquired and liaMUtiet assumed at the acquisition date are as fellows: Scboate Taylor Mining
R&LWina Properties Total CurrentasaeB $3,417,202 $131,857 $6,674 $3^55.733 Property and Equipment
6,071,115 1^69,200 2$MO07 9,944,522 Reserves — 250,000 tfftOOQ 400,000 Goodwill 6,150421 673,322
2,873,055 9,696,798 Assumed LtaWIMei (3J3S8J35) (528,156) (3,860,924) (7,977,835) $12.049,983
$1,796323 $1,70,012 $15,619,218 The accompanying consolidated financial statements include
operations of die subsidiaries from die date of acquisition through December 31, 2007. NOTK
C—PROPERTY AND EQWTMENT; NET Property and equipment consists of the following at December 31: 2007
2006 Land $599,654 $2,026568 Building and improvements 25,424 25,424 Preparation plant 1,476,805
WH697 Mining equipment 27.SS4J63 10,564,757 Loading and marine transport equipment 1,775,000 —
Office equipment 324*684 195,962 Vehicles 65,965 9U65 31,95235 14,119,173 Leu accumulated
depredation and amortization (2,923,813) (721,501) $29,028482 $13,397.672 In November 2007, the
Company sold certain assets and reserves to Covol for $i,230,0O0 in cash. The assets comprised a
permit, lease, mobile equipment, a preparation plant and slurry reserves. Aa part of the agreement,
the Company entered into a coal purchase and sale agreement to purchase the processed coal fines
from Cowl tad a coal pivxs^lng a^eemenr Id enable the Company to temporarily wash iu
coarse coal product at the preparation plant In addition to the Covol sale, the Company also sold
noa-core n^ estate for grcra proceeds of $1,926,951, and other smaller, non-core assets such as
mobile equipment during 2007. On a book basat, the Company incurred net losses of $1,810,138
related to the disposal of these asset*. NOTBB —DE8T The Company has a $3.1 million secured
linc-of-credlt agreement with Filth Third Bank for working capital purposes ($2 million at December
31,200Q. The line-of-credlt is collateral ized by all general busiiwis asseis of PhOranix Coal
0>rpc«tiOT (er»pt for the assets held by PACT and certain reserves held by Evergreen Mineral
Company, Inc.), including but not United to all equipment now owned and hereafter acquired,
accounts receivables and inventory. The line bean interest at the UBOR rate phis 4% (B.(50% at
December 31,2007). The interest rate was LIBOR plus 2.75% at December 31, 2006. There was no
outstanding balance on the Itne-of-credit at December 31, 2007 and 2006. Under die debt agreement,
the Company is subject to certain debtcuveaants. As of December 31, ZQ07, the Company was in
compliance with all debt covenants or received a waiver. In November 2007, the Company entered into
a loan agreement with a finance company, acting as administrative agent for a syndicate of tenders,
for $6,000,000 Canadian dollars (“C$”). The note is collaleraUied by, among other things, the
assets of PACT, matures on October 31,2008, and bears interest at 12%. Interest on the note is paid
monthly. The principal amount of the loan Is convertible, in whole or in part, by the lenders at
the time of an initial public offering of securities of the Company, at a conversion price equal to
90% of the offering price. The value of the note is adjusted to U.S. dollars based on current
exchange rates, and any adjustments are charged or credited to the statement of operations. The
value of the outstanding loan was $6^rT2^40asof Decen*er31,2fl07. Asconsirkratiooforlhctoan, the





 









 









	PHOENIX COAL COBPOHATTON & SUBSIDIARIES NOTES TO CONSOLIDATE]) FINANCIAL STATEMENTS (Continued)
December 31, 2007,2006, and 2005 NOTE D — DEBT (Contimud) Company paid to the lenders a
non-refundable $600,000 bonus in the Sana of 483,000 shares of common stock at a deemed price of
11.25 per share. (See Note L) In December ZOOS, the Company received a $500,000 advance at part of
a bridge financing agreement associated with the Charolab acquisition completed in January 2)07.
The advance was repaid la January 2007 and reissued as part of the full bridge financing of
$4,135,600 denominated is Canadian dollar* (approximately 13 S mffltoa in U.S. dollars). The loan
was repaid in August of 2007 resulting in a foreign currency transaction loss of approximately
$418,000. Long-term debt consisted of the following >t December 31: axrr saw Note payable to
bank with interest at LIBOR pins 2.75% (8-1% at December 31,2006). Payments of $41,667 plus
interest starting January 2007 are made in monthly installments. The loan was coilateraOzed by all
assets and was repaM in 2007. $ — $ L339.958 Equipment notes payable, interest at 5.25% to 730%.
Payments are made in monthly installments. The loans are eoUaterainsd by related assets with a net
book value of $10,237,079 as of December 31,2007 and have maturity dates from June 2008 to November
2011 9^687,113 1,157,017 Note payable to bank with interest at LIBOR pros 175%. Monthly payments of
$116,687 plus interest beginning January 2007. Loan was collateralized by substantially all assets
and was repaid in 2007. .... — 7,000,000 Subordinated note payable—MVC Capital with interest
payable quarterly at 15% per annum. Interest in excess of 10% to be rolled Into principal. Holder
had option on June B, 2007 to convert interest to shares of common stock which was not exercised
and amount was repaid in 2007, — 7,179,192 Advance on bridge financing — 500,000 Advanced coal
purchase, repayable monthly through December 31, 3X37, Interest at 2,8% — 183,418 9,687,113
17,359,585 Less: current maturities (2338,198) (3,315,422) 17348^15 tl4.044.163 Expected maturities
of notes payable are as follows: 2007 2008 $1338,198 2009 1,955,253 2010 2,071,274 2011 1122,194
2012 1,200,194 $9,687,113 In 2006, the Company entered into an interest rate swap transaction
whereby the interest payments on an original notional dollar amount of $7,000,000 are converted to
a fixed rate of 8.10% compared to a variable rate of LIBOR re-measured on a quarterly basis. The
notional amount decreases over the lire of the swap agreement, which expires in December 201L The
notional amounts of the agreement were $5,483,333 and $7,000*000 at December 31,2007 and 2006,
respectively. Under the agreement, the Company pays or receives the net Interest amount monthly,
with the monthly settlements included in interest expense. In 200$ management designated the
interest rate swap agreement as a cash flow hedging instrument, and determined the agreement met
the requirements of the shortcut method under the provisions of Statement of Financial Accounting
Standards No. 133. For 20D6, the agreement was recorded at its fair valua with subsequent changes
in fair value included in comprehensive income. Is August, 2007, the debt to which Brit swap was
related was retired. As a result, the amount previously recorded in other comprehensive income was
charged to interest





 









 









	PHOENIX COAL CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2007,2006, and 2D05 NOTE D —DEBT (Continued) expense and soy future change* to the
ftdr value of the swap will either increase or decrease interest expense as the contract no longer
qualifies as an accounting hedge. The value of the derivative was $224,696 and $143,858 at December
31,2007 ami 2006, respectively and is included in accrued liabilities on the balance sheet NOTE E
—INCOME TAXES The components of the income tax expense at December 31 are: 2007 2006 1005 Current
STD.ISS $— 4— Deferred , — — — A reconciliation of differences between the statutory VS. federal
income tax expense (benefit) and tie Company’* effective tax benefit at December 31 are at follows
2007 2006 2005^ Federal and state taxes at statutory rate 5(8,934^67) $(1,691,532) 1(683,096)
Permanent Items 58,325 (94478) 25,498 Valuation allowance 8,946^97 1,785,710 657,598 Income tax
expense ‘ ‘ S 70,155 $ — $ — The expense far income taws includes: federal and state income taxes
currently payable or receivable and those deferred or prepaid because of temporary diSerenees
between the financial statement and tbe tax ba^ of aaeli and liabiU(ie4.TlBCbrapai^ records income
taicei under the liability method. Under tMi method, deferred income tmw are recognized for the
estiinated future ux effects of differences between the tax basis of assets and liabilities and
their flnanctal leporttog amounts based on enacted laws. The deferred tax assets and BaollWes
recognized is the consolidated balance sheet are comprised of the following at December 31: 2007
2006 Deferred tax assets: Net operating loss cany forwards and tax credits J 10,769,102 $2,977,666
Share based compensation 577,488 18,900 Reclamation Expense 491,431 — Goodwill 928^16 — Other 1.702
31,671 12,767,739 3,028,237 Deferred tax liabiliticr Mine Development Costa (54,693) — lax owiboolc
depredation (1,964,971) (1,226.359) (2£19,6S4) (1.22M59) 10,748,075 1,801,678 valuation allowance
(10,748,075) (1,801.678) Net deferred tax t — $ — As a result of tosses from operations, management
has recorded a valuation allowance against the total deferred tax asset aa they do not believe it
is more likely than not these assets will he realized. Tne net change in valuation allowance for
the current period is $8,946,397. At December 31,2007, the Company had available net operating joss
(NOL) carry forwards, to reduce future taxable income of approximately





 









 









	PHOENIX COAL CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2007,1006, and 2005 NOTE E—INCOME TAXES (Continued) $28,000,000 expiring through 2028.
The future benefit of these NOL carry forwards may b« limited on aa annual bask and in total undo’
Section 382 of the Internal Revenue Code depending on the extent of ownership change* contemplated
by the Company’s plan*. Net Operating Los* Carryovers (20 year carryover): toss Expiring In Amount
2004 2025 $304,900 2005 2026 1,860,275 2006 2027 5,088,854 2007 2028 19,645,199 $27,899,228 NOTE 7
— CONCENTRATIONS For the year ended December 31, 2007 the Company*! three primary customers
comprised approximately 89% of coal safci. Accounts receivablei due bom the three primary customers
»t December 31,2007 were $2,285,240. Rsr the period ended December 31,2006, the Company’s two
primary customers comprised approximately 93%clcoal5aIe3. Amounts receivables due from the two
primary customers at December 31, 2006 were $960,795. For the year ending December 31, 2005,100% of
revenue was derived from one customer, NOTE G — COMMITMENTS AND CONTINGENT LIABILITIES In the
normal coarse of business, the Company makes various commitment! and incur* certain contingent
liabilities including liabilities related to reclamation costs and financial obhgattara In
connection with mining permits that are not reflected in the accompanying balance sheet The Company
does not anticipate any material tosses as a [«uitof the« transactions. According to KRS Chapter
3S0, the CoropinyU required to post reclamation bonds to assure the reclamation work ij completed.
Outstanding reclamation bonds totaled approximately $9 million at December 31,2007 and
approximately $8 million at December 31, 2006. These bonds are secured by lettort of credit equal
to the amount of the outsranding reclamation bonds. The letters of credit are collateralized by
general business assets of the Company and the restricted cash on the balance sheet of $2312,500
and $1,697,038 at December 31,2007 and 2006, respectively. The Company leases certain office space
and muting equipment over long-term operating leases running through 2010. Future minimum lease
commitments under non-cancelable operating Isasu as of December 31, 2007, ate as follows: 2008
$1,092,570 2009 338,160 $M30,730 A significant amount of the Company’s coal reserves are controlled
through leasing arrangements and non-cancellable royalty lease agreements under which future
minimum lease payments are due. As of December 31, 2007, the Company had committed to purchase
$7,100,000 of mining equipment Sir its operations, with delivery scheduled during the first quarter
of 2008. The equipment it being purchased to increase operating efficiencies at its surface coal
mines. A series of notes with an equipment financing company will be used to finance the equipment,
with estimated down payments of $500,000. The notes will be coilaterallzed by the equipment
purchased. As of the audit opinion dais, the Company had completed the purchase of this raining
equipment and executed five notes with two financing companies with toaa terras ranging from 30 to
48 months, interest rates of 525% to 841%, and total monthly payments of $187,000. In conjunction
with the sale of certain assets to Covol, the Company entered into a master coal purchase and sale
agreement (the “Master Agreement”) to purchase coal fines recovered and processed by CovoJ from two
coal slurry reserves areas in Muhlenberg County, Kentucky defined in tin Master Agreement as the
Rock Crusher Reserves and the National Guard Reserves (collectively, die “Starry Reserve*"'). The
term of the Master Agreement runs through the exhaustion of the Slurry Reserve (the’Term”). For the
remainder o« 2008, Covol shall u» itj commerdatly reaionablE efforts to produce
 from the Sluny
Reserve* not less than 60,000 tool per month, but in any event shall produce and deliver not less
than 20,000 tons per month. During the remainder of the Master Agreement Terra, Covol shall produce
and deliver to the Company not less than 60,000 toni per month. The Company agrees that it will
purchase from Covol, pursuant to die terms of the Master Agreement including certain BTU and
quality speafications, all of the coal fines produced by Covol from the Slurry Reserves up to
60,000 tons per month during the Term. The price tor the coal lines shall be the contract price set
forth in each confirmation attached to the Master Agreement, provided, however, that in no





 









 









	PHOENIX COAL CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31,2007, 2006, and 2005 NOTE G— COMMITMENTS AMD CONTINGENT llABUJTiES (Continued) event
shall the contract pries be lea than $2530 per ton for coal delivered from the Sock Crusher
Reserve! or $2450 per toa for coal delivered from the National Guard Reserves. NOTE H — COMMON AND
PREFERRED STOCK COMMON STOCK The Company has conducted four separate equity transactions bi which
it Issued common stock. Although each transaction was designated m new series, the stock issued for
each series was all common stock with the sarae right* and privileges. A summsiy of the
transactions follows: Far Common Paid-in Stares Share Stock Capital Total Initial —Common
12,750.000 $.19 $12,750 $2,6*1,763 $2354313 Series A 8370,000 30 8370 4,176,830 4,185,000 Series B
9,170,000 .75 9470 6368330 6,877300 Series C 6,102,667 135 6,103 7,62231 7,62833* 36392,607 36393
21308^54 21345347 Expense* — — (304329) (304329) Balance as Of December 31,2006 36392,667 36393
21,004,425 21,040,818 2007 Activity: Series C 621,440 1.25 621 776,166 776,787 Stock issued for
losn feet 970,000 155 970 1311330 1,212300 Common shares converted to preferred shares (982.667)
1.25 (983) (1^27,351) (1328334) Restricted stock issued 400,000 135 400 499300 500300 Optima
exercised 300,000 .42 300 124,700 125,000 Balance as of December 31,2007 37,701,440 $37,701
$22.389,070 $22,426,771 PREFERRED STOCK In 2007, the Company conducted a preferred Stock offering;
Preferred stock was issued in August 2007 and the proceeds used for working capital and the
reduction of outstanding debt The hoJdexB at preferred stock have the rfghttotimtnumbcrof ¦votes
equal to the number of share* of common stock issuabls upon conversion of the preferred stock.
Subject to the restrictions of any credit facility as may then he in effect, the preferred stock
pays a 6S% per annum cumulative dividend upon redemption or la common shores upon conversion. Based
on these provisions, die accrued dividend has been reflected in the value of the preferred stock on
the balance sheet Additionally, holders of Series C common shares could exchange one common share
for One share of prtferred stock £or eveiy share of preferred stock purchased. Preferred stock can
be converted by the holder at anytime to mmmon stock based on a conversion fonnulalncorporariiig
the iisue price of the preferred stock and subsequent values of common stock. The preferred stock
is converted automatically into common stock upon the dosing of an underwritten public offering of
shares of the common stock of the Company or if the holders of a majority of the preferred slock
consent to the conversion into common stock. Additkmaifc/, subject to various restrictions and the
automatic and voluntary conversion provisions noted, commencing one yesr after lsstniice of tiie
preferred stock, the holder may revest rede^ issue price ($1.25 per share) plus any unpaid
dividends. Per Preferred Paid-in Shares Share Stock Capital Tbtal Preferred 36,207,600 $1.25
$36,208 $45,223,292 $45,259300 Issuance of warrants — — — 462,800 462300 Common shares converted to
preferred shares 982367 155 983 1,227351 1,228334 Dividend — — — 1577,838 1,277338 Expenses ___
(3,592,198) (3392,198) Balance as of December 31,2007 37,190,267 $37,191 $44399,083 $44,636374





 









 









	PHOENIX COAL CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Contfnoed)
December 3L 2007,2006, and 2B05 NOTE I—STOCK XNCEflTVE PLAN AND WARRANTS The Company"* Stock
Incentive Plan (the “Incentive Man”) reserved 8,297,411 shares of the Ocnnpaiiy’s common stock for
awards to officea, other selected key management employees and members of the Bond of Directors of
the Company, The Incentive Han provide* the Board of Directors with tiie flexibility to grant
either incentive or non-statutory stack options (“Awards”). The Incentive Fhui calls for the
adjustment of shares awarded under the plan in the event of a split Stock option* an generally
subject to vesting provisions of 25% at the end-of-year one from the date of grant and then evenly
over the following 48 months. The option* are granted at a price equal to 10096 of the fair
valucoftfao Compan/scomniDdsiock on the date of grant and have a ten-year term. Information
regarding stock option activity under the Incentive Pfcui follows: Weighted Average Weighted
Average Remaining Common Shares Exerdse Price Contractual Life Option* outstanding at January I,
2007 3,045JMQ $ .32 Granted 4,004,000 US Exercised (300,000) .42 Options outstanding at December
31,2007 6,749,000 $ .87 85 Options exerdsable at December 31,2007 2,609,050 $ .66 &5 Caah received
from options exercised under ail share-based paymeatartangeasats for flw period ended December
31,2007 was $125,000. Compensation cost Of itock opticm grama is recognized straight-line over the
options’ vesting period*, Compensation expense related to stock options for the years ended
December 31,2007 and 2006 were $943,a59andM7,224,reape«lveiy.Aaaf December 31,2007, there was
approximately $2,l£SiQ00 of unrecognized enmpenaation cost related to the unvested stock options to
be recognized over a weighted-average period of 33 yearn. The options’ fair value was determined
using the Black-Sctioles option-pricing model. Expected volatilities are based on comparable
company historical stock movement, and other factor*. The cost relating to the stoci-based
aampeMatfcm plans is Included in selling, general and administrative expenses in the accompanying
Consolidated Statement of Operations. 2007 2006 2005 Weighted average fair value per share of
options granted $.73 per share. $.29 per share $.15 per share Assumptions (weighted average):
Risk-free loterestrate : 437% 4.52% 440% Expected dividend yield 0.00 0X10 040 Expected volatility
        , , 140 0.40 0.40 Expected option life (in years) , iQJOO 10.00 10.00 Prior to adopting SFAS No.
123R, die company applied APB Opinion No. 2S and related interpretations to account for its equity
incentive plans. The following table reflects 2005 pro forms net income had connpwuation cost bera
delennixied for the Company’s ncawjualified and incentive stock options based on the fair value at
the grant dates consistent with the methodology set forth under SEAS No. 123R; ZOOS Net loss As
reported $(L769,6W) Pro forma (1,848,140) In December 2007, the Company issued 400,000 restricted
shares to four of its directors. The share* were valued at $500,000 and the related expense is
included in selling, general and administrative expenses. The shares cannot be sold uoless the
Company doses a public offering of the Company’s shares, or if the Company is sold to a third
patty. As ‘part of the fee structure related to the preferred stock offering in August 2007, the
underwriter received warrants to purchase 1,780,000 shares of the prefaced stock of the Company at
$1.25 per share. The warrants expire 24 months following the date, die Company consummates an
initial public offering of shares of common slock of the Company. The warrants total value, of
$462,800 was determined using the Black-Sdieles option pricing model. Assumptions used in t
he model
were ¦ risk free interest rats of 4.76%, dividend yield of &50%, and expected volatility of .40.
The value of the warrants was charged to additional paid in capital.





 









 









	PHOENIX COAL CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31,2007, 2006, and 2005 NOTE J — DEHMBO CONTRIBUTION PLAN The Company ha* a retirement
savings but plan in effect for substanti^ all fuU-time employeo. Tbc Plan also coneiins a deferred
salary arrangement under ISC Section Wl(k). Under the deferred salary arrangement, employees can
contribute up to 100% of their earnings and the Company may match a portion of the employee
contributions. The Company paid and charged to operations approximately $556,000, 593,000, and $0
for me yean ended December 31, 2007, 2006, and 2005 for Plan contribution*. NOTE K — RELATED PARTY
TRANSACTIONS The Company enters iota transaction* with stockholders and/or affiliated entities that
have some level of common ownership with the Company. A summary of the related party transactions
aad balances follows: 2007 2006 2005 Expense*: Consulting fee* $610,000 $765,000 $470,000 Bent and
misceflnteowi 65,377 32,623 2JSS2 Accounts receivable 16,858 57,655 30357 Accounts payable 6,670
14484 — These transactions were paid to MM Energy Partners, UUC, which amounts were applied
towards, among other things, salaries, overhead and benefits for individuals who provided services.
These transactions an also in the normal course of business, and are recorded at the consideration
established and agreed to by the related parties. David Wiley and Timothy Fbgarty are managing
directors of MHI Energy Partners, LLC ami both of whom, are currently directors of the Company.
NOTE L— SUBSEQUENT EVENTS In May 2008, tho Company modified Its loan agreement with the finance
company, acting •* administrative agent for t syndicate of lenders, that initially loaned the
Company C$6 million in November 2007. The Company borrowed an additional CSS million (the
“Additional Loan”), which together with the initial C$6 million, remain* outstanding as of die
audit opinion date. The net proceeds of die Additional Loan after fees and converting to US doUars
was $4,877,000. The term* mini conditions of the loan agreement are substantially the same except
for the convtrefon price employed should the lenders exercise their right to convert the principal
amount of the loan to common equity. The principal amount of the loan (including the iniUslioan,
which WMamuided at the ume of the Additioaai Loan) (j convertible, in whole or in part, by the
lenders at the time of an initial public ottering of securities of Phoenix or reverse takeover
involving Phoenix (a “Going Public Transaction”) at a conversion price equal to 80% of the Going
Public “transaction offering price. As consideration tor the Additional Loan, the Company paid to
the lenders a non-refundable $510204 bonus In das form of 408,163 shares of common stock at a
deemed issue price of $125 per share. On June 13,2008, the Company and Quest, on behalf of each of
the lenders, entered into an agreement pursuant to which, provided that no event of default has
occurred and to continuing, (A) immediately prior to comptetiOT of the direet share ewJiange,
expected ta occur on or before June 30,2008, the principal amount of the bridge loan will be fully
converted into common stock or the Company at a conversion price of $1.25 per share of Gomroon
Stock, such that upon conversion. Quest (or its designers) shall receive a number of shares of
common stock equal to C$11,003,000 divided by $L2S (based on the Canadian dollar to United States
dollar exchange rate at the time of the conversion), and (8) no adjustment to the number of bonus
shares of common stock Issued in connection with the Bridge Loan wfll be required. The agreement is
conditional upon, among other things, the offering dosing on or prior to July 2, 2008. Oil May
5,2008, Marimba Capital Corp. (“MCC) and entered into a letter of inUnt pursuant to which the
parties agreed to effect a reve
rse triangular merger which wUI result in AcquisitionCo merging into
the Company and the Company as tho surviving company wfll become a wholly owned subsidiary of MCC
On May 22,2008, MCC, the Company and Ar^WtiwiCo entered into a c^nidve merger agreeroent with
respect to such reverse triangular merger. On May 22, 2008, MCC also has filed a preliminary
prospectus for an offering of Subscription Receipts (the “Subscription Receipts”), each
Subscription Receipt to entitle the holder thereof to receive one unit (a “Unit”), each Unit
consisting of one common sabre of MCC and one-half of one warrant of MCC subject to the
satirfactton of certain conditions. MCC has applied to have the common shares and warrants lilted
on the Toronto Stock Exchange (the “TS2C”). The Subscription Receipts have been offered to the
public in si) of the provinces of Canada, except for Quebec, and in the United States in an
offering exempt from the registration requirements of the UJS. Securities Act Subject to applicable
law, the agents acting in connection with the offering have also offered the Subscription Receipts
outside of Canada and the United States. The Offering consists of up to 62,857,160 Subscription
Receipts at a price of $1.75 per Subscription Receipt to raise gross proceeds of C$110,000,030. In
addition, the agents have been granted an over-eitotment option to acquire up to aa additional 15%
of common shares of MCC and/or warrant* of MCC at price* of CSL62 and C$026, respectively (for as
implied aggregate [nice per Unit of CSL75). Pursuant to an agency agreement among MCC, the Company
and the agents, die Agents will receive a cash commission equal to 6% of the gross proceeds of the
Offering plus compensation option* equal to





 









 









	PHOENIX COAL CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS {Continued)
December 31,2007, 2006, and 2005 NOTE L— SUBSEQUENT EVICTS (Continued) 4% of (i) the Subscription
Receipts icld pursuant to the offering and (3) the number of commas shares and warrants that equal
a Unit issued pursuant to the over-allotment option. The proposed offering is subject to final
regulatory approval. NOTE M—DEFERENCES IN GENERALLY ACCEPTESJ ACCOUNTING PMNCHtES BETWEEW THE
UNITED STATES AND CANADA The Company*! consolidated financial statements bib prepared in
accordance with generally accepted accounting principle* 1a the United States. (“US CAAF”)
which differ in certain respects from those principle* that the Company would have followed bad its
consolidated financial statements been prepared in accordance with accounting principle* generally
accepted in Canada (“Canadian GAAJP”). Tie major differences between US GAAP and Canadian GAAP and
their effect on the M07 consolidated financial statements are as follows: The following table
reconcile* the balance sheet amounts bi of December 31,2007 at reported under US GAAP with
those amount* that would have been reported under Canadian GAAP; Canadi#n GAAP1 Canadian US GAAP
Adjustment GAAP ASSETS Current Asset* Cash and equivalents $381,374 $ — $381374 Investments
153,100 — 153,100 Trade accounts receivable 4314385 — 43M385 Accounts receivable—other 16,858 —
15,858 Coal inventories 1372,697 — Wt72,697 Prepaid expenses and other currant assets 526.664 —
526,664 Total caxreat iwti 6,465,078 — 6,455,078 Property Plant and Eqalpment, net 29,028382 —
29,028382 Restricted Cash 2312300 — 2312300 Goodwm 32^93,227 — 32393,227 Mine DereloBOunt Costa
1,464,831 — 1,464331 Deferred Financing Fees (a) 545,455 (545,455) — Other Asset* 1,116338 —
1,116,838 $73326311 S (545,455) $72,781,056 LUmUHES AND STOCKHOLDER’S EQUIT* Current liabilities
‘ Trade, accounts payable and accrued liabilities $8396398 S — $8396398 Seller provided financing
7,794300 — 7,794,000 Preferred stock, subject to redemption provisions — 4S3353S9 45,635369 Note*
payable (a) 6,072340 (545^*55) 5326,785 Current portion of tang-term debt 2338,198 — 2,338,198
Total current llaWUtua 25,101336 45,089314 70,191,250 Reclamation UaWUlj 3,757,353 — 3,757,353
Long-Harm Debt, lest current portion 7348315 — 7348,915 Other long-tonn liabilities 707,796 —
707,796 Stockhold>r»i Equity Preferred stock (b) 37,191 (37,191) — Common stock 37,701 — 37,701
Additional paid-in capital (b) 67384,236 (44,136382) 23347354 Accumulated other camprehensiva
Ids* — — — Aficumuiated deficit (b) (31,648,017) (1,461396). (33,109,913) Total
Stockholder’s Eoeify • 36.411.111 (45335,369) (9324358) j 73326311% (545.455) $72,781,056





 









 









	PHOENIX COAL CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2007, 2006, and 2005 NOTE M— DIFFERENCES IN GENERALLY ACCEPTED ACCOUNTING PMNCIFCJES
BETWEEN THE UNITED STATES AND CANADA (Continued) The following table reconciles the statement of
operation j amounts for the year ended December SI, 2007 as reported under US GAAP with
those amounts that woald have been reported under Canadian GAAP: 2087 NetLoM —US GAAP $(23,25M01)
Increased interest expense from dividends on redeemable preferred Hock (b) (1^277,838) Increased
interest expense from feel on redeemable preferred stock (b) (1,461.896) Net Lea—Canadian GAAP
t(2S.991,135) (a) Deferred financing feel Under VS. GAAP, financing fees related to debt
acquisition bib capitalized as an asset siid the fc« amortized over tha term of the debt
and recorded at interest expense in the statement of operations. Canadian GAAP requires that these
costs be recorded as a contra-liability and reduce the amount of the debt to which they are
related. The financing fees are accreted and also recorded as interest expense. The reconciliation
adjustments listed are to redassify deferred financing feet of $545,455 as a contra-liability on
the balance (beet (b) Preferred stock with redemption rights As dfcqtmwi in Note H» in August 2007
the Company issued preferred stock that automatically converts to common shares upon the closing of
an underwritten pubic offering. Additionally, subject to varxius reslrirtions, arid the autcraiatic
inversion prcr/ision jioted, commencing one year after issuance, the preferred stock hoMef may
request redemption of the preferred shares at its issue price plus any unpaid dividends. Although
the preferred shares have a redemption feature, the redemption is conditional and subject to
liquidity considerations. Based oa these and other characteristics of the preferred shares, under
US. GAAP the proceeds front the sale of the preferred shares, less applicable expenses have been
recorded as stockholders* equity. Due to the redemption features, Canadian GAAP requires the
preferred shares to be recorded as debt Expenses related to the preferred offering are recorded as
a contra-Uabtthy. The expenses are accreted using the effective interest ate method and recorded as
interest expense. Any dividends due on the preferred shares are also included In interest expense.
The reconciliation adjustments recorded are to rctlasslfy the preferred Shares as debt
(344,173.473), accrete the expenses related to the oifering u interest expense ($1,461,896}, «ad
redassify the dividends as interest expense (11^277,838).





 









 









	Phoenix Coal Inc. Consolidated Financial Statements December 31,2008 and 2007





 









 









	REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS To the Shareholders of Phoenix Coal Inc. We
have audited the consolidated balance sheet of Phoenix Coal Inc. (the Company) as at December 31,
2008 and the consolidated statement of operations and comprehensive loss, shareholders’ equity and
cash flows for the year then ended. These financial statements are the responsibility of the
Company’s management Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain reasonable assurance
whether the financial statements are dee of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. In our opinion,
these consolidated financial statements present fairly, in all material respects, the financial
position of the Company as at December 31,2008 and the results of its operations and its cash flows
for the year then ended in accordance with Canadian generally accepted accounting prfaciples.
(signed) Ernst & Young LLP Louisville, Kentucky March 17,2009





 









 









	INDEPENDENT AUDITOR’S REPORT To the Board of Directors Phoenix Coal Inc. We have audited the
accompanying consolidated balance sheet of Phoenix Coal Inc. (successor to Phoenix Coal
Corporation) (the Company) as of December 31, 2007 and the related consolidated statements of
operations and comprehensive loss, shareholders* equity and cash tows for the year ended December
31, 2007 which have been prepared on the basis of accounting principles generally accepted in
Canada, The financial statements are the responsibility of the Company’s management Our
responsibility is to express an opinion on the financial statements based on our audit We conducted
our audit in accordance with auditing standards generally accepted In the United States of America.
Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement An audit includes consideration
of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express
no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements, assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion. In our
opinion, the consolidated financial statements referred to above present feirly, in all material
respects, the financial position of Phoenix Coal toe. (successor to Phoenix Coal Corporation) as of
December 31, 2007 and the results of its operations and to cash flows for the year ended December
31,2007 in conformity with accounting principles generally accepted m Canada. lil Mountjoy &
Bressler, LLP Louisville, Kentucky May 2,2008





 









 









	PHOENIX COAL INC. CONSOLIDATED BALANCE SHEETS (Expressed in U.S. Dollars) As at December 31 Note
2008 Z0O7 ASSETS Current Assets Cash and cash equivalents ,,.. «.,, ,, ,, ,, $40,523,609 $381,374
Short-term investments -.- ___A 100,707 153,100 Trade accounts receivable ___2,843,134 4,314,385
Accounts receivable—other... ,,...,, ,,...,, — 16,858 Coal inventories ,, A 452,558 1,072,697 Prepaid
expenses and other current assets.... ._. 470,506 526,664 Total current assets .... 44,392,514
6,465,078 Property, Plant and Equipment, net ~ E.K 46,037,904 29,028,582 Restricted Cash, Cash
Equivalents and Certificate* of Deposit. K 11,638,921 2,312^500 Mining Rights, Mine Development
Costs and Mineral Reserves, net of accumulated amortization of $3,670,570 in 2008 and $210,658 in
2007 A, D 52,582,655 34,547,492 Otter Assets . ...,, ,,_,.,,.._.. _...,,.,,,,,,._. -.. 492.520 427 404
$155,144414 $72,781,056 LUBILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Trade accounts
payable and accrued liabilities S 6,470,390 S 8,896,898 Vendor financing ,..,,.,,. ,, ,, ,, ,, D —
7,794,000 Preferred shares, subject to redemption provisionsTM O — 45,635,369 Notes payable— _.,. TM
        .. O — 5,526,785 Current portiofl of long-term debt ^.^ — _.___G 6,532,045 2338,198 Current portion
of asset retirement obligations ,, F 1,958,000 1,667,000 Total current liabilities — -.-, 14,960,435
71,858,250 Asset Retirement Obligations, less current portion F 2^66,000 2,090,353 Long-term Debt,
less current portion . .___O 14,641,745 7,348,915 Other Long-term Liabilities .. 482,743 707,796
Shareholders’ Equity Share capital.-.. « — C, G 171,817,981 22,426,771 Stock options and warrants ,,
- ___... L 16,625,724 1,458,884 Accumulated deficit — (65.750.114) (33,109,913) 122,693,591
(9024.258) $155,144,514 S 72,781,056 See accompanying nates to consolidated financial statements
Approved by the Board of Directors: Robert gush an (fflpigefl • Director Robert Wardell Uigmd) .
Director





 









 









	PHOENIX COAL INC CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Expressed in U.S,
Dollars) Far the Yean Ended December 31 Nate 1003 hot Revenue _» — $76,724,270 $
67,184,104 Cost and Expenses Cost of sales 71,881,533 62,175,073 Selling expenses ,, 8,188,945
7,859,571 General and administtathfe expenses L 13,545,412 7,06130 Depredation and
amortization....,...,...,,.TM ,, ,, ___A 8,412,073 3,143,365 Asset impairment write down ....^.,, _., A
— 2,873,055 102,027,963 83,112344 Loss from operations -. (25,303,693) (15,928,240) Other Income
(Expense) Interest expense, including accretion . G (5,767,496) (7,783,908) Interest income , ,, ,, ,,
___570,378 . 106,692 Foreign currency gain (loss) ,, ___,, G 129,130 (498,794) Otfaer.net _,, E
(1,014,424) (1,816,730) (6,082.412) (9592,740) Loss before income taxes ~ -,, (31,3 36,105)
(25,920,980) Income-taxes... ___,,. I 37,838 70,155 Net loss.. ,,..___$(31,423,943) $(25.991.135) Basic
and diluted loss per share $(033) $(0.70) Weighted average number of common shares outstanding.—
,,,,, A 95,249,972 37,141,490 Comprehensive loss Net loss..TM $(31,423,943) $(25,991,135)
Reclassification to net loss of loss on derivatives previously designated as cash flow hedges,.. ,,
___,, — 143,858 Comprehensive loss $(31,423,943) $(25,847,277) See accompanying nates to consolidated
financial statements





 









 









	PHOENIX COAL INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Expressed In U.S. Dollars) For
the years ended December 31,2008 and 2007 Accumulated Stock Other Common Shim Option* and
ComprehendTM Accumulated Note Shares Dollars Warrants Low PeHcii Total December 31,2tH6 36^92,667
$21,040,818 $47,224 $ (143,858) $ (7,118,778) S 13,825,406 Imuuim of common «hana_.
1,591,440 1,989,287 — — — 1,989,287 Common share* converted to preferred shares O (982,667)
(1,228,334) — — — (1,228,334) ShatB-haserfcompeMuioa-opdora— L — 948,859 — — 948,859 Wananfe issued
in ramneerJan who prefenedsh_eoflerin| — L — 462,801 — —• 462,801 Share-based coraperuation *
restricted shares ,, ___L 400,000 500,000 — — — 500,000 Exerra* of stock optfom l 300,000
125,000 — — — 125,000 Interest rats swan Q ___143,858 — 143,858 Net less -. — — — (25,991,135)
(25,991,135) December M.20II7 37,701,440 22,426,771 1,458,884 — (33,109,913) (9,224,258) Smre
capital contribution — common shares issued in payment of loan lees H....,,.,, C.G 408,163 510,204 —
— — 510,204 Issuance of common itwos to seals *W- C.0 8,668,000 10,276,682 — — — 10,276,682
Conversion of prefeoed snares, including scorned dividends, to eommonshares C.G 39,386^70
48,922,722 — — — 48,922,722 Value of additional share* issued in paymentordebt,,..»....- c,G —
808,258 — — (808,258) — Share-bucd compensation-options j_, ___260,000 — — 260,000 Balances — pre
merger, pre snare issue, and prior to recording loss tor the year... — 86,163,873 82^44,637
1,718,884 — (33,918,171) 50,745,350 Marimba Capital Corp. equity balances pre-merger C 2^20,000
347,514 48,120 — (88^55) 307,379 Marimba.Capital shares consolidated on the basis of 1 share for
wary 235 shares outstanding. C (1,332,769) ___Reverse i_«eow adjustment.- C — (88^55) — —
88,255 — Reverse akeover costs incurred c — — — — (408,000) (408,000) Issuance of common shares C
62,857,160 97,784,678 — — — 97,784,678 Issuance of warrants QL — (8,077,145) 8,077,145 ___
issuance of brokeroptioM C.L — (1,106,286) 1,106,286 — — — Shate-basodconrperoatkm-options-.-.. _.
— — 5,675,289 — — 5,675,289 Option and warrsnt* exercised L 37,288 12,838 — — — 12,838 Net!o___-. •
— — — — (31,423,943) (31,423,943) De«ember31,200a 150,045,552 $171,817,981 $16,625,724 $ —
$(65,750,114) $122,693,591 See accompanying notes to consolidated financial statements





 









 









	PHOENIX COALING CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in U.S. Dollars) For the Yeira
Ended December 31 Note 200J 2007 Cash now From Operating Activities Net loss..,-TM «31,423.943) $
(25,991,135) Adjustments to reconcile net lost to rat cash used in operating aclivities;
DepraolatiCB and amortization _, ___A 10,729,602 5,607,126 Loss OB saleof property end equipment ,, —
,, g ij0ia,7S0 1,810,131 Intewtrattswip— — G (224,696) 224,696 Unreiliad foreign currency (gain)
lass ...,,, Q (129,130) 81,227 Share-buedcompens.tkM, L S.935,289 1,448,83? Asset Impairment write
down ,,.,.,,.,,..,,,.._,,, A, 2,873,055 Reclamation liability ,, A (730,436) 1,244,438 to-kindinterest.
        ,..,,..-««,, ...,,TMTM«,,M,,,..,,,TM....,, ,,,,,,,,,, ,, ,, -j*qqqa Dividends accrued on preferred
shares .,,,,_., Q 1,467,165 1,277,838 Changes in non-cash operating assets and liabilities: Account]
receivable . 2£[ 8,442 CW45.742) Inventories—*- — ¦ A 1.192,838 (816^14) Prepaid expenses and
other current assets..- . 59,433 (280,545) Trad* accounts payable and offer accrued
liabilities.._.._.,,., ...___(3,901565) 3310,399 Net cash used ia operating activities — (13,994,621)
(9,406,060) Cash Row From Investing AcUvillr* R«OrKtedcash,cMheo^iys!cotj,sndccrtificatesc^
deposit,,. . K (8,833,264) (515,452)
Payrrisritsfc^i]rve8tnieriti...,,H,MHM,.,Hm.UHU.,,IUMH.R..MM,,,».w,M %.. .,.., .,«, (1007071 -*~
Proceeds Bom sales of investments.. _^..,,,,.,,,,,._.,, 153 jqo 559,977 Payments fiir other
assets, principally mine development and mining rights ,, ___(953,698) 0-239,842) Proceeds Sara sale
of property ind equipment . ..-——-~ ,,TM.TM- .«. B 683,912 6^6,373 Psymentsfbr property and ecpaprnent
H PWUO) (1,549,511) Net assets acquired in merger, prior to public offering , — 307,379
Acquisition* ,, J) (27.946,494) (31.392,433) Net cash used I. (.voting acllvltlai (40^72,882)
(28,230,898) Cash Clow From Fmancfais Activities rVmc%slpiyirientsanaeDt— G (1.058-3*7)
(21.618.644) Proceeds ftom debt, aetoffiMncingfbcs.— ___Q 4,891,890 10.429.023
ItyrrBntsonequinmerrtftaDdag G (6,48e\279) (1,007,250) Reverse takeover costs Incurred. . ,,,, .,, C
(408,000) Decrease in other long-term liabilities.... ,, _..,,.,...,, , (225,052) (580,482) Net
proceeds Corn common and preferred share issuances and exercise of options and warrants C, L
97.797,516 42.488J89 Net cash provided by financing acilviflea 94.5n.738 29.711.236 Nit Inert^n*
(Decrease)la Cash and Cask Eqalvaients.___....-, .. ..,,.,,,., 40,144,235 (7,925,722) Cash and Cash
Equivalents, Betinniag; of Year .. _... . 381.374 8,307,096 Cash and Cash Equivalents, End of Year
— — 5 40,523.609 $381,374 Supplements! DJscHMurc- Intsrastpsid : -. $2.179,723 S 6.814,827
Non-Cajti Investing and Financing Activities: Vendor financing fia equipment purchases ___Q $
18,033.434 $ LO.293,381 Snares issued in connection with acquisition..___fj $ — S 543.300 Vendor
prwided financing of acquisition ,,.,,,,....,,,, ,, fj $ — S 7,794,000 Receivable credited to acquisition
,, 0 $26X1.000 $ — Shares issued in payment of flnBflcJBg fees ___Q $510,204 t 862,500 See
accompanying notes to consolidated financial statements





 









 









	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 NOTE A —
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations: The
Company is engaged in the production and sale of steam coal to utilities and industrial fuel
consumers. The Company’s mining activities are currently limited to one importable business
segment, which is the Illinois Basin. On June 27,2008, Phoenix Coal Corporation (“Phoenix”)
completed a reverse takeover (“RTO”) of Phoenix Coal Inc. (the “Company”), formerly Marimba Capital
Corp. (“MCC”), which was previously listed on the TSX Venture Exchange (note C). MCC was
incorporated under the Business Corporations Act (Alberta) on February 8, 2007 and was classified
as a Capital Pool Company as defined in the TSX Venture Exchange Policy 2.4 and, accordingly, had
no assets other than cash and no commercial operations. MCC changed its name to Phoenix Coal Inc.
on June 25, 2008. Phoenix, a U.S. company headquartered in Madisonville, Kentucky with satellite
offices in Champaign, Illinois and Louisville, Kentucky, was formed in Jury 2004 as a Delaware C
corporation and was originally named Dynamic Separations, Inc. (“DSI”). Where the context requires,
in respect to transactions prior to the RTO, die “Company” also refers to Phoenix. Principles of
Consolidation: Pursuant to the RTO transaction, these consolidated financial statements for the
years ended December 31, 2008 and 2007 reflect the assets, liabilities and results of operations of
Phoenix prior to the RTO and the consolidated assets, liabilities and results of operations of the
Company and Phoenix subsequent to the RTO. Tub consolidated financial statements are
issued under the name of the legal parent (file Company), but are deemed to be a continuation of
the legal subsidiary (Phoenix). The consolidated financial statements include Phoenix Coal Inc. and
its subsidiaries, all of which are wholly-owned. Basis of Presentation: The consolidated financial
statements of the Company have been prepared in accordance with Canadian generally accepted
accounting principles (“GAAF”). All monetary references expressed in these notes are references to
United States dollars, except occasional references to Canadian dollar amounts, where the dollar
amount is preceded by Cdn (“Cdn$”). Use of Estimates: The preparation of the consolidated financial
statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from these
estimates. The assets and liabilities which require management to nuke significant estimates and
assumptions in determining carrying values include, but are not limited to, coal inventories,
property, plant and equipment, mining rights, mine development, mineral reserves, prepaid
royalties, provision for income taxes, and asset retirement obligations. Reverse takeover
accounting: The RTO was completed on June 27, 2008. Prior to the complerloo of the RTO, MCC
affected a reverse split of its outstanding common shares on the basis of 1 new share for each Z35
shares outstanding. Pursuant to the RTO, the Company issued one common share for each outstanding
common share of Phoenix. In addition, warrants and options to purchase Phoenix common shares
outstanding Immediately prior to the RTO were replaced with warrants and options to purchase an
equivalent number of common shares of ate Company, on economically equivalent terms and conditions.
The capital changes of the Company related to the RTO are detailed in note C to these consolidated
financial statements. ‘ Concurrent
with the RTO, the Company raised 597,784,678, net of Issuance
costs, In a prospectus offering of 62,837,160 subscription receipts priced at CdnS 1.75. In
connection with the RTO, each subscription receipt was exchanged for one unit, each unit consisting
of one common share and one half common share purchase warrant exercisable until June 25, 2010 at
CdnS2.25 per share. The acquisition of the shares of Phoenix has been accounted for as an RTO
transaction in accordance with guidance provided in Canadian Institute of Chartered Accountants*
(“OCA”) Emerging Issues Committee (“EIC) Abstract No. 10. As MCC did not qualify as a business for
accounting purposes, the transaction has been accounted for as a capital transaction of Phoenix.
Business Combinations: C1CA Handbook Section 1581 establishes standards for the recognition,
measurement and disclosure of business combinations including criteria for the recognition of
intangible assets of the acquired enterprise apart from goodwill. Initially, in all of the
Company’s previous acquisitions, including the acquisition of Pact Resources LLC





 









 









	PHOENIX COAL INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2008 and 2007
(“Pacf”), a development-stage enterprise, as described In note D, the amount of the purchase price
is excess of the feir value of identifiable tangible assets was allocated in its entirety to
goodwill. The Compaq has determined that in each of these acquisitions, the excess should have been
allocated to mining rights. Consequently, on the June 30,2008 and subsequent balance sheets, the
Company has reclassified $32,393,227, previously shown as goodwill at December 31,2007, to Mining
Rights, Mine Development Costs and Mineral Reserves. Other than this rectification, the change in
the purchase allocation in the Pact and other acquisitions has had no material impact on the
reported financial position or results of operations of any prior period. Financial
Instruments: CICA Section 3 855, “Financial Instruments — Recognition and Measurement”, establishes
standards tor recognizing and measuring financial assets, financial liabilities, and non-financial
derivatives. Under CICA 3855 financial instruments are classified into one of the following five
categories: held for hading assets or liabilities, held to maturity investments, loans and
receivables, available for sale financial assets or other financial liabilities. Held for trading
financial instruments are measured at feir value and all gains and losses are included in net
income in the period in which they arise. Available for sale financial instruments are measured at
fair value with revaluation gains and losses included hi accumulated other comprehensive income
until the instruments are derecognized or impaired. Loans and receivables, investments held to
maturity and other financial liabilities are measured at amortized cost using the effective
interest method. The Company’s financial instruments consist of cash and cash equivalents
(Including restricted cash), short-term investments, trade accounts receivable, trade accounts
payable and accrued liabilities, other long-term liabilities, and short-term and long-term debt,
indudmg notes payable and preferred shares. Cash and cash equivalents are classified as held for
trading, and are measured at fair value at the balance sheet date. Short-term investments are
classified as held for trading and arc measured at fair value at the balance sheet date. Accounts
receivable are designated as loans and receivables and accounted for at amortized cost Trade
accounts payable and accrued liabilities, other long term liabilities and short-term and long-term
debt, including preferred shares, are classified as other financial liabilities and accounted for
at amortized cost Transaction costs for financial instruments, other than held for trading, are
included in the value of the financial instrument. Income and expense related to financial
instruments is included in the consolidated statement of operations as mterest income or Interest
expense. Cash and Cash Equivalents: Cash and cash equivalents include demand deposits held
with banks and highly liquid investments with original maturities of three months or less. For
purposes of reporting cash flows, the Company considers all cash accounts mat are not subject to
withdrawal restrictions or penalties to be cash and cash equivalents. Short-term
investments: Short-term investments typically include certificates of deposit and investments
issued by the United States government, such as Treasury bills and Treasury notes, with original
maturities greater than three months. At December 31,2008, the short-term investment balance off
100,707 was entirely invested in certificates of deposit            Trade Accounts Receivable; Trade
accounts receivables are recorded at the invoiced amount and do not bear interest Customers are
primarily investment grade companies and quasi-governmental agencies
.. As a result, the Company has
not experienced any instances of non-payment and does not currently require an allowance for
doabtful accounts. Management monitors customers closely and will record an allowance if trade
account balances become potentialh/ uncollectible. Inventory: Ita Company accounts for
coal inventories on a first-in-first-out basis and values these inventories at the lower of cost
and net realizable value with cost determined using average cost per ton. Coal inventory values
were $22.62 per ton at December 31, 2008 and ranged from $21.99 to $29.02 at December 31, 2007. At
December 31, 2008, the total inventory value of $452,558 was valued at net realizable value. At
December 31, 2007, the total inventory value of $1,072^97 comprised $748,454 that was valued at
cost and $324,243 that was valued at net realizable value. The Company accounts for parts
inventory using the original cost on a firsNn-first-out basis. Parts inventory is included in other
current assets. There were no write downs or reversal of write downs of inventory recorded in
2008. Restricted Cash, Cask Equivalents, and Certificates of Deposit: Restricted cash
balances are either used to collateralize letters of credit, or secure reclamation bonds with state
agencies. These assets will not be released until the reclamation bonds are released by the state,
and as such are not included in current assets.






 












 









	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007
Property, Plant and Equipment; Property, plant and equipment are stated at cost. The Company
provides far depreciation on the straight-line basis with useftil lives that range from 5 to 10
years. Depreciation expense for the years ended December 31, 2008 and 2007 was $4,364,650 and
$2,652,542, respectively. The cost of assets sold, retired, or otherwise disposed of and the
related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is
included in operations. Expenditures for maintenance and repairs are charged to expense as
incurred. Expenditures for major renewals and betterments that extend the useful lives of property,
plant and equipment are capitalized Interest cost is capitalized for qualifying assets during the
period in which the asset is being installed and prepared for its intended use. Capitalized
interest cost is amortized on the same basis as the related asset No Interest costs were
capitalized for the years ended December 31,2008 and 2007. Consistent with CICA Section 3063,
Impairment of Long-Lived Assets, the Company evaluates long-lived assets for impairment when events
or changes in circumstances indicate that their carrying amount may not be recoverable. This
impairment testing is based on estimated future undlsoounted cash flows to be realized from the use
of the tons-lived asset These future cash flows are developed using assumptions that reflect the
long-term operating plans given management’s best estimate of future economic conditions, such as
revenues, production costs, and reserve estimates. A change in these factors could result in a
modification of die Impairment calculation, Mm Development Costs: Mine development costs represent
the costs incurred to prepare future mine sites fbr mining and are amortized on the
units-of-productlon method. The net book value of mine development costs was $1,681,147 and
$1,464,831 at December 31, 2008 and 2007, respectively. At December 31,2008 and 2007, die net book
value of mine development costs included $1,446,478 and $882,896, respectively, attributable to
properties where the Company was not currently mining and, therefore, the mine development costs
were currently not being amortized. Development costa amortized totaled $665,243 and $455,408 for
the years ended December 31,2008 and 2007, respectively. Mining Rights; Mining rights, which are
lights to mine coal properties acquired through coal leases, are recorded at cost Mining rights are
amortized on the units-of-productlon method. The net book value of mining rights totaled
$50,712^374 and $32,893,227 at December 31,2008 and 2007, respectively. At December 31,2008 and
2007, the net book value of mining rights included $45,627,773 and $24,854,649, respectively,
attributable to properties where the Company was not currently mining and, therefore, the mining
rights were currently not being amortized. Mining rights amortized totaled $3,382,180 and nil fbr
the years ended December 31,2008 and 2007, respectively. In June 2007, the Company closed its
Crittenden County Coal mining operation due to uneconomical mining conditions. As a result of the
closing, we Company recorded an asset impairment writs down related to its mining rights of
$2^173,055. Mineral Reserves; Mineral reserves, which are coal properties fbr which the Company
owns the coal in place, are recorded at cost At December 31, 2008 and 2007, the net book value of
mineral reserves totaled $189,434. This entire amount is attributable to properties where the
Company was not currently engaged in mining operations and, therefore, the assets were not
currently being depleted. Prepaid Royalties: Rights to leased coal lands are often acquired through
royalty payments. Where royalty payments represent prepayments recoupable against production, they
are recorded a
s a prepaid asset As mining occurs on these leases, the prepayment Is charged to cost
of sales. Prepaid royalties were $492,418 and $80,683 at December 31,2008 and 2007, respectively,
and are included in other assets. Asset Retirement Obligations: CICA Handbook Section 3110, “Asset
Retirement Obligations,” addresses financial accounting and reporting fbr obligations associated
with the retirement of tangible long-lived assets and the associated asset retirement costs. The
Company’s asset retirement obligation (“ARO”) liabilities primarily consist of spending estimates
related to reclaiming surface land and support facilities in accordance with federal and state
reclamation laws as defined by each mining permit






 









 












	PHOENIX COAL JNC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 Revenue
Recognition: The Company recognizes revenue when all of the following criteria are met: (1)
persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been
rendered, (3) the seller’s price to the buyer is fixed or determlnable, and (4) collectability is
reasonably assured. In the case of coal that Is mined and sold, a specific sales contract is
negotiated with each customer, which includes a fixed-price per ton, a delivery schedule, and terms
of payment Royally Expense: The majority of the coal that the Company mines is owned by other
entities. The Company acquires the right to mine and sell the coal through various leases. These
leases require the Company to pay a royalty to the owners of the land and the minerals being mined.
Royalty expense for the years ended December 31,2008 and 2007 was $3,778,642 and $3,391,015,
respectively, and is included in selling expenses on the consolidated statement of operations.
Income Taxes: Future Income taxes are provided for temporary differences arising from differences
between the financial statement and tax basis of assets and liabilities existing at each balance
sheet date using substantively enacted tax rates expected to be in effect when the related taxes
are expected fo be paid or recovered Loss per Stare: The Company uses the treasury stock method to
compute the dllutiveeffcrtofoptiona and warrants. Under mis method the dilutive effect on loss per
share is recognized on the use of the proceeds tfiat could be obtained upon exercise of options and
warrants. It assumes that the proceeds would be used to purchase common shares at the average
market price during the year. The Company also uses the “if converted” method to compute the
dilutive effect of any convertible debt For loss per share, the dilutive effect has not been
presented, as it would prove to be anti-dilutive. Basic and diluted loss per common share is
calculated using the weighted-average number of common shares outstanding during the year. As a
result of the RTO transaction, die basic and diluted loss per share has been presented in
accordance with the guidance provided in EIC Abstract No. 10. Stock-based compensation: The Company
uses the fair value method for options, warrants and restricted stock granted. The fm value of
stock options and warrants is determined by the Black-Scholcs option pricing model with assumptions
for risk-free interest rates, dividend yields, volatility factors of the expected market price of
the Company’s common shares and an expected life of the options and warrants. The fair value of the
restricted stock is determined to be the equivalent of the Company’s common shares’ trading price
on the date of the grant; The fair value of the instruments granted is amortized over this vesting
period. Foreign currency translation: The Company translates monetary assets and liabilities at the
rate of exchange in effect at the balance sheet date and non monetary assets and liabilities at
historical exchange rates. Revenues and expenses are translated at rates prevailing at the dates of
the related transactions. New Accounting Policies: Capital Disclosures: Effective January 1,2008,
the Company adopted CiCA Handbook Section 1535, Capital Disclosures. Handbook Section 1535
specifies the disclosure of (1) an entity’s objectives, policies and processes for managing
capital; (li) quantitative data about what the entity regards as capital; (Hi) whether the entity
has complied with any capital requirements; and (iv) if it has not complied, the consequences of
such noncompliance. The Company has included disclosures recommended by the new Handbook section in
note B to these consolidated financial statements. Inventories: Effective January 1, 2008, the
Company adopted new accounting
recommendations set out in the CICA, Handbook Section 3031,
“Inventories”, which supersedes the previously issued standard on inventory. The new standard
introduces significant changes to the measurement and disclosure of Inventory. The measurement
changes include: the elimination of LIFO, the requirement to measure inventories at the lower of
cost and net realizable value method for inventories that are not ordinarily interchangeable and
goods or services produced for specific purposes, the requirement for an entity to use a consistent
cost formula for inventory of a similar nature and use, and the reversal of previous writedowns to
net realizable value when there is a subsequent increase in the value of inventories. Disclosures
of inventories have also been enhanced. Inventory policies, carrying amounts, amounts recognized as
an expense, write-downs and the reversals of write-downs are required to be disclosed. This
standard has had no material impact on the Company’s consolidated financial statements. Financial
Instruments • Disclosures and Presentation: Effective January 1,2008 the Company also adopted the
following new CICA Handbook Sections: Section 3862, Financial Instruments Disclosures, and Section
3863, Financial Instruments






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007
Presentation. Sections 3862 and 3863 consist of a comprehensive series of disclosure requirements
and presentation rules applicable to financial instruments. Section 3862 revises and enhances the
disclosure requirements set out in Section 3861, Financial Instruments Disclosure and Presentation,
and Section 3863 carries forward unchanged the presentation requirements of Section 3861. Section
3862, Financial Instruments Disclosures, requires die Company to provide disclosures in its
financial statements that enable users to evaluate the significance of financial instruments for
tbe Company’s financial position and performance, the nature and extent of the risks arising from
financial instruments to which the Company ia exposed during the year and at the balance
sheet date, and how tbe Company manages those risks. The Company has included disclosures
recommended by the new Handbook section in note H to these consolidated financial statements.
Amendments to Section 1400 — General Standards qf Financial Statement Presentation: The CICA
amended Handbook Section 1400, Going Concern, to include additional requirements to assess and
disclose an entity’s ability to continue as a going concern. The Company has determined that these
amendments had no material impact on the Company’s consolidated financial statements. Future
Accounting Changes; Goodwill and Intangible Assets: The CICA has issued a new standard which may
affect the financial disclosures and results of operations of the Company for interim and annual
periods beginning January 1, 2009. Section 3064, Goodwill and intangible assets, establishes
revised standards for recognition, measurement, presentation and disclosure of goodwill and
intangible assets, Concurrent with the introduction of this standard, the CICA withdrew EIC-27,
Revenues and Expenses during the pre-operating period. International Financial Reporting Standards
(“IFRS”): In 2006, the Canadian Accounting Standards Board (“AcSB”) published a new strategic plan
that will significantly affect financial reporting requirements for Canadian companies. In February
2008, the AcSB announced that Canadian GAAP for publicly accountable enterprises will be converged
who IFRS effective in calendar year 2011. The Company will adopt IFRS for the fiscal year beginning
January I 2011, with restatement for comparative purposes of amounts reported by the Company for
the fiscal year beginning January 1,2010. The Company is currently in the planning phase of the
conversion, which includes identifying potential differences between GAAP and existing IFRS at
December 31,2008, as well as proposed IFRS which may be in effect in 2011. The Company is utilizing
both internal and external resources to identify and ultimately quantify these differences and tbe
impact that they will have on accounting policies, infbrmation technology and data systems,
internal control over financial reporting, disclosure controls and procedures, financial reporting,
and business activities. Employees responsible for financial reporting will attend IFRS training
and begin IFRS accounting policy development in 2009. Reclassiflcatlons: Certain of die 2007
figures have been reclassified to conform to the 2008 financial statement presentation. NOTE B
-CAPITAL MANAGEMENT The Company manages its capital structure and makes adjustments to It, based on
the funds available to the Company, in order to support the acquisition, exploration and
development of its mineral properties. The Board of Directors docs not establish quantitative
return on capital criteria for management, but rather relies on the expertise of the Company’s
management to sustain future development of the business. Tbe Company defines capital to include
its shareholders equity, long and short-
term debt, vendor financing, and its preferred shares.
Capital, as defined, totaled $143,867381 and $59,419,009 at December 31,2008 and 2007,
respectively. The mineral properties in which the Company has an interest are in both the active
mining and development stages. The Company manages its capital structure in a manner that provides
sufficient funding for operational activities, capital expenditures, and mine development. Funds
are secured through a combination of equity capital and external debt In order to maintain or
adjust the capital structure, the Company may attempt to raise additional financing through the
issuance of sew equity securities, the exercise of outstanding common share warrants and stock
options, or the issuance of debt instruments Such as term loans, equipment financing, and
sale-leaseback arrangements.






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 During the
years ended December 31, 2008 and 2007, the Company generated cash flows from equity capital and
external debt as follows: 2008 2007 Proceeds from debt, net of financing fees . $4,891,890
$10,429,023 Net proceeds from common share, warrants and preferred share offerings and exercise of
options and warrants ___97,797,516 42,488,589 Vendor financing of equipment purchases and
acquisitions .,, 18.025.434 18.087.381 Total proceeds from equity capital and external debt S
120.714.840 t 71.004.90,3 Management reviews its capital management approach on an ongoing basis
and believes that this approach, given the relative size of the Company, is reasonable. There were
no changes in the Company’s approach to capital management during the year ended December 31, 2O08.
Neither the Company nor its subsidiaries axe subject to externally imposed capital requirements.
NOTE C — RTO AND RELATED CAHTAL ACTIVITY On May 22,2008, MCC and Phoenix entered into a definitive
merger agreement with respect to the RTO discussed in note A. On May 22,2008, MCC also filed a
preliminary prospectus for an offering (the “Offering”) of Subscription Receipt* (me “Subscription
Receipts”), each Subscription Receipt entitled the holder to receive one unit (a “Unit”), each Unit
consisted of one common share of MCC and one-half of one warrant of MCC, subject to the
satisfaction of certain conditions. MCC applied to have the common shares and warrants listed oa
the Toronto Stock Exchange (the “TSX”). The Subscription Receipts were offered to the public in all
of the provinces of Canada, except for Quebec, and in the United States in an offering exempt from
the registration and prospectus requirements of the U.S. Securities Act Subject to applicable law,
the agents acting in connection with the Offering also offered the Subscription Receipts outside of
Canada and die United States. The Offering consisted of 62,857,160 Subscription Receipts at a price
of Cdn$1.75 per Subscription Receipt to raise gross proceeds of CdnSl 10,000,030. Pursuant to an
agreement among MCC, Phoenix and the Offering agents, the agents received a cash commission equal
to 6% of the gross proceeds of die Offering phis compensation options equal to 4% of the
Subscription Receipts sold pursuant to the Offering. A summary of the gross proceeds received and
Offering costs incurred is as fellows: Gross proceeds (CdnSl 10,000,030 converted to VS. dollars at
a conversion rate of 0.99007 U.S. to Cdn) — S 108,908,500 Agents* fees. .. ,TM . ,,,, ^,, ,, -
(6,534,510) Other out-of-pocket costs ,,,, ,,,. ,, (4,589,312) Net proceeds ,, — ~~... -— $97.784,678
In addition to the Offering costs, the Company incurred $408,000 in costs related to the RTO which
have been treated as a capital transaction and charged to accumulated deficit






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 Common and
preferred share activity in 2008, up to and including the KTO closing date, is detailed as follows:
Number Phoenix Common Share* Issued -105,1)00,000 authorized, $.001 stated value per share of
Shares Amount Balancet Decembers!. 2007 ,,,,,,,.. _,.. ,, 37,701,440 S 22,426,771 Conversion
offinaneecomply debt to common sharM.iricludmg ETC-96 idjustniont-note G.___8,668,000 11,084,940
Issued for fees on payment of debt-noteG 401,163 510^204 Conversion oT preferred shares to common
shun- noteO ___, 37,190,267 46,177,718 Issued to settle dividends on preferred sham- sole Q . ,.,,- -
        ... 2,196.003 2.745,004 Balance June 27,2008, pre RTO -— 86,163.873 S 82,944,637 Number
Phoenix Preferred Sham Issued — 40,000,000 authorized, $.001 stated value per shire ofSharcs
Aroonat Balance, December31,2007,oriudiagaccr«edd1videi>d*OfSl,2?7,830... . 37,190^67
$44,357,330 Accredan of preferred share ottering costs—~~~.~ . _«...,..»...»4.«. -«.
,,.,,.,,.,..TM^-,,,,_ — 1,820;1&8 Conversion of preferred shares to common stares — note G.. «—,,,.,,. ,,
,,. .___,.-. (37,190.267) (46,177,718) Balance, June 27,2008.,,..,.,., ,,.,, ___,,-..,,,._,., — ¦¦,.— — $
— Number MCC and Company Common Shares Issued- unlimited authorized ofSharaa Amount Balance,
December 31,2007 ,, ___, , «TM. 2,320,000 $347,314 Consolidated on the basil of 1 share for every 3.35
sharei ouartandinf-noteA— -— ,, —.— (1333.7691 — Balance after consolidation... . ,,,, . 987,231
347,514 Issued in public oSferina. 62,857,160 97,784,678 Reverse takeover adjiatraeat ,,.. —
(8»\255) Value of broker options aivJsharchoIder warrants issued wMi pubBeoffering — (9,183,431)
Shan capital arising from RTQ transaction on June 27,2008 -note A 86.163,873 82.944ff37 Balance
June 27.2008, post KTO ,, , —,, ___.___150,008^64 $171.805.143. NOTE D—ACQUISITIONS C&R Coal Inc. In
July 2008, the Company’s subsidiary, R&L Wton toe. (“R&L Warn”), purchased all of the outstanding
common shares of C&R Coal Inc. (“C&R”) for cash consideration of $2,051,000, In addition, under the
terms of the agreement, R&L Wlnn will pay the former owners a royalty of $0.60 per ton for each ton
of coal sold from the C&R mines. The current mining area, Beech Creek and Beech Creek South,
contained approximately 450,000 reserve tons (697,000 reserve tons as at December 31,2007 pursuant
to the Company’s National Instrument 43-101 revised technical report less coal mined in the first
seven months of 2008) as at July 31,2008. R&L Wion also acquired other leases in the transaction
from C&R and R&O Leasing, LLC, a company that is affiliated with C&R through common ownership.
Based on exploration completed to date by the Company, management estimates the leases contain
approximately 1,500,000 tons of coal. The potential quantity is conceptual in nature as there has
been insufficient exploration to define a mineral resource and it is uncertain that further
exploration will result in the delineation of a mineral resource. The cost of the C&R acquisition
was allocated to the following identifiable net assets: Current assets and restricted certificates
of deposit — ,,,.........,«,,.. .. $1,281,000 Mining equipment ,, ,,.-« ~ 859,000 Mining rights and
mine development costs ,, ,, 2^87,000 Assumed liabilities- — ,, (2,476,000) $2,051,000 Prior to July
2008, the Company operated and managed C&R’s mines under a management and adnurustrative services
agreement. Since the Company did not own nor control C&R, it did not consolidate its operating
results prior to July 2008, and
recorded funds invested and services provided in other assets and
accounts receivable on its balance sheet, which totaled 1612,751 at December 31,2007.






 









 












	PHOENIX COAL INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 Renfro
Equipment, Inc. In July 2008, the Company purchased all of the outstanding common shares of Renfro
Equipment, Inc. (“Renfro”) for total cash consideration of 51,129,000. Additionally, the Company
incurred 118,000 of dosing costs. The purchase included all assets and liabilities of Renfro,
except certain equipment and associated debt specifically excluded from the purchase. Based on
exploration completed to date by the Company, management estimates Renfro controls approximately
1,000,000 tons of coal reserves and 465,000 resource tons via lease. The potential quantity is
conceptual in nature as there has been insufficient exploration to define a mineral resource and it
Is uncertain that further exploration will result in the delineation of a mineral resource.
Additionally, if by the second anniversary of the closing date, me Company acquires at least
1^00,000 reserve tons as defined by National Instrument 43-101 due to the direct efforts of the
sellers (the “Additional Reserves”), the Company will pay the sellers Sl,000,00O for the first \5
million tons of reserves, plus S0.S0 per ton for each reserve ton in excess of 1.5 million. The
share purchase agreement defines a specific territory from which the Additional Reserves can be
acquired. The acquisition of the Additional Reserves is on terms and conditions acceptable to the
Company in its sole, reasonable discretion. The cost of the Renfro acquisition was allocated to the
following identifiable net assets: Current assets and restricted certificates of deposit ,,..,,, ,,_._
        . S 334,000 Mining equipment — ,, ~~ . -. 429,000 Mining rights and mine development costs.. ,,.,.,,
,,...,,..,,.,,. ,,,,,,,...,, 1,770,000 Assumed liabilities. TM ,,.. (1,386,000) $1,147,000 The Company is in
the process of finalizing its valuation of the assets acquired and liabilities assumed for both the
C&R and Renfro acquisitions. The above allocations are preliminary estimates of fab- value and may
differ from the final allocation and the differences may be material. The Company will finalize the
allocations within one year of the acquisition dates. Pact Resources LLC In October 2007, the
Company acquired the membership interests in Pact Resources LLC (“PACT”) upon exercising its option
in September 2007 pursuant to the option agreements dated September 7,2006 {the “Option
Agreements”). Through the acquisition of PACT, the Company controls the leases for the proposed
Pratt Mine within the area of interest as defined in the Option Agreements. The proposed Pratt Mine
contains both underground and surface coal totaling 33,333,000 tons of measured and indicated
resources, 670,000 tons of inferred resources and 28,933,000 toss of proven and probable reserves.
The Company has been carrying out development work on the proposed Pratt Mine since the fourth
quarter of 2006, and in August 2008 received a state permit which will allow the Company to begin
construction on the Pratt Mine. In addition to the leases for the proposed Pratt Mine, the sellers
of PACT delivered to the Company the lease for the Panama South property, which is described
further below. As a result, the in-place tons associated with the Panama South property were
included in the calculation of the Scheduled Payment (as described below). The Panama South
property contains both underground and surface coal totaling 76,287,000 tons of measured and
Indicated resources. Pursuant to the Option Agreements, in addition to the scheduled payment for
in-place tons of coal delivered by the sellers (the “Scheduled Payment”), which payment terms would
be subsequently modified, the Company agreed to pay £300,000 (the “Option Fee”) at the effective
date of the Option Agreements, an overriding royalty no greater than 3% o
f the gross sales price
per ton sold from the proposed Pratt Mine (the “Overriding Royalty’’) awl expenses related to the
development of the proposed Pratt Mine during the option period (the “Pratt Expenses”). Prior to
the closing of the acquisition, the Company and the sellers of PACT modified the original Option
Agreements and entered into modification of option agreements (the “Modification of Option
Agreements”). The Modification of Option Agreements stipulated that the Scheduled Payment was SI
5,000,000 payable in three installments, 510,000,000 of which was paid in 2007, plus a true-up
payment of $0.10 per in-place ton on September 7, 2008 for any additional tons of coal greater than
150,000,000 in-place tons that the sellers deliver. As at December 31,2007, the Company estimated
that the sellers had already delivered 177,940,000 in-place tons of coal for a total Scheduled
Payment of $17,794,000. As such, the Company recorded an additional $7,794,000 of vendor






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 financing on
its consolidated balance sheet due to the former owners of PACT as at December 31,2007. Of this
amount, $5,000,000 was originally payable in April 2008, with the balance due in September 2008. On
March 31, 2008, the Company entered into a buy-out agreement with the former owners of PACT, which
was subsequently amended in June 2008 (collectively the “Buy-out Agreements”). Under the terms of
the Buy-out Agreements, if die Company either completed a public offering of its shares, sold On a
private sale) more than 50% of its issued and outstanding shares or more than 50% of its assets, or
completed an RTO (the “Monetization Event”), the Company would pay the former owners of PACT $25
million (the “Buy-out Payment”). Pursuant to the Buy-out Agreements, Phoenix’s obligations to make
a $5 million payment in April 2008 and the balance in September 2008 were suspended until the
occurrence of a Monetization Event Upon receipt of the Buy-out Payment, all obligations of Phoenix
to make any additional payments, including the accrued amount on the consolidated balance sheet as
at December 31, 2007 and future overriding royally payments, would cease and terminate. In the
event the Monetization Event was an RTO, and the offering was not closed on or before July 1,2008,
then all obligations of the Company to mate additional payments to the former owners of PACT for
the PACT properties would be reinstated at that time. On June 27,2008, the Company completed the
RTO and paid $25,000,000 to the former owners of Pact on June 30, 2008. At December 31,2007,
Phoenix’s acquisition costs In PACT totaled $12,909,000. With the $25,000,000 Buy-out Payment paid
on June 30, less the vendor financing of $7,794,000 previously recorded at December 31,2007, the
acquisition costs increased by $17,206,000 during the year ended December 31,2008, with a
corresponding increase in mining rights. The Company’s total acquisition cost of PACT is comprised
of the Option Fee, Pratt Expenses, the Scheduled Payments, and the Buy-out Payment which total
$36,115,000 (the “Purchase Priced at December 31,2008 and $18,909,000 at December 31,2007 as
follows: 2001 2BQ7 Option Fee ,, ,, $300,000 $300,000 Pratt Expenses ,,. 815,000 815,000 Scheduled
Payments and Buy-out Payment . 33,000,000 17,794,000 S 36,113,000 $18,909,000 The Purchase Price
was allocated to the following identifiable net assets: 20M 2087 Cash. ___$3,000 $3,000 Advance
royalties — ___,, ,, ___.. 42,000 42,000 Land purchase option ___75,000 75,000 Mining rights and
mine development costs — . ... 35,995.000 18.789,000 S 36.115.000 S 18,909,000 At the acquisition
date, the owners of PACT owned less than 1% of the total outstanding shares of Phoenix and also
held 300,000 options to purchase common shares of Phoenix. The PACT purchase price was negotiated
by members of senior management that had no financial ownership in PACT and the acquisition was
considered to be an arms-length transaction. During 2008, the Company finalized the purchase
allocation and related valuation of the assets acquired and liabilities assumed for the PACT
acquisition. Initially, the purchase price in excess of tangible and identifiable assets was
allocated to goodwill. However, as PACT is a development stage enterprise which has not yet
commenced commercial production, the Company has concluded that the allocation should be to
acquired mining rights as explained more fully under “Business Comfainations,, in note
A. Panama South In December 2007, the Company entered into a lease with Peon Virginia Operating
Co., LLC for the right to mine its Panama South property, located in Webster County, Kentucky,
which contains bot
h underground and surface coal totaling 76,287,000 tons of measured and indicated
resources. In connection therewith, the Company paid a non-recoupable fee of






 









 












	PHOENIX COAL INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2MB and 2007 S500.000. The
lease outlines three terms: (I) the development term (the “Development Terra”), from the effective
date of the lease until December 31,2011; (2) the primary term (the “Primary Term”), from the end
of the Development Term until the earlier of. (i) December 31, 2021, (ii)the time at which the
Company has mined and removed all leased coal, or (HI) termination of the lease; and (3) the
remainder term, from the end of the Primary Term until me Company has completed reclamation,
environmental and other obligations under the lease. The Primary Term can be renewed twice for a
period of five years each. The Company is required to pay a tonnage royalty tor each ton of leased
coal mined and sold, and a monthly minimum rental fee. Each month’s tonnage royalty will be
credited against the monthly rmrmnum rental fee such that no minimum rental payment shall be due in
any month where tonnage royalties equal or exceed the minimum rental. The Company is also required
to pay a wheelage fee for any coal mined from adverse lands and transported through me leased
premises. The Company must produce and ship no less than 500,000 tons of leased coal from the
leased premises during the calendar year ending December 31, 2014 and during each calendar year
thereafter. Failure to do so will result in the payment of additional fees under the lease.
Charolah Corporation In January 2007, the Company acquired assets and shares of the Charolais
Corporation and related entities for a total consideration of S21,924,000 principally allocated as
follows: Real property ,, ___. .,,,,.,,.,,,.,,,,,.,, $557,000 Plant and equipment ___,, ,,.,,..,,,.».-. ...
13,483,000 Mining rights and mineral reserves ,, > ___8,705,000 Asset retirement obligations ,, ,,
(821,000) $21,924,000 The purchase price paid to the seller was $21,735,000, including 434,640
common shares of the Company valued at $543,000. In addition, the Company incurred $189,000 of
transaction costs related to the purchase. The purchase bom expanded the Company’s reserve base in
the Western Kentucky markets, and increased sales volume wiiri a well established utility, NOTE
E—PROPERTY, PLANT AND EQUIPMENT.NET Property, plant and equipment consists of the following at
December 31: 2MB Accumulated
Cart Depreclttkm N>t Book Value Land .- S 1,474,574 $. S 1,474474 Building and improvements _
25,424 7,698 17,726 Preparation plant ~ ~- 3,084,768 347,416 2,737,352 Mining equipment — ,, —
45,886,694 5,758,494 40,128,200 Loading and marine transport equipment — ,, l ,775,000 340,208
1,434,792 Office equipment- ,, ,, 370,450 158,172 212^278 Vehicles 65,965 32^83 32^82 $52,682,875 S
6,644,971 $46,037,904






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 2D07 ___
Attnmulattd Cm* Depreciation Net Bank Value Land— ,, ___$599,654 $ — $599,654 Building and
improvements ,, 25,424 5,156 20,268 Preparation plant ,, 1,476,805 260,003 1,216,302 Milling
equipment ,, 27,684,863 2,393,571 25,291,292 Loading and marine transport equipment ,, .. 1,775,000
162,708 1,612,292 Office equipment — .,.,, ..,,.-..-«___~-TM 324,684 82^85 242^099 Vehicles ,, ,, 65,965
19.790 46475 $31.952395 $2,923,813 129,028,582 In 2008, the Company sold several pieces of non-core
equipment, generating gross proceeds of $683,912. The Company recorded a loss of 51,012,780 related
to these sales. In November 2007, the Company sold certain assets and reserves to Covol Fuels No.
2, LLC (“Covol”) for $4,230,000 in cash. The- assets comprised a permit, lease, mobile equipment, a
preparation plant and slurry reserves. As part of the agreement, the Company entered into a coal
purchase and sale agreement to purchase the processed coal fines from Covol and a coal processing
agreement to enable the Company to temporarily wash its coarse coal product at the preparation
plant In addition to the Covol sale, the Company also sold non-core real estate for gross proceeds
of $1,926,951, and other smaller, non-core assets such as mobile equipment during 2007. The Company
incurred net losses of $1,810,138 related to the disposal of these assets in 2007. NOTE F—ASSET
RETIREMENT OBLIGATIONS The Company estimates its ARO liabilities for fwal reclamation and mine
closure based upon detailed engineering calculations of the amount and timing of the future cash
spending for a third party to perform the required work. Spending estimates are escalated for
Inflation and men discounted at me ovdaVaijusted risk-free rate, which ranged from 6.12% to 7.64%
at December 31,2008 and 6,53% at December 31,2007. Total estimated undiscounted future cash
spending related to the ARO liabilities totaled $5,142,000 at December 31,2008, with spending
estimated to occur from 2009 to 2016. Total estimated undiscounted future cash, spending related to
the ARO liabilities totaled $4,437,000 at December 31, 2007. The Company records an ARO asset
associated with the discounted liability for final reclamation and mine closure. The obligation and
corresponding asset are recognized in the period in which me liability is incurred. The ARO asset
is amortized on the unite-of-production method over its expected life and the ARO liability is
accreted to the projected spending date. As changes in estimates occur (such as mine plan
revisions, changes in estimated costs or changes in timing of the performance of reclamation
activities), the revisions to the obligation and asset am recognized at the appropriate
credit-adjusted risk-free rate. The Company also recognizes an obligation fbr contemporaneous
reclamation liabilities incurred as a result of surface mining. Contemporaneous reclamation
consists primarih/ of grading, topsoil replacement, and revegetation of backfilled pit areas, A
progression of the reclamation liability recorded on the consolidated balance sheet is as follows:
JOCS 2097 Balance at beginning of year $3,757,353 $1,536,948 Liabilities acquired ,, — 1,131,000
821,000 Liabilities incurred ,, ,, ,,. 166,083 1,339,052 Accretion. ,, 189,132 60,353 Liabilities
settledTM ~ — ___(919,568) — Total asset retirement obligations .,, 4,324,000 3,757,353 Less current
portion ,,...- ,, ___1,958,000 1,667,000 $2,366,000 $2,090,353






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 NOTE G
—DEBT Revolving Line-of-CredU Prior to July 2008, the Company had a S3.I million secured
llne-of-credit agreement with a bank for working capital purposes. The line-of-credit was
collateral ized by general business assets of the Company, including but not limited to equipment,
accounts receivable and inventories. On July 7,2008, there was no balance owing on the line of
credit facility when the Company terminated the line of credit The collateral has since been
released. The line bore interest at the LIBOR rate phis 4% (8.60% at December 31,2007). There was
no outstanding balance on the line-of-credit at December 31,2007. Preferred Shares In 2007, the
Company conducted a preferred share offering. Preferred shares were issued in August 2007 and the
proceeds used tor working capital and the reduction of outstanding debt The holders of preferred
shares had the right to that number of votes equal to the number of shares burnable upon conversion
of the preferred shares. Subject to the restrictions of any credit facility that may have been in
effect, the preferred shares paid a 6.5% per annum cumulative dividend upon redemption or in common
shares upon conversion. Additionally, holders of Series C common shares could exchange one common
share for one preferred share for every preferred share purchased. Proceeds received and preferred
shares issued m the third and fourth quarters of 2007 related to the preferred share offering, less
related expenses, were as follows: Starts Per Stare Total Preferred shares , 36,207,600 Si 25
$45,259,500 Common shares converted to preferred shares ~. — 982,667 1,25 1,228,334 Issue costs ,,
        ,.,,,...,,,,...,,,. (3,592,198) Totals as at December 31,2007 TM 37,190,267 S 42,895,636 Preferred
shares conld have been converted by the holder at any time to common shares based on a conversion
formula incorporating the issue price of the preferred shares and subsequent values of common
shares. The preferred shares would be converted automatically into common shares upon the closing
of an underwritten public offering of common shares of the Company or if the holders of a majority
of the preferred shares consented to the conversion into common shares. Additionally, subject to
various restrictions and the automatic and voluntary conversion provisions noted, commencing one
year after issuance of the preferred shares, the holder could request redemption of the preferred
shares at ha issue price (SI .25 per share) plus any unpaid dividends. Due to the redemption
features, OAAP required the preferred shares to be recorded as debt Costs related to the preferred
offering were netted against the liability. The liability was being accreted to its face value
using the effective interest rate method and the accretion recorded as interest expense. Dividends
due on the preferred shares were also included in interest expense, which totaled $1,467,165 and
$1,277,838 for the years ended December 31, 2008 and 2007, respectively. The net carrying value of
the preferred shares, including accrued dividends of $1,277,838, was $45,635,369 at December
31,2007. On June 27, 2008, in conjunction with the RTO, the preferred shares and accrued preferred
dividends were converted to common shares at the conversion price of $1.25 per share. The carrying
value of the preferred shares prior to the conversion was reclassified to common equity. A summary
of the conversion is as follows: CommoQ Shares Preferred shares issued 37,19(067 $46,487,833
Preferred shares offering costs net of accretion. ___(310,115) Preferred share dividends accrual -
2.196.003 2.745,004 Amounts reclassified to common shares 39,386 270 $48 922,722






 









 












	PHOENIX COAL INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 Bridge Loan
In November 2007, the Company entered into a loan agreement with a finance company, acting as
administrative agent for a syndicate of lenders, for CdnS6,000,000. The note was coltateralfzed by,
among other thugs, the assets of PACT, was scheduled to mature on October 31, 2008, and bore
interest at 12%. Interest on the note was paid monthly. The principal amount of the loan could be
converted, in whole or in part, by the lenders at the time of an initial public offering of
securities of the Company, at a conversion price equal to 90% of the ottering price. The value of
the note was adjusted to U.S. dollars based on current exchange rates, and any adjustments were
charged or credited to the consolidated statement of operations, As consideration for the loan, the
Company paid to the lenders a non-refundable $£00,000 bonus in the form of 480,000 common shares at
a deemed price of $1.25 per share. The value of the outstanding loan was $5,526,785 net of
unamorflzed loan fees as at December 31,2007. In May 2008, the Company modified its loan agreement
with the finance company, acting as administrative agent for a syndicate of lenders, that initially
loaned the Company Cdn$6,000,000 in November 2007. The Company borrowed an additional CdnS5,000,000
million (the “Additional Loan”). The net proceeds of the Additional Loan after fees and converting
to VS. dollars was 34,877,000. The terms and conditions of the loan agreement were substantially
the same except for the conversion price employed should the lenders exercise their right to
convert the principal amount of the loan to common equity. The principal amount of the loan
(including the initial loan, which was amended at the time of the Additional Loan) was convertible,
in whole or in part, by the lenders at the rime of an initial public offering of securities of
Phoenix or reverse takeover involving Phoenix (a “Going Public Transaction”) at a conversion price
equal to 80% of the Going Public Transaction offering price. As consideration for the Additional
Loan, the Company paid to the lenders a non-iefimdabie $510,204 bonus in the form of 408,163 common
shares at adeemed issue price of 51.25 per share. On June 13, 2008, the Company and the finance
company, on behalf of each of the lenders, entered into an agreement clarifying the terms of the
loan agreement modified in May 2008 pursuant to which, provided that no event of default had
occurred, (A) immediately prior to completion of the direct share exchange, expected to occur on or
before June 30,2008, the principal amount of the loans would be fully converted into common shares
of the Company at a conversion price of $1.25 per common share, such that upon conversion, the
finance company {or its designees) would receive a number of common shares equal to CdnSl 1,000,000
divided by $125 (based on the Canadian dollar to United States dollar exchange rate at the time of
the conversion), and (B) no adjustment to the number of bonus common shares issued in connection
with the loans would be required. The agreement was conditional upon, among other things, the
offering closing on or prior to July 2,2008. As a result of the modifications of the conversion
terms of the November 2007 debt, pursuant to EI096, Accounting for the Early Extinguishment of
Convertible Securities through Early Redemption or Repurchase and Induced Early Conversion, the
Company distributed an estimated 499,000 additional common shares to the lenders related to the
November 2007 debt of Cdn$6,000,000, since the conversion price decreased from 90% of the offering
price to $1.25. As a result of the additional common shares distributed, the Company recorded a
charge to accumulated deficit and an offsetting increase to share capital of $808,258. On June
23,2008, the finance com
pany, on behalf of each of the lenders, elected to convert the entire
principal amount of the loan into common shares of the Company. Based on a loan value of
$10,835,000, and a conversion price of $1.25 per share, the Company issued 8,668,000 common shares
to ihe lenders. The ban value of $10,835,000, less unamortized loan costs of $558,318, was credited
to sharecaphal. The assets collateralizing the loan have been released,






 









 












	PHOEMXCOAHNC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 Long Term Debt
Summary Long-term debt consists of tha following at December 31: zooa «07 Bank notes payable,
interest at 7.25% to 8.90%. Payments are made in monthly installments. The loans are collateralized
by various pieces of equipment and mature April 2010 $105,109 S — Equipment notes payable,
interest at 5.25% to 8.75%. Payments are made in monthly installments. The loans are collateralized
by related assets with a net book value of $26,773,902 as at December 31, 2008 and have maturity
dates from May 2009 to December2012. TM 21,068,681 9,687,113 Total long-term debt . 21,173,790
9,687,113 Less current portion..-, , , ... .. ,,.. 6,532,045 2,338,198 $14,641,745 $7,348,915
Expected maturities of notes payable based on years ending December 31 are as follows: 2009—
$6,532,045 2010 . ,, ,,. 6,543338 2011 5.709,365 2012 ,, 2,389,042 $21,173,790 Interest Rate Swap and
Other Debt In 2006, the Company entered into an interest rate swap transaction whereby the Interest
payments on an original notional dollar amount of $7,000,000 converted to a fixed rate of 8.10%
compared to a variable rate of LIBOR re-measured on a quarterly basis. The notional amount
decreased over the life of tha swap agreement, which was due to expire in December 2011. The
notional amount of the agreement was $5,483333 at December 31,2007. Under the agreement, the
Company paid or received the net interest amount monthly, with the monthly settlements included in
interest expense. In 2006, management designated the interest rate swap agreement as a cash flow
hedging instrument, and determined the agreement met the requirements for hedge accounting under
OAAP. In August 2007, the debt to which this swap was related was retired. As a result, the amount
previously recorded in other comprehensive income was charged to interest expense in October 2007
and any future changes to the fair value of the swap either increased or decreased interest expense
as the contract no longer qualified as an accounting hedge. On Jury 15, 2008, the Company paid
$237,200 to terminate the swap. The fair value of the derivative was $224,696 at December 31,2007,
and is included in accrued liabilities on the consolidated balance sheet on that date. In December
2006, the Company received a $500,000 advance as part of a bridge financing agreement associated
with the Charolais acquisition completed in January 2007. The advance was repaid in January 2007
and reissued as part of the full bridge financing of $4,135,600 denominated in Canadian dollars
(approximately $3.5 million in U.S. dollars). The loan was repaid in August of 2007 resulting m a
foreign currency exchange loss of approximately $418,000. Interest Expense Included in interest
expense for the years ended December 31,2008 and 2007 is $955,048 and S2£54,999, respectively, for
interest on indebtedness initially incurred for a term of more titan one year. NOTE H — FINANCIAL
INSTRUMENTS AND FINANCIAL RISK FACTORS The Company has exposure to credit risk, liquidity risk,
interest rate risk, and foreign currency risk. The Company’s risk management objective is to
protect earnings and cash flow and, ultimately, shareholder value. Risk management strategies,







 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 as discussed
below, are designed and implemented to ensure the Company’s risks and the related exposure are
consistent with the business objectives and risk tolerance. Credit Risk: Credit risk is the risk of
a financial loss to the Company if a customer or counterparty to a. financial instrument fails to
meet its contractual obligation. The Company invests its cash and cash equivalents and short-term
investments in a U.S. financial institution, which at December 31,2008, carried Standard and Poor’s
investment ratings on their deposits of A to A-l. At December 31,2008, approximately 539,700,000 of
the cash and cash equivalents balance was invested in a money market fund managed by mis financial
institution. In January 2009, the Company reduced this money market balance to approximately
$8,000,000, an amount that is guaranteed until April 30,2009 by the US, Treasury Department under
the Temporary Guarantee Program for Money Market Funds. The Company has not experienced any losses
on its deposits with this financial institution. The Company is also subject to credit risk from
its trade accounts receivable. While economic factors can affect credit risk, the Company manages
risk by providing credit terms on a case by case basis. Customers are primarily investment grade
companies and quasi-governmental agencies. As a result, the Company has not experienced any
instances of non-payment Subsequent to December 31,2008, the Company has collected all of its trade
accounts receivable at December 31,2008. the Company also invests in short-term Investments issued
by the United States government, such as Treasury bUIs and Treasury notes. Historically, these
types of investments have been AAA rated, so the Company does not anticipate any risk related to
default on these investments by the issuer. At December 31, 2008, the total fair value of assets
subject to credit risk, including cash and cash equivalents (including restricted cash and
investments], short-term investments, and trade accounts receivable totaled 155,108,371. Liquidity
Rist Liquidity risk is the risk that the Company will not be able to meet its financial obligations
as they come due. The Company manages its liquidity by ensuring mat there is sufficient capital to
meet short and long-term business requirements, after taking into account cash flows from
operations and the Company’s holdings of cash, cash equivalents and short-term investments. The
Company also strives to maintain sufficient financial liquidity at all times in order to
participate in investment opportunities as they arise, as well as to withstand sudden adverse
changes in economic circumstances. Management forecasts cash flows for its current and subsequent
fiscal years to predict future financing requirements. Future requirements are met through a
combination of credit commitments and access to capital markets. At December 31,2008, the Company
had $40.6 million of cash, cash equivalents, and short-term investments. The following are the
maturities, excluding interest payments, reflecting undiscounfed future cash disbursements of the
Company’s financial liabilities based on years ending December 31: 2009 2010 to 2011 2012 and later
Trade accounts payable and accrued liabilities ,..,..,,-.» $6,470,390 Long-term debt 6,532,045 S
12,252,703 $2^89,042 Other long-term liabilities ; 241,372 241,371 $13,002,435 $12,494,075
$2,630,413 Interest Rate Risk Interest rate risk is the risk borne by an interest-bearing asset or
liability as a result of fluctuations in interest rates. Financial assets and financial liabilities
with variable interest rates expose the Company to cash flow interest rate risk. The Company’s most
significant interest rate risk arises from its investments in marketable securities and cash
equivalents. However, the maturity on
 these Instruments is generally less than ninety days, thereby
mitigating the exposure to the impact of changing interest rates.






 









 












	PHOENIX COAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 The
Company’s long-term debt consists of only fixed rate notes. The Company previously maintained a
credit facility which bore variable interest rate based on LIBOR. This facility was retired on July
7,2008, The following represents the hypothetical annual future interest income that would be
earned on the Company’s cash and cash equivalents (including restricted cash and investments) and
short-term investments, and the effect of a 1% change in the interest rates on these investments.
The calculation uses the interest rates realized on these assets at December 31* 2008 and the
balances of the investments at December 31,2008. Armualized Income Earned Using: Interest rates in
effect at December 31,2008TM ,, ,, S 834,200 Interest rates with a 1% decrease in rates.___,,,,.___TM,,»» _
___319,300 Interest rates with a 1% increase in rates .«,,... ... ,,.««.,,. — . 1,349,100 Currency Risk
The Company’s functional currency is the U.S. dollar and the Company’s sales are denominated in
U.S. dollars. As the Company operates m an international environment^ some of the Company’s
financial instruments and transactions are denominated in currencies other than the U.S. dollar.
The results of the Company’s operations are subject to currency transaction risk and currency
translation risk. At December 31, 2008, the Company had no material financial instruments that were
denominated in non U.S. currencies. Fair Values: At December 31,2008, the fair values of cash and
cash equivalents (including restricted cash and investments), short-term investments, trade
accounts receivable, and trade accounts payable and accrued liabilities approximated their carrying
values because of die short-term nature of these instruments. The fair value of other long-term
liabilities also approximated its carrying value. The fair value of the Company’s long term debt,
calculated using die present value of the scheduled debt payments, and using a credit adjusted risk
free rate of 6,75%, was $21,052^00 at December 31,2008. NOTE I—INCOME TAXES The components of
income tax expense for the years ended December 31 are: 2QM 2007 Current ,,,^,... ,,—..,, $37,838
$70,155 $37J3J $70.155 The Company’s income tax provision in 2008 and 2007 is all currently payable
and consists principally of state taxes. A reconciliation of the differences between the statutory
U.S. federal income tax expense (benefit) and the Company’s effective tax expense at December 31 is
as follows: 2008 2007 Tax Amount Effective Rate Tax Amount Effective Rate Federal taxes at
statutory rates— $(10,998,379) 35.0% $(9,096,897) 35.0% State income texes.net of federal benefit
        . (1,093,424) 3.6% (865,526) 3.6% Permanent items: Share-based compensation 2,291,022 (7.3%) — 0.0%
Interest and fees on preferred shares 1,268,919 (4.0%) 1,072,977 (4.1%) Other permanent items
44,348 (0-1%) 58,325 (0-2%) Total current year permanent items 3,604,289 (11.4%) 1,131302 (43%)
Change m valuation allowance attributable to current year activity 8,525,352 (27.2%) 8,901.276
(34.3%) Income tax expense ,,...,,.,. S 37,838 0-0% $70,135 0-0%






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 The expense
for income taxes Includes federal and state income taxes currently payable or receivable and those
deferred or prepaid because of temporary differences between the financial statement and the tax
basis of assets and liabilities. The Company records income taxes under the liability method. Under
this method, future income taxes are recognized for be estimated future tax effects of differences
between the tax basis of assets and liabilities and their financial reporting amounts based on
enacted laws. The future tax assets and liabilities recognized in the consolidated balance sheet
are comprised of the following at December 31: ana ZQQ7 Future tax assets: Net operating toss carry
forwards ___,,, . $23,820,480 $10,769,102 Share-based compensation ___« ,,.,.. 18,228 577,488 Asset
retirement obligations ... ,,..,,.. 1,669,064 491,431 Mining rights ,, . , ; — 928,016
Vacatioiiexpense ..-...,,,,...,, 79,370 Other ___568 1,702 25,587,710 12,767,739 Future tax
liabilities: Mine development costs.. ,, . (426,708) (54,693) Mining rights. . (2,705,138) Royalty
expense. ,,.._,, -,..-...,,,,,,,,..,,,,— (190,073) Tax over book depreciation.^.. (7,884,915) (1,964,971)
(1136334) (2,019,664) Total ..___» 14,380,876 10,748,075 Valuation allowance — (14,380,876)
(10,748,075) Net future taxes ,,,,, ...,,,,...,,..,,, $ — $ — As a result of losses from operations,
management has recorded a valuation allowance against the total net future tax asset as they do not
believe it is more likely man not these assets will be realized. At December 31,2008, the Company
had available net operating loss (NOL) carry forwards, to reduce future taxable income of
approximately S61,711,000 expiring through 2029. The future benefit of these NOL cany forwards may
be limited on an annual basb and in total under Section 382 of me United States Internal Revenue
Code as a result of prior ownership changes and depending on the extent of future ownership changes
contemplated by the Company. As a result of its valuation allowance, the Company has not currently
recognized any benefit for these losses in its consolidated financial statements. Net Operating
Loss Carryovers (20 year carryover): Loat Expiring In Amount Expiring 2004 2025 $305,000 2026
1,860,000 2027 6,089,000 2028 19,648,000 2029 33,809.000 S 61,711,000






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 NOTE
J—MAJOR CUSTOMERS For the years ended December 31,2003 and 2007 the Company’s concentration of
major customers was as follow*: MM 2007 Number of primary customers,. . ... . ,,...___3 3 Percentage
of coal sales ,, .,,,,.. ,,,, 87% 89% Accounts receivable due at year end. ,,.,, ,,, ___—.— $2,410,395 S
2,285,240 The Company has never experienced non-payment from any of these customers. AU amounts due
from these customers at December 31,2008 have subsequentiy been collected. NOTE K— COMMITMENTS AND
CONTINGENT LIABILITIES In the normal courae of business, the Company makes various coirnnitments
and incurs certain contingent liabilities including liabilities related to asset retirement
obligations and financial obhgations in connection with mining permits that are not reflected in
the accompanying consolidated balance sheet. The Company does not anticipate any material losses as
a result of these transactions. In accordance with Kentucky state law, the Company is required to
post reclamation bonds to assure that reclamation work is completed. Outstanding reclamation bonds
totaled approximately $11 million at December 31,2008 and approximately $9 million at December
31,2007. These bonds are secured by letters of credit or certificates of deposit issued by a bank
equal to the amount of the outstanding reclamation bonds. At December 31, 2008, the letters of
credit are collateralized by the restricted cash and certificates of deposit on the consolidated
balance sheet of $11,638,921. At December 31,2007, the letters of credit were collateralized by
general business assets of the Company and the restricted cash and certificates of deposit on the
consolidated balance sheet of $2,312,500. Injury 2008, the Company agreed to increase its
restricted cash collateral securing its letters of credit with its bank to 100% of the reclamation
bonds outstanding. As a. result, the letters of credit are only collateralized by the restricted
cash balance, and tite general business assets of the Company were released. The Company leases
certain office space and mining equipment over long-term operating leases running through 2009.
Future minimum lease commitments under non-cancekble operating leases as at December 31, 2008,
payable in 2009, totaled S567.355. A significant amount of the Company’s coal reserves are
controlled through leasing arrangements and non-cancellable royalty lease agreements under which
future minimum lease payments are due. In the ordinary course of business, the Company enters into
contracts to purchase diesel fuel from local suppliers tor physical delivery at specified prices.
Pursuant to these contracts, the Company does not own a futures or options position in the
purchased fuel As at, and subsequent to, December 31,2008, the Company has executed purchase
contracts for a total of 2,688,000 gallons to be delivered in 2009 at a total cost of $5,871,096,
or an average weighted price of $2.18 per gallon. In 2008, the Company purchased over 5,000,000
gallons of diesel fuel for use at its owned or managed operations. As at, and subsequent to,
December 31,2008, the Company has committed to purchase approximately $5,100,000 of mining
equipment for its operations, with delivery scheduled during the first calendar quarter of 2009,
The Company has received commitments from equipment finance companies to finance the purchase of
the equipment, with interest rates ranging from 8.50% to 8.75%, terms of 36 to 48 months, and down
payments totaling approximately $765,000. The notes will be collateralized by the equipment
purchased. In conjunction with the sale of certain assets to Covol in 2007, the Company entered
into a master coal purchase and sale agreement (me “Master Agreement”) to purchase coal fines
recovered and processed
by Covol from two coal slurry reserves areas in Muhlenberg County, Kentucky
defined in the Master Agreement as the Rock Crusher Reserves and the National Guard Reserves
(collectively, the “Slurry Reserves”). The term of the Master Agreement runs through the exhaustion
of the Slurry Reserves (the ‘Term”).






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 At December
31, 2008, for the remaining Term of the Master Agreement, Covol is obligated to deliver not less
than 60,000 tons of coal fines per month. The Company agrees that it will purchase from Covol,
pursuant to the terns of the Master Agreement including certain BTU and quality specifications, ail
of the coal fines produced by Covol from the Slurry Reserves up to 60,000 tons per month during the
Term. The price for the coal fines shall be the contract price set form in each confirmation
attached to the Master Agreement, provided, however, that in no event shall the contract price be
less than S25.50 per ton for coal delivered from the Rock Crusher Reserves or $24.50 per ton for
coal delivered from the National Guard Reserves. NOTE L —STOCK INCENTIVE PLAN AND WARRANTS
2007Stock Option Man ofMCC MCC adopted an incentive stock option plan in May 2007 (the “2007 Plan”)
which provides that the board of directors of the Company may from time to time, in its discretion,
and In accordance with TSX requirements, grant to directors, officers, employees and technical
consultants to the Company, non-transferable options to purchase common shares, provided that me
number of common shares reserved for issuance will not exceed 10% of the issued and outstanding
common shares. Such options will be exercisable for a period of up to 5 years from the date of
grant. Vesting terms will be determined at me time of grant by the Board of Directors. In 2007,
upon closing of an initial public offering, MCC granted to its directors and officers options to
acquire 150,000 share* at a price of Cdn$0.25 per share; exercisable for a period of five years
from August 28,2007, The 2007 Plan remains ia force and options issued prior to the RTO will
continue to be governed by the 2007 Plan; however due to me approval of the 2008 Plan (defined
below), no further options will be issued pursuant to the 2007 Plan. 2004 Stock Incentive Plan of
Phoenix Phoenix’s 2004 stock incentive plan (the “2004 Plan”) authorized Phoenix’s board of
directors to grant options to its employees (including officers), directors and consultants.
Pursuant to the 2004 Plan, Phoenix could issue “non-statutory options” and “incentive stock
options* to purchase common shares of Phoenix as well as “stock purchase rights”. The number of
common shares or rights of Phoenix authorized and reserved for issuance under the 2004 Plan was
fixed at 8,297,411. Stock options granted under the 2004 Plan were generally subject to vesting
provisions of 25% at the end-of-year one from the date of grant and then evenly over the following
48 months. The options were granted at a price equal to 100% of the fair value of the Company’s
common shares on the date of grant and have a ten-year term. Upon completion of the RTO, each
Phoenix stock option was cancelled and extinguished and the holder received a replacement option of
the Company to purchase diat number of common shares of the Company equal to the number of shares
of Phoenix common shares issuable under the Phoenix option with no change in the exercise price of
such options due to the nature of the exchange rate between United States dollars and Canadian
dollars. 2008 Stock Option Plan of the Company In connection with completion of the RTO, the
Company adopted a new stock option plan (the “200g Plan”) on May 20, 2008, which was effective upon
the closing of the RTO. The 2008 Plan is designed to advance the interests of the Company by
encouraging employees, officers, directors and consultants to have equity participation in the
Company through the acquisition of common shares. The current intention is to use the 2008 Plan for
option grants to employees, officers, directors and consultants of the Company. Options granted
under the 2008 Plan may be ‘incentive stock options” or “non-qualified stock options”. The 2008
Plan was approved by the shareholders of the Company in June 2008 and 13,500,000 common shares are
reserved for issuance under the 2008 Plan. The exercise price per common share is not to be less
man the market price of the common shares at the time of the grant The exercise period for each
stock option is not to be more than ten years (five years in the case of an incentive stock option







 









 












	PHOENIX COALING NOTES TO CONSOLIDATES FINANCIAL STATEMENTS December 31,2008 and 2007 granted to a
person who owns more than 10% of the issued and outstanding common shares). Options may be granted
subject to vesting requirements. Unless terminated earlier by the board of directors, the 2008 Plan
will remain in effect until all options granted under the 2008 Plan have been exercised or
forfeited, or have expired. However, no new options may be granted under the 2008 Plan more than 10
yean from the date the Plan was originally adopted by the board of directors. Information regarding
stock option activity under the Plans follows: 1008 Activity Number of Weighted Average 2004
Phoenix Plan Common Share Options Options Exercise Price Balance, December 31,2007 ,, ,,. 6,749,000
$0.87 Granted.— — ___,, ,, ,, 1,000 1.25 Exercised- (25,438) 0.25 Forfeited ,,., ., (1,413,562) 0.43
Options outstanding at December 31,2008 5,311,000 S0.98 Options exercisable at December 31,2008 ,
2,986,495 $0.89 Options Denominated In Canadian Dollars Number of Weighted Average 2007 MCC Plan
and 2008 Company Plan Optima Exercise Price Balance, December 31,2007 ,, ,, ,, 150,000 Cd»S0.25
Consolidated at 1:235 ..,, (86,170) Balance after consolidation. ~ . 63,830 Cdn 039 Granted under
2008 Plan . ...,, 9397,000 Cdn 1.32 Votantarily surrendered and cancelled under 2008 Plan ».
(S.OSO.OOO) Cdn 1.75 Options outstanding atDecernber 31,2008 4,410,830 CdnS0.83 Options exercisable
at December 31,2008 ,, 1,498340 odnST|,82 2007 Activity Number of Weighted Average 2004 Phoenix Plan
Common Share Options Options Exercise Price Balance, December 31,2006 ,,. — ,, ___,,.,, 3,045,000 $032
Granted—,,.. ,, — 4,004,000 1.25 Exercised ,, .___,,.. (300,000) 0,42 Options outstanding at December
31,2007 6,749,000 $0.87 Options exercisable at December 31,2007- ,, 2^09,050 S0.66 Compensation cost
of stock option grants is recognized straight-line over the options* vesting periods. Compensation
expense related to stock options for the years ended December 31, 2008 and 2007 was $5,935,289 and
$948,859, respectively, In November 2008, members of the board of directors and two senior
executives voluntarily surrendered, and the Board concurrently cancelled, 5,050,000 options that
had been issued to them in June 2008 concurrent with the Offering, of which 1,683333 were fully
vested at the surrender date. The voluntary surrender was not accompanied by a concurrent grant of
a replacement award or other consideration to these executives. This surrender caused an
acceleration of the related compensation costs under OCA Handbook Section 3870. Had these board
members and employees not voluntarily surrendered these options, the related compensation expense
for the 2008 fiscal year would have decreased by $2^47,250.






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 The options’
fair value was determined using the Black-Scholes option-pricing model. Expected volatilities are
based on comparable company historical share price movement and other factors. The cost relating to
the stock-based compensation plans U included in general and administrative expenses in the
accompanying consolidated statements of operations. 2008 Company 2007Pftoenn 2007 MCC Weighted
average fair value per share of options granted $0.67 per share $0.73 per share S0.21 per share
Assumptions (weighted average): Risk-free interest rate 3.98% 4.37% 4.75% Expected dividend yield-
0.00 0.00 0.00 Expected volatility... ...,,..,,..,,,..,,,..,,. 0.40 0.40 1.25 Expected option life (in
years) TM 10.OO 10.00 5.00 At December 31,2008, the following stock options were outstanding:
Number of Options Exercise Price ___Expiration Date 683,000 $0.23 April, 2015 465,000 0.25 December,
2015 360,000 0.50 May. 2016 920,000 1.25 March, 2017 2,883,000 125 November, 2017 63,830 CdnOJg
August, 2012 1,797,000 Cdnl.75 June, 2018 2.550,000 ‘CdaO.18 November, 2018 9.72^830 Phoenix
Warrants As part of the fee structure related to Phoenix’s preferred share offering In August 2007,
the underwriter received warrants to purchase 1,780,000 shares of the preferred shares of Phoenix
at $1,25 per share. The warrants expire 24 months allowing the date Phoenix consummates an initial
public offering of its common shares. The warrants’ total value of $462,800 was determined using
the Black-Scholes option pricing model. Assumptions used m the model were a risk free interest rate
of 4.76%, dividend yield of 6.50%, and expected volatility of .40. The value of the warrants was
charged to additional paid in capital. On June 27,2008, under the terms of the Broker Agreement,
the warrants were converted to warrants to purchase common shares of the Company at $1.25 per
common share and expire in June 2010. Company Warrants Under the terms of the Offering, 31,428,580
warrants were issued to the purchasers of the common shares offered. The warrants entitle the
holder to purchase one common share for each warrant held at a price of Cdn$2.25 per share. The
warrants expire on June 25,2010. The warrants total value of $8,077,345 was determined by the
underwriter of the Orxering. The value of the warrants was charged to share capital.






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 Information
regarding the warrant activity follows: Weighted
Number of Average Exercise Phoenix Preferred Share Warrants Warrants Friea Balance,
December31,2007. 1,780,000 S1.25 Converted preferred warrants to common warrants, ,, (1,780,000)
1.25 Warrants outstanding at December 31,2008 ,, ,, &=^ Weighted
Number of Average Exercise Phoenix Common Share Warrants Warrants Price Balance, December 31,2007 _
        ... . — $— Converted preferred warrants to common warrants ,, ...,, 1,780,000 1.25 Warrants
outstanding at December 31,2008 1,780,000 SL25 Warrants exerdsable at December 31,2008 ,, 1,780,000
n^ Weighted Warrants Denominated in Canadian Dollars Number of Average Exercise Company Common
Share Warrants Warrants Price Balance, December 31,2007 ,,.,, ,, ,, 100,000 Cdn$0.25 Consolidated at
1:2.3S ,, (57.447) Balance after consolidation.. ,,..___,, 42^53 Cdn 0.59 Exercised (11,850) Cdn 0.59
Warrants issued with new common shares TM.. ..._,___31,428,580 Cdn 155 Warrants outstanding at
December 31,2008 ~ 31,459,283 CdnSZ.25 Warrants exercisabk at December 31,2008 ___,. 31,45933
Crin:82.25 At December 31,2008 the following warrants were outstanding: Number of Warrants Exercise
Price Expiration Pate 1,780,000 $1.25 June, 2010 30,703 Cdn 0.59 September, 2009 31.428.580 Cdn
2.25 June, 2010 31?J9.283 Total cash received from options and warrants exercised during the years
ended December 31, 2008 and 2007 totaled $12,838 and $125,000, respectively. Broker Options Under
the terms of the Offering, the agents received Brokers’ Options entitling the agents to purchase in
the aggregate 2,514,286 Brokers’ Units. Each Broker Unit entitles the agent to purchase one common
share for CdnS1.75 per share and one half warrant entitling the agent to purchase one additional
common share for each full warrant at CdoS2.25 per share. The Brokers Options expire on June 25,
2010 and are all exercisable at December 31, 2008. The options total value of $1,I06,28<5 was
determined using the Black-Scholes option pricing model. Assumptions used in the model were a risk
free interest rate of 3.99%, no dividend yield, and expected volatility of .40. The value of the
options was charged to sham capital as a cost of the Offering.






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,2008 and 2007 Stuck Grants
In December 2007, the Company Issued 400,000 restricted shares to four of int directors. The shares
were valued at $500,000 and the related expense is included in general and administrative expenses.
At the date of issue, the shares could not be sold until the Company closed a public offering of
its shares. Following the Offering in June 2008, ihe shares are no longer restricted. NOTE M—
DEFINED CONTRIBUTION FLAN The Company has a retirement savings trust plan in effect for
substantially all full-time employees. The Plan also contains a deferred salary arrangement under
IRC Section 401(k). Under the deferred salary arrangement; employees can contribute up to 100% of
their earnings and the Company may match a portion of the employee contributions. The Company paid
and charged to operations approximately $629,000 and $556,000 for the years ended December 31,2008
and 2007, respectively, for Plan contributions. NOTE N— RELATED PARTY TRANSACTIONS The Company
enters into transactions with shareholders and/or affiliated entities that have some level of
common ownership with the Company. A summary of the related parry transactions and balances follows
for the years ended December 31,2008 and 2007: 20OS SWOT Expenses: Consulting tees, ___$156,000
$610,000 Rent and miscellaneous ,,,,.,,,,... ,, . ~..~. 32^25 65377 Accounts receivableTM-. ,,.,,,,_,,.
        ,..,,.,,.^,,,> ... — 16,858 Accounts payable . ..,,.,,,,...___, ,,,,.,,...,.,,.. ...,. ..,, — 6,670 The
above expense amounts were paid to MHI Energy Partners, LLC, which amounts were applied towards,
among other things, salaries, overhead and benefits for Individuals who provided services. These
transactions are also in the normal coarse of business, and are recorded at the consideration
established and agreed to by the related parties. David Wiley and Timothy Fogarty were managing
directors of MHI Energy Partners, LLC. David Wiley is currently an officer and director of the
Company and Phoenix, and Tim Fogarty resigned as a director of Phoenix hi September 2008. During
the second quarter of 2008, the Company discontinued these payments to MHL NOTE O — SUBSEQUENT
EVENTS On January 8,2009, the Company announced mat It received a 404 Permit granted by the US.
Army Corps of Engineers (“COE”), With the 404 Permit, the Company secured all of the necessary
permits to begin mining on the Radio Hill section of the Briar Hill surface mine (“Radio HUT) in
Muhlenberg County, Kentucky. During December 2008, Phoenix had obtained a permit required under
Section 401 of the Clean Water Act (“401 Permit”) and a state mining permit granted by the KDNR for
Radio HilL On March 4,2009, the Company announced that It received a 404 Permit for its Winn North
property, which is part of the Back in Black mine. With the 404 Permit, vie Company secured all of
the necessary permits to begin mining on Winn Norm in Muhlenberg County, Kentucky. During December
2008, Phoenix had obtained a 401 Permit and a state mining permit granted by the KDNR for Winn
Norm. In addition, the Company announced it received two out of the three required permits for KO.
The state mining permit from the KDNR had been Issued conditionally, pending the outcome of a phase
one archaeological study. When the phase one study is complete the condition will be lifted;
however, the conditional permit allows for initial development of KO. The 404 Permit, which was
originally protested in September 2008, is still outstanding on this property.






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED HNANCIAL STATEMENTS December 31,2008 and 2007 On March 3,
2009, the Company entered into a mutual release and settlement agreement with one of its customers
to terminate a coal supply agreement for delivery of coal in 2009 and 2010 (the “2009/2010 Supply
Agreement”). la consideration for terminating the 2009/2010 Supply Agreement, the Company paid the
customer $3,000,000 in cash. The payment relieved die Company of the obligation to deliver
approximately 970,000 tons of coal, 470,000 in 2009 and 500,000 in 2010. In addition, the Company
agreed to make up in 2009 approximately 170,000 tons of shipments that were not delivered in 2008
under a separate coal supply agreement dated January 1,2008 (the “2008 Supply Agreement”). In
return for fulfilling the 2008 Supply Agreement, the customer agreed to change the guaranteed
monthly average BTU specification from 11,500 to 11,200. The S3.00O.O00 payment will be charged to
the consolidated statement of operations in 2009.






 









 












	Interim Financial Statements of PHOENIX COAL INC. For the three and six months ended June 30,2009
(Unaudited- Prepared by Management) Management’s Comments on Unaudited Interim Financial Statements
The accompanying unaudited interim financial statements of Phoenix Coal Inc. for the three and six
months ended June 30, 2009 have been prepared by management and approved by the Board of Directors
of the Company. These statements have not been reviewed by the Company’s external auditors.






 









 












	PHOENIX COAL INC. CONSOLIDATED BALANCE SHEETS “(Expressed in U.S. Dollars) June 30, December 31,
Note 2009 2008 (unaudited) ASSETS Current Assets Cash and cash equivalents 7 $17,694,780
$40,525,609 Short-term investments 7 3,078,875 100,707 Trade accounts receivable 7 3,288,714
2,843,134 Coal inventories 2 — 452,558 Prepaid expenses and other current assets 1,046,986 470,506
Restricted cash, cash equivalents and certificates of deposit 7,8 5,849,000 — Assets held for sale
2 28,718,201 — Total current assets 59,676,556 44,392,514 Property, Plant and Equipment, net 4
906,060 46,037,904 Restricted Cash, Cash Equivalents and Certificates of Deposit 7,8 6,668,297
11,638,921 Mining Rights, Mine Development Costs and Mineral Reserves, net of accumulated
amortization of nil as at June 30,2009 and 53,888,082 as at December 31,2008 3 43,499,589
52,582,655 Other Assets 574,531 492,520 $111,325,033 $155,144,514
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities Trade accounts payable and accrued liabilities $8,243,534 $6,470,390 Vendor
financing 3 3,000,000 — Current portion of long-term debt 2,6 — 6,532,045 Current portion of
asset retirement obligations 5 2,300,000 1,958,000 Liabilities associated with assets held for sale
2 25,184,215 — Total current liabilities 38,727,749 14,960,435 Asset Retirement Obligations, less
current portion 5 38,070 2,366,000 Long-term Debt, less current portion 2,6 — 14,641,745 Other
Long-term Liabilities 436,189 482,743 Shareholders’ Equity Sharecapital 171,817,981 171,817,981
Stock options and warrants 9 18,490,724 16,625,724 Accumulated deficit (118,185,680) (65,750,114)
72,123,025 122,693,591 $111,325,033 $155,144,514 See accompanying notes to consolidated financial
statements






 









 












	PHOENIX COAL INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Expressed in U.S.
Dollars) (Unaudited) For the Three and Six Months Ended June 30,2009 and 2008 Three Months Ended
Six Months Ended Note June 2009 June 20O8 June 2009 June 2008 Revenue $17,320,379 $21,326,102 S
35,292,271 $39,821,562 Cost and Expenses Cost of sales 17,019,692 21,199,549 31,763,409 38,684,869
Selling expenses 1,852,362 2,074,001 4,008,043 4,144,935 General and administrative expenses 9
2,004,939 3,813,178 5,602,583 5,412,290 Depreciation and amortization 1,907,711 2,043,344 3,731,492
3,107,176 Write down of assets held for sale 2 38,920,000 — 38,920,000 — Sales contract
termination cost 10 — — 3,000,000 — 61,704,704 29,130,072 87,025,527 51,349,270 Loss from
operations (44,384,325) (7,803,970) (51,733,256) (11,527,708) Other Income (Expense) Interest
expense, including accretion 2,6 (424,723) (2,765,589) (784,625) (5,124,968) Interest income 21,789
14,060 98,478 26,721 Foreign currency (loss) gain — (103,710) — 129,130 Other, net (3,329)
(37,302) (6,082) (215,152) (406,263) (2,892,541) (692,229) (5,184,269) Loss before income taxes
(44,790,588) (10,696,511) (52,425,485) (16,711,977) Income taxes (benefit) 10,081 (879) 10,081
(879) Net loss and comprehensive loss $(44,800,669) $(10,695,632) $(52,435,566) $(16,711,098) Basic
and diluted loss per share $(0.30) $(0.25) $(0.35) $(0.42) Weighted average number of common shares
outstanding 150,045,552 42,036,051 150,045,552 39,868,745 See accompanying notes to consolidated
financial statements






 









 












	PHOENIX COAL INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Expressed in U.S. Dollars)
(Unaudited) For the Six Months Ended June 30,2009 and Year Ended December 31,2008 Common Shares
(unlimited Stock Options authorized) and Accumulated Note Shares Dollars Warrants Deficit Total
December 31,2007 37,701,440 $22,426,771 S 1,458,884 $ (33,109,913) S (9,224,258) Share capital
contribution — common shares issued in payment of loan fees 408,163 510,204 — — 510,204 Issuance
of common shares to settle debt 8,668,000 10,276,682 — — 10,276,682 Conversion of preferred
shares, including accrued dividends, to common shares 39,386,270 48,922,722 — — 48,922,722 Value
of additional shares issued in payment of debt — 808,258 — (808,258) — Share-based compensation
- options 9 — — 260,000 — 260,000 Balances — pre merger, pre share issue, and prior to recording
loss for the year 86,163,873 82,944,637 1,718,884 (33,918,171) 50,745,350 Marimba Capital Corp.
equity balances pre-merger 2,320,000 347,514 48,120 (88,255) 307,379 Marimba Capital shares
consolidated on the basis of 1 share for every 2.35 shares outstanding (1,332,769) — — — —¦
Reverse takeover adjustment — (88,255) — 88,255 — Reverse takeover costs incurred — — —
(408,000) (408,000) Tssuance of common shares 1 62,857,160 97,784,678 — — 97,784,678 Issuance of
warrants 9 — (8,077,145) 8,077,145 — — Issuance of broker options 9 — (1,106,286) 1,106,286 —
— Share-based compensation — options 9 — — 5,675,289 — 5,675,289 Options and warrants exercised
9 37,288 12,838 — — 12,838 Net loss — — — (31,423,943) (31,423,943) December 31,2008
150,045,552 171,817,981 16,625,724 (65,750,114) 122,693,591 Share-based compensation — options 9 —
— 1,865,000 — 1,865,000 Net loss : — — — (52,435,566) (52,435,566) June 30,2009 150,045,552
$171,817,981 $18,490,724 $(118,185,680) $72,123,025 See accompanying notes to consolidated
financial statements






 









 












	PHOENIX COAL INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed In U.S. Dollars) (Unaudited) For
the Three and Six Months Ended June 30 Three Months Ended Six Months Elided Note June 2009 June
2008 June 2009 June 2008
Cash Flow From Operating Activities Net loss $(44,800,669) $ (10,695,632) $ (52,435,566) $
(16,711,098)
Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and
amortization 1,907,711 3,296,291 3,731,492 5,424,704 Loss on sale of property and equipment 1,730
37,202 1,730 214,057 Write down of assets held for sale 2 38,920,000 — 38,920,000 — Interest rate
swap — (120,501) — (15,160) Foreign currency loss (gain) — 103,710 — (129,130) Share-based
compensation 9 6,000 2,151,277 1,865,000 1291,277 Asset retirement obligations 5 73,404 47,283
(67,949) 94,566 Dividends accrued on preferred shares — 703,344 — 1,467,165 Changes in non-cash
operating assets and liabilities: Accounts receivable 2,218,434 209,615 (445,580) 297,558
Inventories (304,825) 136,150 (425,283) 812,560 Prepaid expenses and other current assets (469,097)
197,521 (576,480) 203,488 Trade accounts payable and accrued liabilities (556,124) (633,470)
1,773,144 2,315,908 Net cash used in operating activities (3,003,436) (4,567,210) (7,659,492)
(3,734,105) Cash Flow From Investing Activities Reacted cash, cash equivalents, and certificates of
deposit 7,8 (148,127) 122,900 (1,377,960) 86,425 (Payments for) proceeds from investments
(2,477,578) 153,100 (2,478,584) 153,100 Payments for other assets, principally mine development
(1.182J983) (166,910) (1,720,693) (1,043,559) Proceeds from sale of property and equipment 10,000
30,000 10,000 403,300 Payments for property and equipment 4 (986,315) (179,366) (1,851,441)
(214,512) Net assets acquired in merger, prior to public offering — 307,379 — 307,379
Acquisitions — (25,000,000) — (25,000,000) Acquisition of mining rights 3 — — (3,307,259) —
Net cash used in investing activities (4,785,003) (24,732,897) (10,725,937) (25,307,867) Cash Flow
From Financing Activities Principal payments on debt 2,6 (75,901) (202,407) (167,152) (400,984)
Proceeds from debt — 4,891,890 — 4,891,890 Payments on equipment financing 2,6 (2,010,172)
(1,236,536) (4,231,694) (2,022^31) Line of credit — (3,050,000) — — Reverse takeover costs
incurred — (408,000) — (408,000) Decrease in other long-term liabilities (29,177) (25,364)
(46,554) (30,654) Net proceeds from capital contributions 1 — 97,784,678 — 97,784,678 Net cash
(used in) provided by financing activities (2,115,250) 97,754,261 (4,445,400) 99,814,699 Net
(Decrease) Increase in Cash and Cash Equivalents (9,903,689) 68,454,154 (22,830,829) 70,772,727
Cash and Cash Equivalents, Beginning of Period ___. 27,598,469 2,699,947 40.525,609 381,374 Cash and
Cash Equivalents, End of Period ,, $17,694,780 $71,154,101 $17,694,780 $71.154,101 Supplemental
Disclosure: Interest paid $409,723 $803.398 $769,625 $1,218,152 Non-Cash Investing and Financing
Activities: Vendor financing for equipment purchases $734,000 $4,797,889 S 5,821,290 $7,088,637
Vendor provided financing for acquisition of mining rights . — » 3 000000 $ See accompanying notes
to consolidated financial statements






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and Six Months Ended June
30,2009 and 2008 (Unaudited) NOTE 1 — NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES Nature of Operations: The Company is engaged in the production and sale of steam coal to
utilities and industrial fuel consumers. The Company’s mining activities are currently limited to
one reportable business segment, which is the Illinois Basin. On June 27, 2008, Phoenix Coal
Corporation (“Phoenix”) completed a reverse takeover (“RTO”) of Phoenix Coal Inc. (the “Company”),
formerly Marimba Capital Corp. (“MCC”), which was previously listed on the TSX Venture Exchange.
MCC was incorporated under the Business Corporations Act (Alberta) on February 8,2007 and was
classified as a Capital Pool Company as defined in the TSX Venture Exchange Policy 2.4 and,
accordingly, had no assets other than cash and no commercial operations. MCC changed its name to
Phoenix Coal Inc. on June 25, 2008. Phoenix, a U.S. company headquartered in Madisonville, Kentucky
with a satellite office in Louisville, Kentucky, was formed in July 2004 as a Delaware C
corporation and was originally named Dynamic Separations, Inc. (“DSI”). Where the context requires,
in respect to transactions prior to the RTO, the “Company” also refers to Phoenix. Principles of
Consolidation: Pursuant to the RTO transaction, these consolidated financial statements reflect the
assets, liabilities and results of operations of Phoenix prior to the RTO and the consolidated
assets, liabilities and results of operations of the Company and Phoenix subsequent to the RTO. The
consolidated financial statements are issued under the name of the legal parent (the Company), but
are deemed to be a continuation of the legal subsidiary (Phoenix). The consolidated financial
statements include Phoenix Coal Inc. and its subsidiaries, all of which are wholly-owned. Basis of
Presentation: The accompanying interim consolidated financial statements of the Company have been
prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) for interim
financial statements and accordingly do not include all disclosures required for annual financial
statements. All monetary references expressed in these notes are references to United States
dollars, except occasional references to Canadian dollar amounts, where the dollar amount is
preceded by Cdn (“CdnS”). With the exception of new accounting pronouncements discussed in this
note, these interim consolidated financial statements follow the same significant accounting
policies and methods of application as the Company’s audited annual consolidated financial
statements for the year ended December 31, 2008 (the “Annual Financial Statements”)- The interim
consolidated financial statements should be read in conjunction with the Annual Financial
Statements. In the opinion of management, all adjustments (including normal recurring accruals)
considered necessary for a fair presentation have been included. Operating results for these
interim periods are not necessarily indicative of the results that may be expected for the full
fiscal year ending December 31,2009. Assets Held for Sale: In the second quarter 2009, the Company
initiated a process to consider various strategic opportunities, including, but not limited to, the
sale of some or all of its coal mining assets and operations. As further discussed in Note 2,
subsequent to the end of the second quarter 2009, the Company entered into a definitive agreement
to sell substantially all of its surface coal mining assets. Pursuant to Canadian Institute of
Chartered Accountants’ (“CICA”) Section 3475, Disposal of Long-Lived Assets and Discontinued
Operations, and Emerging Issues Committee (“EIC”) Abstract No. 161, Disconti
nued Operations, the
Company has classified its surface mining assets and liabilities related to the pending sale, as
assets and liabilities held for sale. The Company’s underground coal mining assets do not meet the
definition of assets held for sale, and therefore have not been classified as such in these
financial statements. As the Company will not have substantial continuing operations subsequent to
the sale, discontinued operations accounting has not been applied in these financial statements.
Reverse takeover accounting: The RTO was completed on June 27, 2008. Prior to the completion of the
RTO, MCC affected a reverse split of its outstanding common shares on the basis of 1 new share for
each 2.35 shares outstanding. Pursuant to the RTO, the Company issued one common share for each
outstanding common share of Phoenix. In addition, warrants and options to purchase Phoenix common
shares outstanding immediately prior to the RTO were replaced with warrants and options to purchase
an equivalent number of common shares of the Company, on economically equivalent terms and
conditions.






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and Six Months Ended June
30,2009 and 2008 (Unaudited) Concurrent with the RTO, the Company raised $97,784,678, net of
issuance costs, in a prospectus offering (the “Offering”) of 62,857,160 subscription receipts
priced at Cdn$1.75. In connection with the RTO, each subscription receipt was exchanged for one
unit, each unit consisting of one common share and one half common share purchase warrant
exercisable until June 25,2010 at Cdn$2.25 per share. The acquisition of the shares of Phoenix was
accounted for as an RTO transaction in accordance with guidance provided in EIC-10, As MCC did not
qualify as a business for accounting purposes, the transaction was accounted for as a capital
transaction of Phoenix. New Accounting Policies: Goodwill and Intangible Assets: The CICA has
issued a new standard, CICA Section 3064, Goodwill and Intangible assets, which establishes revised
standards for recognition, measurement, presentation and disclosure of goodwill and intangible
assets and is effective January 1, 2009. Concurrent with the introduction of this standard, the
CICA withdrew EIC-27, Revenues and Expenses during the pre-operating period. This standard has had
no material impact on the Company’s consolidated financial statements. Financial Instruments: The
EIC has issued EIC-173, Credit Risk and the Fair Value of Financial Assets and Financial
Liabilities, which clarifies the application of credit risk when determining the fair value of
financial assets and liabilities. EIC-173 is effective for interim and annual financial statements
for periods ending on or after January 20, 2009. This standard has had no material impact on the
Company’s consolidated financial statements. Mining Exploration Costs: The EIC has issued EIC-174,
Mining Exploration Costs, which discusses the circumstances under which exploration costs may be
capitalized. Additionally, EIC-174 clarifies the timing for testing capitalized exploration costs
for impairment. EIC-174 is effective for interim and annual financial statements issued after March
27, 2009. This standard has had no material impact on die Company’s consolidated financial
statements. Future Accounting Changes: International Financial Reporting Standards (“IFRS”): In
2006, the Canadian Accounting Standards Board (“AcSB”) published a new strategic plan that will
significantly affect financial reporting requirements for Canadian companies. In February 2008, the
AcSB announced that Canadian GAAP for publicly accountable enterprises will be converged with IFRS
effective in calendar year 2011. The Company will adopt IFRS for the fiscal year beginning January
1, 2011, with restatement for comparative purposes of amounts reported by the Company for the
fiscal year beginning January 1,2010. The Company is currently in the planning phase of the
conversion, which includes identifying potential differences between GAAP and existing IFRS as at
June 30, 2009, as well as proposed IFRS which may be in effect in 2011. The Company is utilizing
both internal and external resources to identify and ultimately quantify these differences and the
impact that they will have on accounting policies, information technology and data systems,
internal control over financial reporting, disclosure controls and procedures, financial reporting,
and business activities. Employees responsible for financial reporting have attended IFRS training,
have begun IFRS accounting policy development, and initiated development of an IFRS project
timeline Quantification of GAAP and IFRS differences has not yet been determined due to the need to
evaluate internal data and make final policy choices and elections. Reclassiftcations: Certain of
the 2008 figures have been reclassified to conform to the 2009 financial statement presentation.
NOTE 2 —ASSETS HELD FOR SALE Subsequent to the en
d of the second quarter 2009, the Company entered
into a definitive agreement with a privately owned coal producer to sell substantially all of the
operating assets and operations, including coal reserves, mining property, plant and equipment,
mining rights, coal purchase contracts and coal sales contracts associated with its surface coal
mining operations in Western Kentucky. All of the Company’s current revenues are derived from these
operations.






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and Six Months Ended June
30,2009 and 2008 (Unaudited) The consideration which will be received upon closing includes $5,7
million in cash, assumption by the purchaser of all debt associated with the equipment being sold
and the assumption of certain reclamation liabilities related to the coal reserves. In addition,
the purchaser will replace the Company’s letters of credit for assumed reclamation obligations,
which, upon transfer of the active mining permits, will release the restrictions on approximately
$5.8 million of restricted cash and certificates of deposit. The Company can potentially receive an
additional $1.0 million, upon satisfaction of certain post-closing obligations. The closing of the
transaction is subject to certain closing conditions, including closing conditions related to
satisfying the purchaser as to the size and quality of the coal reserves. As a consequence of the
above, at June 30,2009, the assets and liabilities associated with the sale of the Company’s
surface mining operations have been classified as current assets and current liabilities held for
sale and shown separately on the balance sheet Furthermore, effective June 30, 2009, the property,
plant and equipment, mining rights, mine development costs and mineral reserves being sold have
been written down to the amount expected to be realized on sale, namely the cash to be received
plus the amount of the liabilities being assumed by the purchaser on closing, less costs to sell.
This resulted in a write down of assets held for sale in the amount of $38,920,000 in the three
months ended June 30,2009. Assets and liabilities held for sale on the consolidated balance sheet
include the following amounts: June 30, 2009 Current assets Coal inventories $877,841 Property,
plant and equipment, net 27,719,034 Other assets 121,326 $28,718,201 Current liabilities Asset
retirement obligations $2,587,981 Term debt 22,596,234 $25,184,215 Term Debt June 30, 2009 Bank
notes payable, interest at 5.50% to 8.90%. Payments are made in monthly installments. The loans are
collateralized by various pieces of equipment and mature April 2010 $66,810 Equipment notes
payable, interest at 5.25% to 8.75%. Payments are made in monthly installments. The loans are
collateralized by related assets with a net book value of $31,258,000 as at June 30, 2009 and have
maturity dates from August 2010 to March 2013 22,529,424 Total term debt associated with assets
held for sale $22,596,234 NOTE 3 — ACQUISITIONS Petersburg Coal Sublease In March 2009, the
Company entered into a sublease agreement with Petersburg Coal, LLC (“Petersburg”) to sublease
mineral reserves which are contiguous to its Gryphon Mining Complex, formerly known as the Pratt
Mine. Under the terms of the sublease, the Company paid $3,000,000 at closing, assumed $192,178 in
liabilities, and will pay an additional $3,000,000 upon satisfactory completion of certain
contingencies, including receipt of all required permits from Petersburg. The Company also incurred
transaction costs related to the sublease of $115,081, bringing the total cost of the sublease to
$6,307,259. A mineral reserve and mineral resource evaluation prepared in accordance with National
Instrument 43-101 (“NI43-101”) of the Gryphon Mining Complex was prepared as at April 1, 2009 by an
independent geological and engineering consulting firm. Based on the report, at the Gryphon Mining
Complex the Company controls 68.4 million tons of proven and probable






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and Six Months Ended June
30,2009 and 2008 (Unaudited) coal mineral reserves, 3.7 million tons of underground measured and
indicated coal resources, and 0.2 million tons of inferred coal resources. The costs of the
sublease were allocated to the following identifiable assets: Prepaid royalties $172,413 Mining
rights 6,134,846 $6,307,259 The Company is in the process of finalizing its valuation of the assets
acquired and liabilities assumed for this sublease. The above allocations are preliminary estimates
of fair value and may differ from the final allocation and the differences may be material. The
Company will finalize the allocations within one year of the execution of the sublease. NOTE 4 —
PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment consist of the following: December
31, June 30,2009 2008 Accumulated Net Book Net Book
Cost Depreciation Value Value Land $879,327 $ ___$879,327 $1,474,574 Building and improvements — —
— 17,726 Preparation plant — — — 2,737,352 Mining equipment — — — 40,128,200 Loading and
marine transport equipment — — — 1,434,792 Office equipment 35,688 8,955 26,733 212,278 Vehicles
— — — 32,982 S 915,015 $8,955 $906,060 $46,037,904 Property, plant and equipment related to the
Company’s surface mining operations have been reclassified as current assets held for sale as at
June 30,2009 as further described in Note 2. NOTE 5 — ASSET RETIREMENT OBLIGATIONS The Company
estimates its ARO liabilities for final reclamation and mine closure based upon detailed
engineering calculations of the amount and timing of the future cash spending for a third party to
perform the required work. Spending estimates are escalated for inflation and then discounted at
the credit-adjusted risk-free rate. The Company records an ARO asset associated with the discounted
liability for final reclamation and mine closure. The obligation and corresponding asset are
recognized in the period in which the liability is incurred. The ARO asset is amortized on the
units-of-production method and the ARO liability is accreted to the projected spending date. As
changes in estimates occur (such as mine plan revisions, changes in estimated costs or changes in
timing of the performance of reclamation activities), the revisions to the obligation and asset are
recognized at the appropriate credit-adjusted risk-free rate. The Company also recognizes an
obligation for contemporaneous reclamation liabilities incurred as a result of surface mining.
Contemporaneous reclamation consists primarily of grading, topsoil replacement, and revegetation of
backfilled pit areas.






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and Six Months Ended June
30,2009 and 2008 (Unaudited) A progression of the asset retirement obligations recorded on the
consolidated balance sheet is as follows: Total asset retirement obligations as at December 31,2007
$3,757,353 Liabilities acquired 1,131,000 Liabilities incurred 166,083 Accretion 189,132
Liabilities settled (919,568) Total asset retirement obligations as at December 31,2008 , 4,324,000
Liabilities incurred 670,000 Accretion 146,805 Liabilities settled (214,754) Total asset retirement
obligations as at June 30, 2009 4,926,051 Less current portion 2,300,000 Less asset retirement
obligations associated with assets held for sale 2,587,981 $38,070 NOTE 6 —DEBT Long-term debt
consists of the following: June 30, December 31, 20O9 2008 Bank notes payable, interest at 5.50% to
8.90%. Payments are made in monthly installments. The loans are collateralized by various pieces of
equipment and mature April 2010 $ — $105,109 Equipment notes payable, interest at 5.25% to 8.75%.
Payments are made in monthly installments. The loans are collateralized by related assets with a
net book value of $31,258,000 as at June 30, 2009 and have maturity dates from August 2010 to March
2013 — 21,068,681 Total long-term debt — 21,173,790 Less current portion — 6,532,045 $ —
$14,641,745 Long-term debt associated with the Company’s surface mining operations has been
reclassified as current liabilities associated with assets held for sale as at June 30,2009 as
further described in Note 2. NOTE 7 — FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS The Company
has exposure to credit risk, liquidity risk, interest rate risk, and foreign currency risk. The
Company’s risk management objective is to protect earnings and cash flow and, ultimately,
shareholder value. Risk management strategies, as discussed below, are designed and implemented to
ensure the Company’s risks and the related exposure are consistent with its business objectives and
risk tolerance. Credit Risk: Credit risk is the risk of a Financial loss to the Company if a
customer or counterparty to a financial instrument fails to meet its contractual obligation. The
Company had invested approximately $15,630,000 of its cash and cash equivalents (including
restricted cash and investments) and short-term investments in a U.S. financial institution, which
as at June 30, 2009, carried Standard and Poor’s investment ratings on their deposits of A-2 to
BBB+. As at June 30,2009, approximately 83,343,000 of the cash and cash equivalents balance was
invested in a money market fund managed by this financial institution, which is guaranteed until
September 18, 2009 by the U.S. Treasury Department under the Temporary Guarantee Program for Money
Market Funds. The Company has not experienced any losses on its deposits with mis financial
institution.






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and Six Months Ended June
30,2009 and 2008 (Unaudited) The Company is also subject to credit risk from its trade accounts
receivable. While economic factors can affect credit risk, the Company manages risk by providing
credit terms on a case by case basis. Customers are primarily investment grade companies and
quasi-governmental agencies. As a result, the Company has not experienced any instances of
non-payment The Company also invests in short-term investments issued by the United States
government, such as Treasury bills and Treasury notes. Historically, these types of investments
have been AAA rated, so the Company does not anticipate any risk related to default on these
investments by the issuer, As at June 30, 2009, the total fair value of assets subject to credit
risk, including cash and cash equivalents (including restricted cash and investments), short-term
investments, and trade accounts receivable is their carrying value of $36,579,666. Liquidity Risk:
Liquidity risk is the risk mat the Company will not be able to meet its financial obligations as
they come due. The Company manages its liquidity by ensuring that there is sufficient capital to
meet short and long-term business requirements, after taking into account cash flows from
operations and the Company’s holdings of cash, cash equivalents and short-term investments. The
Company also strives to maintain sufficient financial liquidity at all times in order to
participate in investment opportunities as they arise, as well as to withstand sudden adverse
changes in economic circumstances. Management forecasts cash flows for its current and subsequent
fiscal years to predict fiiture financing requirements. Future requirements are met through a
combination of credit commitments and access to capital markets. As at June 30, 2009, the Company
had S20.8 million of cash, cash equivalents, and short-term investments. Merest Rate Risk- Interest
rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations
in interest rates. Financial assets and financial liabilities with variable interest rates expose
the Company to cash flow interest rate risk. The Company’s most significant interest rate risk
arises from its short-term investments and cash equivalents. However, the maturity on these
instruments is generally less than ninety days, thereby mitigating the exposure to the impact of
changing interest rates. The Company’s long-term debt consists of only fixed rate notes. Currency
Risk The Company’s functional currency is the U.S. dollar and the Company’s sales are denominated
in U.S. dollars. As the Company operates in an international environment, some of the Company’s
financial instruments and transactions are denominated in currencies other than the U.S. dollar.
The results of the Company’s operations are subject to currency transaction risk and currency
translation risk. As at June 30, 2009, the Company had no material financial instruments that were
denominated in non U.S. currencies. NOTE 8 — COMMITMENTS AND CONTINGENT LIABILITIES In the normal
course of business, the Company makes various commitments and incurs certain contingent liabilities
including liabilities related to asset retirement obligations and financial obligations in
connection with mining permits that are not reflected in the accompanying consolidated balance
sheet. The Company does not anticipate any material losses as a result of these transactions. In
accordance with Kentucky state law, the Company is required to post reclamation bonds to assure
that reclamation work is completed. Outstanding reclamation bonds related to surface mining
operations totaled approximately $12.5 million as at June 30, 2009 and approximately $11.0 million
as at December 31, 2008. These bonds are secured by letters of credit or certific
ates of deposit
issued by a bank equal to the amount of the outstanding reclamation bonds. The letters of credit
are collateralized by the restricted cash and certificates of deposit on the consolidated balance
sheet of $12,517,297 and 11,638,921 as at June 30, 2009 and December 31, 2008, respectively.
Pursuant to the surface mining operation sale detailed in note 2, approximately $5,849,000 of the
Company’s cash-collateralized reclamation bonds will be replaced by the purchaser. As a result, as
at June 30,2009, the Company has classified $5,849,000 of the restricted cash and certificates of
deposit as a current asset. The Company leases certain office space under a long-term operating
lease running through 2009. Future non-cancelable minimum lease commitments under this lease as at
June 30, 2009, payable in 2009, totaled $114,597. This lease is not related to the surface mining
operations held for sale.






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and Six Months Ended June
30,2009 and 2008 (Unaudited) A significant amount of the Company’s surface and underground coal
reserves are controlled through leasing arrangements and non-cancellable royalty lease agreements
under which future minimum lease payments are due. In the ordinary course of business, the Company
enters into contracts to purchase diesel fuel from local suppliers for physical delivery at
specified prices. Pursuant to these contracts, the Company does not own a futures or options
position in the purchased fuel. As at, and subsequent to, June 30, 2009, the Company has executed
purchase contracts for a total of 2,562,000 gallons to be delivered in 2009 and 2010 at a total
cost of $5,672,407, or an average weighted price of $2.21 per gallon. These fuel contracts are
exclusively related to the surface mining operations held for sale. In 2007, the Company entered
into a master coal purchase and sale agreement (the “Master Agreement”) to purchase coal fines
recovered and processed by Covol Fuels No. 2, LLC (“Covol”) from two coal slurry reserve areas in
Muhlenberg County, Kentucky. On July 6,2009 the Company executed an amendment to the Master
Agreement (the “Amended Master Agreement”) revising the annual purchase and sale tonnage
commitments. The term of the Amended Master Agreement runs through the exhaustion of the reserves
(the “Term”). During the Term of the Amended Master Agreement, by July 1 of each year, the Company
and Covol will agree to the annual tonnage commitment (the “Commitment”) that Covol will produce
and that the Company will purchase for the next calendar year. For the calendar year 2010 the
Commitment cannot be less than 360,000 tons and for subsequent years the Commitment cannot be less
than 400,000 tons. The price to be paid by the Company for the coal fines is dependent on the price
at which the fines are sold by the Company to its customer, but not less than $24.50 per ton.
Additionally, the Company has the first right of refusal to purchase any tons produced by Covol in
excess of the Commitment, but up to 720,000 tons annually. This Master Agreement is exclusively
related to the surface mining operations held for sale. In June 2009, the Company entered into a
coal supply agreement with an Illinois Basin producer to purchase 20,000 tons of coal per month
from July 2009 through December 2009 at a purchase price of $39.00 per ton. Upon mutual agreement
of the parties to the coal supply agreement, the term of the agreement may be extended to December
31, 2010. This coal supply agreement is exclusively related to the surface mining operations held
for sale. As part of the Renfro Equipment Inc. acquisition in July 2008, the Company agreed that
if, by July 31, 2010, it acquires at least 1.5 million reserve tons as defined by National
Instrument 43-101 (“NI43-101”) due to the direct efforts of the sellers (“Additional Reserves”),
the Company will pay the sellers $1,000,000 for the first 1.5 million tons of reserves, plus $0.50
per ton for each reserve ton in excess of 1.5 million. The acquisition closing documents define a
specific territory from which the Additional Reserves can be acquired. The acquisition of the
Additional Reserves must be on terms and conditions acceptable to the Company in its sole,
reasonable discretion. As at June 30, 2009, the sellers had provided several mineral leases to the
Company. However, the analysis and drilling that is required to qualify these properties as reserve
tons under the definition of NI 43-101 is in its early stages. Therefore, it is not yet probable
that the sellers will deliver 1.5 million reserve tons to the Company, so no liability has been
currently accrued on the consolidated balance sheet to the sellers. This commitment is exclusiv
ely
related to the surface mining operations held for sale. NOTE 9 — STOCK INCENTIVE PLAN AND WARRANTS
2007 Stock Option Plan ofMCC MCC adopted an incentive stock option plan in May 2007 (the “2007
Plan”) which provides that the board of directors of the Company may from time to time, in its
discretion, and in accordance with TSX requirements, grant to directors, officers, employees and
technical consultants to the Company, non-transferable options to purchase common shares, provided
that the number of common shares reserved for issuance will not exceed 10% of the issued and
outstanding common shares. Such options will be exercisable for a period of up to 5 years from the
date of grant. Vesting terms will be determined at the time of grant by the board of directors. In
2007, upon closing of an initial public offering, MCC granted to its directors and officers options
to acquire 150,000 shares at a price of Cdn$0.25 per share, exercisable for a period of five years
from August 28,2007. The 2007 Plan remains in force and options issued prior to the RTO will
continue to be governed by the 2007 Plan; however due to the approval of the 2008 Plan (defined
below), no further options will be issued pursuant to die 2007 Plan.






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and Six Months Ended June
30,2009 and 2008 (Unaudited) 2008 Stock Option Plan of the Company In connection with completion of
the RTO, the Company adopted a new stock option plan (the “2008 Plan”) on May 20, 2008, which was
effective upon the closing of the RTO. The 2008 Plan is designed to advance the interests of the
Company by encouraging employees, officers, directors and consultants to have equity participation
in the Company through the acquisition of common shares. The current intention is to use the 2008
Plan for option grants to employees, officers, directors and consultants of the Company. Options
granted under the 2008 Plan may be “incentive stock options” or “non-qualified stock options”. The
2008 Plan was approved by the shareholders of the Company in June 2008 and 13,500,000 common shares
are reserved for issuance under the 2008 Plan. The exercise price per common share is not to be
less than the market price of the common shares at the time of the grant. The exercise period for
each stock option is not to be more than ten years (five years in the case of an incentive stock
option granted to a person who owns more than 10% of the issued and outstanding common shares).
Options may be granted subject to vesting requirements. Unless terminated earlier by the board of
directors, the 2008 Plan will remain in effect until all options granted under the 2008 Plan have
been exercised or forfeited, or have expired. However, no new options may be granted under the 2008
Plan more than 10 years from the date the Plan was originally adopted by the board of directors.
Phoenix had a stock incentive plan authorized by its board of directors in 2004 (the “2004 Plan”)
to grant options to its employees (including officers), directors and consultants. Pursuant to the
2004 Plan, Phoenix could issue “non-statutory options” and “incentive stock options” to purchase
common shares of Phoenix as well as “stock purchase rights”. Stock options granted under the 2004
Plan were generally subject to vesting provisions of 25% at the end-of-year one from the date of
grant and then evenly over the following 48 months. The options were granted at a price equal to
100% of the fan-value of the Company’s common shares on the date of grant and have a ten-year term.
Upon completion of the RTO, each Phoenix stock option was cancelled and extinguished and the holder
received a replacement option of the Company to purchase that number of common shares of the
Company equal to the number of shares of Phoenix common shares issuable under the Phoenix option
with no change in the exercise price of such options due to the nature of the exchange rate between
United States dollars and Canadian dollars. These replacement options are governed by the terms of
the 2008 Plan.






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and Six Months Ended June
30,2009 and 2008 (Unaudited) Information regarding stock option activity under the Plans follows:
2007 MCC Plan and 2008 Company Plan 2009 Activity Number of Weighted Average Options Denominated in
Canadian Dollars Options Exercise Price Balance, December 31,2008 4,410,830 CdnS0.83 Granted
6,500,000 Cdn0.30 Voluntarily surrendered and cancelled (900,000) Cdn 1.75 Cancelled (25,000) Cdn
1.75 Cancelled and replaced (337,000) Cdn 1.75 Replacement options, including 208,000 previously
issued in U.S. dollars 545,000 Cdn 0.30 Forfeited (535,000) Cdn 1.75 Options outstanding as at June
30,2009 9,658,830 CdnS0.27 Options exercisable as at June 30,2009 3,253,641 Cdn$0.27 Options
Denominated in U.S. Dollars (2004 Plan Options Replaced with Number of Weighted Average 2008 Plan
Options) Options Exercise Price Balance, December 31,2008 5,311,000 $0.98 Voluntarily surrendered
and cancelled (3,300,000) 1.25 Cancelled and replaced (in Canadian dollars) (208,000) 1.25
Forfeited (403,000) 0.96 Options outstanding as at June 30,2009 1,400,000 S0.32 Options exercisable
as at June 30,2009 1,176,892 $0.31 2008 Activity Number of Weighted Average Options Denominated in
Canadian Dollars Options Exercise Price Balance, December 31,2007 150,000 Cdn$0.25 Consolidated at
1:2.35, pursuant to RTO (86,170) Balance after consolidation 63,830 Cdn 0.59 Granted 9,397,000 Cdn
1.32 Voluntarily surrendered and cancelled (5,050,000) Cdn 1.75 Options outstanding as at December
31,2008 4,410,830 CdnS0.83 Options exercisable as at December 31,2008 1,498,340 Cdn$0.82, Options
Denominated in U.S. Dollars (2004 Plan Options Replaced with Number of Weighted Average 2008 Plan
Options) Options Exercise Price Balance, December 31,2007 6,749,000 $0.87 Granted 1,000 1.25
Exercised (25,438) 0.25 Forfeited (1,413,562) 0.43 Options outstanding as at December 31,2008
5,311,000 $0.98 Options exercisable as at December 31,2008 2,986,495 S0.89






 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and Six Months Ended June
30,2009 and 2008 (Unaudited) Compensation cost of stock option grants is recognized straight-line
over the options’ vesting periods. Compensation expense related to stock options for the six months
ended June 30, 2009 and 2008 was $1,865,000 and $2^291,277, respectively. In March 2009, certain
officers of the Company voluntarily surrendered, and the board of directors concurrently cancelled,
4,200,000 options that had been previously issued to them, of which 2,075,849 were fully vested at
the surrender date. The voluntary surrender was not accompanied by a concurrent grant of a
replacement award or other consideration to these officers. This surrender caused an acceleration
of the related compensation costs under CICA Handbook Section 3870. Had these officers not
voluntarily surrendered these options, the related compensation expense for the six months ended
June 30,2009 would have decreased by approximately $1,295,000. Additionally, in March 2009, the
board of directors cancelled and replaced 545,000 stock options that had been previously issued to
various production and administrative personnel. These options had originally been granted in 2007
and 2008, with vesting periods ranging from 3 years to 5 years, and exercise prices ranging from
$1.25 to Cdn$1.75. The replacement options have a 3 year vesting period and an exercise price of
Cdn$0.30. Under the terms of the 2008 Plan, the sale of the surface mining assets and associated
liabilities described in note 2 could, depending on the final valuation of the sale, cause all
options outstanding under the 2008 Plan to become fully vested and result in any unrecognized
compensation expense to be charged to the statement of operations on the date of sale. As at June
30,2009 the unrecognized expense related to these options totaled approximately $720,000. The
options* fair value was determined using the Black-Scholes option-pricing model. Expected
volatilities are based on comparable company historical share price movement and other factors. The
cost relating to the stock-based compensation plans is included in general and administrative
expenses in the accompanying consolidated statements of operations. As at June 30,2009, the
following stock options were outstanding: Number of Options Exercise Price Expiration Date 585,000
$0.25 April 2015 465,000 0.25 December 2015 335,000 0.50 May 2016 15,000 1.25 March 2017 63,830
Cdn0.59 August 2012 2,550,000 Cdn0.18 November 2018 6,345,000 Cdn 0.30 March 2019 700.000 Cdn 0.30
May 2019
11.058.830 Phoenix Warrants As part of the fee structure related to Phoenix’s preferred share
offering in August 2007, the underwriter received warrants to purchase 1,780,000 shares of the
preferred shares of Phoenix at $1.25 per share. The warrants expire 24 months following the date
Phoenix consummates an initial public offering of its common shares. The warrants’ total value of
$462,800 was determined using the Black-Scholes option pricing model. Assumptions used in the model
were a risk free interest rate of 4.76%, dividend yield of 6.50%, and expected volatility of .40.
The value of the warrants was charged to share capital. On June 27,2008, under the terms of a
broker agreement, the warrants were converted to warrants to purchase common shares of the Company
at $1.25 per common share and expire in June 2010. Company Warrants Under the terms of the
Offering, 31,428,580 warrants were issued to the purchasers of the common shares offered. The
warrants entitle the holder to purchase one common share for each warrant held at a price of
Cdn$2.25 per share. The warrants expire in June 2010. The warrants total value of $8,077,145 was
determined by the underwriter of the Offering. The value of the warrants was charged to share
capital.









 









 












	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and Six Months Ended June
30,2009 and 2008 (Unaudited) Information regarding the warrant activity follows: Weighted Number of
Average Exercise Phoenix Warrants Warrants Price Balance, December 31,2007 — $ — Converted
preferred warrants to common warrants 1,780,000 1.25 Warrants outstanding and exercisable as at
June 30, 2009 and December 31, 2008 1,780,000 $1.25 Weighted Warrants Denominated in Canadian
Dollars Number of Average Exercise Company Warrants Warrants Price Balance, December 31,2007
100,000 CdnS0.25 Consolidated at 1:2.35, pursuant to RTO (57,447) Balance alter consolidation
42,553 Cdn 0.59 Exercised (11,850) Cdn 0.59 Warrants issued with new common shares 31,428,580 cdn
2.25 Warrants outstanding and exercisable as at June 30,2009 and December 31, 2008 31,459,283
CdnS2.25 As at June 30,2009 the following warrants were outstanding: Number of Warrants Exercise
Price Expiration Date 1,780,000 $1.25 June 2010 30,703 Cdn 0.59 September 2009 31.428.580 Cdn 2.25
June 2010 33.239.283 Total cash received from options and warrants exercised during the six months
ended June 30, 2009 and the year ended December 31, 2008 totaled nil and $12,838, respectively.
Broker Options Under the terms of the Offering, the agents received Brokers’ Options entitling the
agents to purchase in the aggregate 2,514,286 Brokers’ Units. Each Broker Unit entitles the agent
to purchase one common share for Cdn$1.75 per share and one half warrant entitling the agent to
purchase one additional common share for each full warrant at Cdn$2.25 per share. The Brokers
Options expire in June 2010 and are all exercisable at June 30,2009. The options total value of
$1,106,286 was determined using the Black-Scholes option pricing model. Assumptions used in the
model were a risk free interest rate of 3.99%, no dividend yield, and expected volatility of .40.
The value of the options was charged to share capital as a cost of the Offering. NOTE 10 — SALES
CONTRACT TERMINATION On March 3, 2009, the Company entered into a mutual release and settlement
agreement with one of its customers to terminate a coal supply agreement for delivery of coal in
2009 and 2010 (the “2009/2010 Supply Agreement”). In consideration for terminating the 2009/2010
Supply Agreement, the Company paid the customer $3,000,000 in cash. The payment relieved the
Company of the obligation to deliver approximately 970,000 tons of coal, 470,000 in 2009 and
500,000 in 2010. In addition, the Company agreed to make up in 2009 approximately 170,000 tons of
shipments that were not delivered in 2008 under a separate coal supply agreement dated January
1,2008 (the “2008 Supply Agreement”). In return for fulfilling the 2008 Supply Agreement, the
customer agreed to change die guaranteed monthly average BTU specification from 11,500 to 11,200.
The $3,000,000 payment has been charged to die consolidated statement of operations.






 











 









	PHOENIX COAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and Six
Months Ended June 30,2009 and 2008 (Unaudited) NOTE 11 — RELATED PARTY TRANSACTIONS
The Company enters into transactions with shareholders and/or affiliated entities that have
some level of common ownership with the Company. A summary of the related party transactions and
balances follows for the six months ended June 30, 2009 and 2008: Six Months Ended
2009 1008 Expenses: Consulting fees $ — $156,000 Rent and
miscellaneous — 32,925 Accounts receivable — 16,858 Accounts payable —
3,741 The above expense amounts were paid to MHI Energy Partners, LLC, which amounts were
applied towards, among other things, salaries, overhead and benefits for individuals who provided
services. These transactions are also in the normal course of business, and are recorded at the
consideration established and agreed to by the related parties. David Wiley and Timothy Fogarty
were managing directors of MHI Energy Partners, LLC. David Wiley is currently an officer and
director of the Company and Phoenix, and Tim Fogarty resigned as a director of Phoenix in September
2008. During the second quarter of 2008, the Company discontinued these payments to MHI.
NOTE 12 — SUBSEQUENT EVENTS On July 28,2009, the Company executed an amendment to a
coal sales contract with one of its customers. Under the original terms of the contract, shipments
to this customer were for 11,500 BTU quality coal and scheduled to be completed by December 31,
2009. The amendment terms extend the period of time to fulfill the contracted tonnage shipments to
December 31,2012 and decrease the minimum BTU guarantee to 11,400 BTU for coal shipped in 2009 and
2010.






 









 












	PHOENIX COAL INC. Management’s Discussion and Analysis For the three and six
months ended June 30,2009






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months
Ended June 30,2009 The following discussion of the results of operations,
financial condition and cash flows of Phoenix Coal Inc. (the “Company”) prepared as at
August 14, 2009 should be read in conjunction with the Company’s unaudited interim
financial statements for the three and six months ended June 30,2009 and its 2008
audited financial statements and the notes thereto. These financial statements, which
were prepared in accordance with generally accepted accounting principles in Canada,
are available at www.sedar.com. All amounts disclosed are in United States dollars
unless otherwise stated. This Management Discussion and Analysis contains
“forward-looking statements” which may include, but are not limited to, statements
with respect to the future financial or operating performance of the Company and its
projects, the future price of coal, the estimation of mineral resources, the timing
and amount of estimated future production, costs of production, capital, operating and
exploration expenditures, costs and timing of the development of new deposits, costs
and timing of future exploration, requirements for additional capital, government
regulation of mining operations, environmental risks, reclamation expenses, title
disputes or claims, limitations of insurance coverage and the timing and possible
outcome of regulatory matters. Often, but not always, forward-looking statements can
be identified by the use of words such as “plans,” “expects,” “is expected,” “budget,”
“scheduled,” “estimates,” “forecasts,” “intends,” “anticipates,” or “believes” or
variations (including negative variations) of such words and phrases, or statements
that certain actions, events or results “may,” “could,” “would,” “might” or “will” be
taken, occur or be achieved. Forward-looking statements are based on the reasonable
assumptions, estimates, analysis and opinions of management made in light of its
experience and perception of trends, current conditions and expected developments, as
well as other factors that management believes to be relevant and reasonable at the
date that such statements are made. Forward-looking statements involve known and
unknown risks, uncertainties, assumptions and other factors that may cause the actual
results, performance or achievements of the Company to be materially different from
any future results, performance or achievements expressed or implied by the
forward-looking statements. Such factors include, but are not limited to, the factors
discussed in the section entitled “Risk Factors” in the prospectus of the Company
available on SEDAR at www.sedar.com. Although the Company has attempted to identify
important factors that could cause actual actions, events or results to differ
materially from those described in forward-looking statements, there may be other
factors that cause actions, events or results to differ from those anticipated,
estimated or intended. Forward-looking statements contained herein are made as at the
date of this management discussion and analysis. There can be no assurance mat
forward-looking statements will prove to be accurate, as actual results and future
events could differ materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking statements. The Company
does not undertake to update any forward-looking statements except as required by
applicable securities laws. Overview The Company is headquartered in
Madisonville, Kentucky and is engaged in the exploration, production, acquisition and
sale of coal from the Illinois Basin. The primary customers of the Company are
electric utility companies. The current mining operations and nea
r-term development
projects of the Company are located in Western Kentucky, an area that comprises a part
of the Illinois Basin. As at June 30, 2009, the Company operated five surface mines
-Briar Hill/Radio Hill (two mines at one geographic location), Back in Black, KO, and
Jessup. As further discussed, subsequent to the end of the second quarter 2009, the
Company entered into a definitive agreement to sell substantially all of the assets
associated with its surface mining operations.






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months
Ended June 30,2009 Highlights for the first six months of 2009 During the three
and six months ended June 30,2009: Subsequent to the end of the second quarter 2009, the
Company entered into a definitive agreement to sell substantially all of its surface coal mining
assets to a significant privately-owned, Ohio-based coal producer on terms and conditions detailed
in the in the Sale of Surface Mining Assets section below. The Company received the required
permitting from the Kentucky Department of Natural Resources and the U.S. Army Corps of Engineers
for its Winn North, Radio Hill and KO reserves. After receiving all requisite permits, the Company
began mining its Radio Hill reserve in January; re-opened the Winn North reserve, part of the Back
in Black mine, in February after being idled for eight months; and commenced mining the KO reserve
in May. On January 26,2009, a devastating ice storm hit Western Kentucky, destroying electrical
infrastructure and seriously crippling the area. Consequently, the Company was unable to produce
coal for approximately a week because of the loss of power and inability to access its mine sites.
The Company estimated it lost approximately 50,000 to 60,000 tons of production due to the ice
storm. Heavy rainfall during the second quarter 2009 hampered production at most mine locations.
April rainfall was 34% higher than average for the month, while May was 29% higher than average,
according to data published by the National Oceanic and Atmospheric Administration. On March 3,
2009, the Company entered into a mutual release and settlement agreement with one of its customers
to terminate a coal supply agreement for delivery of coal in 2009 and 2010 (the “2009/2010 Supply
Agreement”). In consideration for terminating the 2009/2010 Supply Agreement, the Company paid the
customer $3,000,000 in cash. In addition, the Company agreed to make up in 2009 approximately
170,000 tons of shipments that were not delivered in 2008 under a separate coal supply agreement
dated January 1,2008. On March 27,2009, the Company announced it had entered into a sublease
agreement with Petersburg Coal, LLC (“Petersburg”). The subleased mineral reserves are contiguous
to the Company’s Gryphon Mining Complex, formerly known as the Pratt Mine. On May 12, 2009, the
Company announced it had completed its National Instrument 43-101 technical report on the Gryphon
Mining Complex. Based on the report, at the Gryphon Mining Complex the Company controls 68.4
million tons of proven and probable coal mineral reserves, 3.7 million tons of underground measured
and indicated coal resources, and 0.2 million tons of inferred coal resources. During the second
quarter of 2009, the Company produced approximately 450,000 tons of saleable coal and purchased
nearly 83,000 tons of saleable coal. For the six months ended June 30,2009, the Company produced
approximately 943,000 tons of saleable coal and purchased nearly 136,000 tons of saleable coal. •
Coal sales totaled approximately 522,000 tons and 1,060,000 tons for the quarter and six months
ended June 30,2009, respectively. Revenue for the three months ended June 30, 2009 was
approximately $17,320,000 for an average revenue per ton sold of $33.20. Revenue for the six months
ended June 30,2009 was approximately $35,292,000 for an average revenue per ton sold of $33.30.
Cost of sales for the three months ended June 30,2009 was approximately $17,020,000 for an average
cost per ton sold of $32.62. Cost of sales for the six months ended June 30,2009 was approximately
$31,763,000 for an average cost per ton sold of $29.97.






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months Ended
June 30,2009 For the three and six months ended June 30, 2009, the Company’s net loss was
approximately $44,801,000 and $52,436,000, respectively. These amounts include the write down of
assets held for sale of $38,920,000 described in the Sale of Surface Mining Assets section below.
Capital expenditures for the six months ended June 30, 2009 were $7,673,000, which included
$5,821,000 of new equipment that was financed through term loans. At June 30, 2009, the Company
had approximately $20,774,000 in cash, cash equivalents and short-term investments. Results of
Operations Sale of Surface Mining Assets Subsequent to the end of the second
quarter 2009, the Company entered into a definitive agreement with a privately owned coal producer
to sell substantially all of the operating assets and operations, including coal reserves, mining
property, plant and equipment, mining rights, coal purchase contracts and coal sales contracts
associated with its surface coal mining operations in Western Kentucky. The consideration which
will be received upon closing includes $5.7 million in cash, assumption by the purchaser of all
debt associated with the equipment being sold and the assumption of certain reclamation
liabilities related to the coal reserves. In addition, the purchaser will replace the Company’s
letters of credit for assumed reclamation obligations, which, upon transfer of the active mining
permits, will release the restrictions on approximately $5.8 million of restricted cash and
certificates of deposit The Company can potentially receive an additional $1.0 million, upon
satisfaction of certain post-closing obligations. The closing of the transaction is subject to
certain closing conditions, including closing conditions related to satisfying the purchaser as to
the size and quality of the coal reserves. Effective June 30, 2009, the property, plant
and equipment, mining rights, mine development costs and mineral reserves being sold have been
written down to the amount expected to be realized on sale, namely the cash to be received plus
the amount of the liabilities being assumed by the purchaser on closing, less costs to sell. This
resulted in a write down of assets held for sale in the amount of $38,920,000 in the three months
ended June 30, 2009. Production On January 26, 2009, a devastating ice storm hit
Western Kentucky, destroying electrical infrastructure and seriously crippling the area.
Consequently, the Company lost approximately 50,000 to 60,000 tons of production because of the
loss of power and inability to access its mine sites. Heavy rainfall during the second quarter
2009 delayed mining as water had to be pumped from the coal pits. April rainfall was 34% higher
than average for the month, and May was 29% higher according to data published by the National
Oceanic and Atmospheric Administration. For the first half of 2009, production from
Phoenix’s owned mines came from six sources — Briar Hill, Radio Hill, Back in Black, KO, Jessup,
and Beech Creek. The closing of the Beech Creek mine and subsequent opening of the KO mine
negatively impacted production as a mine at full production was replaced by a mine in its early
stages of production during the second quarter 2009. In addition, Back in Black encountered
productivity problems due to old works and short pit length. The Graham #5 and Stony Point mines
(producing a combined 169,550 tons for the quarter ended June 30,2008) were depleted during 2008
while Beech Creek mined out in April 2009 after producing 24,393 tons and 134,094 tons for the
second quarter and the six months ended June 30,2009, respectively.






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months Ended June
30,2009 The following table summarizes the production from Phoenix’s owned mines during the
quarter and six months ended June 30,2009 versus comparable time periods in the prior year. Q2.Q2
% YTD 6/30 YTD 6/30% 2009 2008 Variance Variance 2009 2008 Variance Variance Briar
Hill/Radio Hill 296,154 236,586 59,568 25.2% 587,260 474,722 112,538 23.7%
Back in Black 42,583 65,605 (23,022) -35.1% 72,590 127,637 (55,047) -43.1%
KO 25,162 — 25,162 0.0% 25,162 — 25,162 0.1%
Jessup 852 T7J6.0%jj 123,568;T j.23J568 JL0% BejschOreekjjjj’jjT
Sub^taF’Z 450,144” 302,19lTi 147,953 j j 49.0%g S 942,674;; 602,359 ji 340315 jf 56.5%
J. Othermines — Z”.
55oZ” (169,550)I00.0%; 2ZZZZ . 37l.804_;: (,371,804)1 Total
T 450,144 471,741 (21,597)11 -4.6%j j 942,674 ;; 974,163 (31,489)0 -3.2% Briar
Hill/Radio Hill continued to lead production during the second quarter 2009. These two mines
produced a total of 296,154 tons for the quarter ended June 30,2009, a 59,568 ton increase over
the 236,586 tons produced for the quarter ended June 30,2008. Production at this location
increased 25% and 24% for the quarter and six months ended June 30, 2009, respectively. Water
inflow from portions of Radio Hill’s overburden decreased during the quarter, contributing to the
production increase at this location. The Back in Black mine produced 42,583 tons in the quarter
ended June 30, 2009, a decrease of 23,022 tons from 65,605 produced tons for the similar period in
2008. The mine had been idled for eight months after it had mined through its permit area in June
2008 and resumed production in February 2009. In the second quarter 2009, Back in Black
encountered old works in the west end of its pit creating a shorter, less productive pit length.
These conditions, coupled with permit boundary restrictions, constrained the space available for
overburden removal. As a result, additional trucks and manpower were deployed to haul spoil to an
old pit to provide relief, generating increases in diesel fuel consumption and labor hours. In
July 2009, manpower was redeployed to another section of the mine with lower stripping ratios, in
an effort to increase production at this location. KO mine was originally scheduled to begin
production in March 2009, but was delayed until late May due to permit issues. As production
began, mining was slow as a mud slip and an eighteen inch parting were encountered limiting
production to 25,162 tons in the quarter ended June 30,2009. The mud slip is no longer present and
coal quality is improving as the parting in the seam is drier and more friable, creating less
contamination as the coal is mined. The Jessup mine had its highest productivity month, producing
21,882 tons in May 2009 and 61,852 tons for the quarter ended June 30,2009, making Jessup the
second highest producing mine for the second quarter 2009. Purchased Coal First quarter 2008 was
Covol’s first full quarter of operation after acquiring the Rock Crusher preparation plant and
slurry reserves from the Company at the end of November 2007. Production was slow to start due to
inclement weather, start-up issues and downtime related to initial capital improvements. During
the second quarter 2008, production increased to nearly 10,000 tons per month. By the end of 2008,
Covol had finished construction on its new preparation plant and modifications on the Rock Crusher
plant setting me stage for higher production in 2009. Consequently, Covol continued to improve
production and quality during the first half 2009 with the second quarter being the most
productive quarter since the commencement of operations.






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months Ended
June 30,2009 Prior to the acquisition of C&R at the end of July 2008, the Company managed
the Beech Creek property on behalf of C&R and purchased the production from the mine. During the
first quarter 2008, the Company developed the mine area for the Beech Creek South permit, which
had limited production at the outset. However, after developing a longer, more efficient pit
length and acquiring new equipment, the second quarter 2008 production improved to where the
Company purchased over 140,000 tons from C&R. The following table summarizes the
purchased coal, including C&R, during the second quarter and six months ended June 30,2009 versus
similar periods in the prior year. Q2 Q2 YTD 6/30 YTD 6/30
2009 2008 Varianc 2009 2008 Variance Covol 82,878
29,269 53,609 135,843 36,776 99,067 C&R Coal — 140,496
(140,496) —  159,639 I (159,639) Totaf 82,878
l69,765 (86,887) 135,843 196,415 (60,572) In June 2009, the Company
entered into a coal supply agreement with an Illinois Basin producer to purchase 20,000 tons of
coal per month from July 2009 through December 2009 at a purchase price of $39.00 per ton. Upon
mutual agreement of the parties to the coal supply agreement, the term of the agreement may be
extended to December 31, 2010. This coal is a higher BTU product than the Company currently
produces from its operations. Blending this coal with the Company’s coal will reduce the amount of
coal that the Company will have to wash from its own operations. Revenue The
Company primarily derives its revenue from coal sales to electric utility companies. For the three
months ended June 30, 2009, the Company’s revenue decreased by 19% to $17,320,379 from $21,326,102
in the prior year comparative three month period. For the six months ended June 30, 2009,
Phoenix’s revenue decreased by 11% to $35,292,271 from $39,821,562 in the prior year six month
period. For the three month periods ended June 30, tons sold decreased 19% from 646,000 tons in
2008 to 522,000 tons in 2009. For the six month periods ended June 30, sold tons decreased 12%
from 1.2 million tons in 2008 to 1.1 million tons in 2009. The decrease in revenue was primarily
attributable to a decrease in sales volume due to the year over year reductions in produced and
purchased coal previously discussed. For the six months ended June 30,2009, average
revenue per ton sold increased to $3330 from $33.02 in the same period in 2008. The increase of
$0.28 per ton resulted from shipments on several sales contracts which transitioned to 2009
contract pricing after fulfilling 2008 contract commitments. Additionally, due to renegotiating a
change in quality specifications with two customers, and deferring tons shipped to another
customer with a higher quality requirement into 2010, the Company was able to ship a higher
percentage of its sales on contracts which currently provide the highest base price realization of
all its sales contracts. Conversely, due to the depletion of the Beech Creek mine, overall BTU
quality decreased, reducing the revenue per ton realized by the Company on several of its sales
contracts and thus offsetting any of the increase discussed above. Cost of Sales
Cost of sales consists of all mining related expenses, preparation costs, transportation costs
and purchased coal before depreciation and amortization. Diesel fuel had the largest cost decrease
during the second quarter 2009 compared to the second quarter 2008. On a cost per ton produced
basis, diesel fuel cost was $5.44 in the second quarter 2009 compared to $9.10 in the second
quarter 2008, a $3.66 or 40% decrease. Fuel costs decreased from an average of $3.83 per gallon to
an average of $2.02 per gallon in the quarter ended June 30,2008 versus 2009. Year






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Sis Months Ended
June 30,2009 over year, diesel fuel cost decreased $3,629,014 for the six months ended
June 30, 2009 due primarily to a $1.38 decrease in the per gallon fuel cost from $3.39 in 2008 to
$2.01 for the same period in 2009. Labor and benefits increased 20% from $3,854,407 in
the second quarter 2008 to $4,643,217 in the second quarter 2009. Cost per ton produced increased
from $8.17 in the second quarter 2008 to $10.31 in the second quarter 2009. Man hours worked
increased for the quarter ended June 30,2009 primarily due to the excess rainfall and production
delays at the KO and Back in Black mines previously discussed. Purchased coal, a variable
cost, accounted for approximately 12% of the cost of sales in the second quarter 2009. For the
quarter ended June 30,2009, purchased coal was $2,106,623 versus $5,346,762 for the same period in
2008. For the six monms ended June 30, 2009, purchased coal was $3,461,367 and $6,160,445 for the
same period in 2008. Prior to its purchase of C&R in July 2008, Phoenix was purchasing coal from
C&R, thus accounting for the significant cost differential year over year. The cost per ton
purchased decreased from $31.49 for the second quarter ended June 30, 2008 to $25.41 in 2009. For
the six months ended June 30, 2009, the cost per ton purchased decreased from S31.36 in 2008 to
$25.48 in 2009 In 2009, Covol provided all purchased coal, which was less expensive than the coal
purchased from C&R in 2008. Maintenance costs for the second quarter ended June 30,2009
were $2,894,435 and $1,926,971 for the same period in 2008, an increase of $967,464. Cost per ton
produced was $6.43 for the second quarter ended June 30, 2009 and $4.08 for 2008, a 58% increase.
Maintenance costs increased for the second quarter 2009 versus the second quarter 2008 due to
shovel rebuild work performed that was not anticipated until 2010. Additionally, some older pieces
of equipment utilized at Jessup required significant maintenance work during the second quarter
2009 as Jessup increased its production levels. Overall, the Company’s cost of sales
decreased by 20% to $17,019,692 in the second quarter 2009 from $21,199,549 in the similar period
for 2008. Comparing the same periods on a cost per ton sold basis, cost of sales was $32.62 versus
$32.80. For the six months ended June 30, 2009, cost of sales decreased from $38,684,869 in 2008
to $31,763,409 in 2009. Cost per ton sold for the six months ended June 30,2009 was $29.97
compared to $32.07 in 2008 for a decrease of 7%. Selling. General and Administrative
CSG&A”^ Expenses SG&A expenses primarily consist of royalty payments to surface and
mineral owners, sales commissions, federal excise tax, severance tax, federal reclamation fee and
corporate overhead costs in the Company’s Madisonville and Louisville offices. For tie three
months ended June 30, 2009, the Company’s selling expenses were $1,852,362 versus $2,074,001 for
the similar period in 2008. For the six months ended June 30, 2009, the Company’s selling expenses
were $4,008,043 versus $4,144,935 for the same period in 2008. The Company’s selling costs
(royalties and coal taxes described above) are variable with respect to coal sales and ranged from
approximately 10% to 11% of coal sales for the above mentioned periods. General and
administrative (“G&A”) costs in the second quarter 2009 were $2,004,939 compared to $3,813,178
during the similar period in 2008. The primary variance between the 2009 and 2008 quarters is a
non-cash charge to employee share-based compensation, which was $6,000 in 2009 and $2,151,277 in
2008. Stock option forfeitures and a lower valuation of more recently issued options reduced
share-based compensation expense in 2009, while the issuance of 6,847,000 options at
 a higher
valuation significantly increased this expense in 2008. G&A costs for the six months ended June
30,2009 were $5,602,583 and $5,412,290 for the similar period in 2008. Depreciation and
Amortization Depreciation and amortization expense for the three and six months ended
June 30, 2009 was $1,907,711 and $3,731,492, respectively, compared to $2,043,344 and $3,107,176,
respectively, for the similar periods in 2008. Depreciation expense for the first six months of
2009 increased $1,013,919 when compared to the same period in






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months Ended
June 30,2009 2008. This increase in depreciation expense was primarily related to the
significant investment in mining equipment in the fourth quarter 2007 and during the calendar year
2008. Interest Expense/Foreign Currency Adjustment Interest expense for the
three and six months ended June 30, 2009 was comprised primarily of interest paid on equipment
financing. For the three and six months ended June 30, 2008, interest expense included (1)
interest on the Company’s revolving line of credit, equipment financing, and short-term bridge
financing and (2) non-cash costs which included accrued dividends on the preferred shares,
accretion of the preferred share offering costs, accretion of loan costs on the short-term bridge
financing, and mark to market on an interest rate swap. Interest expense for the three and six
months ended June 30, 2009 was $424,723 and $784,625, respectively. Interest expense for the three
and six months ended June 30,2008 was $2,765,589 and $5,124,968, respectively. Interest expense
decreased year-over-year for both the quarter and year to date periods due primarily to the
elimination of interest related costs on the preferred shares and the short-term bridge financing
which were converted to common share equity in June 2008. The foreign currency loss of
$103,710 for the three months ended June 30, 2008 and the foreign currency gain of $129,130 for
the six months ended June 30, 2008 was related to mark to market adjustments for the short-term
bridge financing which was denominated in Canadian dollars. This financing was converted to common
share equity in June 2008. Interest Income Interest income for the three months
ended June 30,2009 and 2008 was $21,789 and $14,060, respectively. For the six months ended June
30, 2009 interest income was $98,478, compared to $26,721 for the comparable period in 2008. The
year over year increase in interest income for both the quarter and six month periods was due to
higher balances of cash and short-term investments as a result of the capital raised from the
prospectus offering in June 2008. Interest income decreased in the first two quarters of 2009,
compared to the third and fourth quarters of 2008 primarily due to historically low interest rates
on United States Treasury bills, which is the primary investment vehicle utilized by the
Company. Other Expense For the six months ended June 30,2008, the Company
realized a loss on the sale of assets in the amount of $214,057 versus a loss of $1,730 for the
comparable period in 2009. In 2008, the Company disposed of non-core property and equipment





 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months
Ended June 30,2009 Summary of Quarterly Results I 2009 II 2008 II 2007
(figures in thousands except per unit data) Q2’09 QX ‘09 Q4’08 Q3 ‘Q8 Q2 ‘08 Ql ‘08 Q4
‘01 Q3 ‘07 Saleable coal production 450 493 527 431 472 502 547 S84
Purchased coal (1) 83 53 18 109 170 27 — Tons sold 522 538 568 52!? 646 560
539 562 Average revenue per ton $33,20 $33.40 $33.11 S 34.20 $33,00 $33.03 $
31.19 $31.62 Average cost of sales per ton $32.62 $27.40 S 26.90 S 33.87 $
32.80 S 31.23 S 34.40 $27.21 Revenue $17,320 $17,972 S 18,809 $18,094 $21,326 S
18,495 S 16,830 $17,764 Cost of sales 17,020 14,744 15,278 17,919 21,200 17,485
18,562 15,287 Selling expenses 1,852 2,156 2,286 1,757 2,074 2,071 2,175 2,229
General and administrative 2,005 3,598 5,593 2,541 3,813 1,599 3,118 1,206
Depreciation and amortization 1,908 1,824 3,084 2,221 2,043 1,064 1,023 837
Write down of assets held for sale 38,920 — - — - — - — Sales contract
termination cost 3,000 — - — - — - Asset impairment write down .
2,873 Loss from operations $(44,385) S (7,350) $ (7,432) $ (6.344) (7,804)
$(3,724) $ (10,921) $(1,795) Other expense, net 406 285 578 320 2,893 2,292 4,859
3,875 Income taxes J0 — 38 — (1) — 76 (7) Net loss for the period $
(44,80T) $(7.635) $ (8,048) $ (6,664) $(10,696) $ (6,016) $ (15,856) $ (5,663)
Basic and diluted net loss per share $ (0.30) $ (0.05)[| $ (0.05) $ (0.04)1
(0-25)| $ (0.16)|| $ (0.43) $ (0.15) |(i) The Company purchased coal from Covol
Engineered Fuels (“Covol”) and C&R — Beech Creek, a mine which it managed
fom September 2007 Through before the Company acquired C&R.
Production During 2008, the Company operated the Briar Hill, Graham #5, Stony
Point, Back in Black, Beech Creek and Jessup mines. The Stony Point mine effectively depleted
at the end of February 2008, only producing approximately 24,500 tons from March through July
2008 while completing a required fece-up project for the lessor of the property. As at the
beginning of June 2008, the Company had mined through its Back in Black mine permit area, and
production at Back in Black was idled until the Company received the requisite permits for
the adjacent property in the first quarter 2009. The equipment and manpower had been moved to
Beech Creek to maintain similar Company-wide production levels. At the end of July 2008, the
Company closed the acquisitions of C&R and Renfro, which added the Beech Creek and Jessup
mines to the Company’s owned portfolio. The third quarter 2008 results were
negatively impacted by a two-week vacation shutdown taken in August. Typically, vacation is
scheduled for the end of June and the beginning of July, thus spreading the effect over the
second and third quarters, not just one quarter. Fourth quarter production was negatively
affected by depletion at Graham #5, which depleted in December, and Beech Creek which
experienced declining production as it neared the end of its reserve life. These 2008
production losses were somewhat offset by Jessup, which produced nearly 43,000 tons in the
fourth quarter 2008 as opposed to approximately 19,000 tons in the third quarter 2008. Please
see the Results of Operations section for detail on 2009 production.






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months Ended June
30,2009 The following table summarizes the quarterly saleable production results for the trailing
five quarters: Q2 ‘08 Q3’08 Q4’08 Q1’09 Q2’09? Briar Hill/Radio Hill 236,586
l82,438 256,188 291,106 296,154 Ghraham_#5 154,986 108,251 83,614 — -
Back in Black 65,605 — - 30,007 42,583 ko — - — 25,162 Stony Point Stony Point 14,564 9,971 — - — Jessup -
18,742 42,495 61,716 61,852 Beech Creek — 111,465 145,053 109,701 24,393
Total production 471,741 430,867 527,350 492,530 450,144 Purchased Coal Prior to the
acquisition of C&R at the end of July 2008, the Company managed the Beech Creek property on behalf
of C&R and purchased the production from the mine. The declining trend in purchased coal from C&R
from the second quarter 2008 to the third quarter 2008 is due to the acquisition and accounting
for the tonnage from August and September as production and no longer as purchased coal. Since the
first quarter 2008, the Company has been purchasing coal fines from Covol, whose production has
trended upward through the second quarter 2009. The Company only purchased approximately 18,000
tons of coal fines in the fourth quarter 2008 because Covol was not able to meet quality
specifications, which has been corrected in 2009. Due to a shortfall in its 2008 commitment to the
Company, Covol agreed to make up 124,624 tons of coal that were not delivered in 2008 (the “2008
make-up tons”) beginning on April 1, 2009. The Company will pay a reduced price of $24.00 per ton
instead of $25.50 per ton, until the 2008 make-up tons are completely delivered. Covol had
supplied approximately 70% of its 2008 make up tons by June 30,2009. The following table
summarizes the quarterly production and purchased coal for the trailing five quarters,
illustrating the transition of Beech Creek from purchased coal to owned production. Q2’08
Q3’08 Q4’08 Ql’09 Q2’09 Company production (excl Beech Creek) 471,741 319,402
382,297 382,829 425,751 Beech Creek (Owned) — l11,465 145,053 109,701 24,393
Sub-total Company production 471,741 430,867 527,350 492,530
450,144 C&R-Beech Creek 140,496 64,803 —  — -
Covol (purchased coal) 29,269 44,190 17,558 52,965 82,878 Sub-total purchased coal
169,765 108,993 17,558 52,965 82,878 TotaiTources of roduction 641,506
539,860 544,908 545,495 533,022






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months Ended June
30,2009 Revenue Revenue per ton sold growth in 2008 was due to contractual price increases on
existing contracts and servicing new contracts with higher negotiated sales prices. The
incremental revenue per ton sold realized in the third quarter 2008 was due to additional
transportation and loading fees paid to the Company to ship coal to customers from alternate dock
facilities during the Green River lock maintenance shutdown, which occurred in August and
September. For the first three months of 2009, average revenue per ton sold increased to S33.40
from $33.11 in the fourth quarter of 2008. The increase of $0.29 per ton resulted from shipments
on several sales contracts which transitioned to 2009 contract pricing after fulfilling 2008
contract commitments during the first quarter of 2009. Revenue declined in the second quarter 2009
to $33.20 per ton sold from the first quarter 2009 level of $33.40 per ton sold due to diesel fuel
and BTU quality adjustments. During the first quarter 2009, on one of its customer contracts, the
Company was compensated at a higher diesel fuel reimbursement rate while it was completing its
2008 contract obligations. As the 2008 contract obligations were fulfilled, the diesel fuel
reimbursement was recalculated using 2009 diesel fuel pricing, creating a reduction in the diesel
fuel reimbursement Additionally, due to the depletion of me Beech Creek mine, overall BTU quality
decreased for the quarter, reducing the per ton revenue realization on several of the Company’s
contracts. Cost of Sales The trend in cost of sales has primarily been impacted by maintenance
costs and commodity costs. Since the beginning of the fourth quarter 2007, the Company has spent
approximately $33,400,000 on new production equipment, which has increased productivity and
lowered maintenance costs through the first quarter 2009. Rising commodity costs had a significant
impact on the Company’s diesel fuel and explosives costs through the first three quarters of 2008.
After the severe sell-off in commodities during the latter part of 2008, diesel fuel cost per
gallon and ammonium nitrate fuel oil (“ANFO”) cost per hundred-weight trended downward through the
first quarter of 2009. Diesel fuel and explosives, on a cost per ton produced basis, increased
from the first quarter 2009 to the second quarter 2009 primarily due to the additional spoil
hauling at the Back in Black mine and challenging mining conditions at the KO location.
Additionally, the Jessup mine had to employ a restricted blasting pattern as it neared its permit
line, thereby increasing its overall explosives cost. The following table summarizes the trend in
diesel and ANFO/explosives costs through the second quarter 2009. Cost per ton produced
Q2 ‘08 Q3’08 Q4’08 Q1;09 Q2’09 Diesel fuel
$9.10 $8.38 $5.10 $4.39 $5.44 ANFO/Explosives
3.16 2.92 2.43 2.28 3.05 Total $ 12.26 $11.30 $7.53 $6.67 $8.49
Selling. General and Administrative Expenses During 2008, selling expenses, which
include coal taxes and royalties, ranged from approximately 10% to 12% of coal sales. The Company
does not pay coal taxes or royalties on purchased coal so selling expenses declined as a
percentage of coal sales to approximately 10% during the second and third quarters of 2008 when
purchased coal was at its highest for the year. During the third quarter, the Company started
paying a $0.60 per ton sold overriding






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months Ended
June 30,2009 royalty to the owners of C&R as part of the acquisition agreement For the
fourth quarter of 2008, selling expenses reached 12% of coal sales as approximately 97% of sales
were sourced from the Company’s production and it was the first full quarter for paying the
overriding royalty to C&R. For the six months ended June 30, 2009, selling expenses -were 11% of
coal sales. The C&R overriding royalty of $0.60 per ton ceased in April 2009, as Beech Creek was
depleted. General and administrative expenses have risen as the Company has hired more
employees to fill various roles at the middle and senior management levels. The spike in G&A in
the second quarter 2008 was because of a non-cash share-based compensation charge related to stock
option issuances of $2,151,277. During the fourth quarter of 2008 and the first quarter of 2009,
the Company cancelled certain stock options that the Board of Directors and several officers
voluntarily surrendered. This action accelerated the non-cash stock option expense related to
these options and increased compensation expense by approximately $2,250,000 for the fourth
quarter 2008 and $1,441,000 for the first quarter 2009. Liquidity and Capital
Resources As at June 30,2009, the Company had $20,773,655 in cash, cash equivalents and
short-term investments, compared to $40,626,316 as at December 31,2008. The Company also had
restricted cash, cash equivalents and certificates of deposit as collateral for letters of credit
for reclamation bonding in the amount of $12,517,297 as at June 30, 2009 versus $11,638,921 as at
December 31,2008. The Company’s primary sources of cash include sales of coal production
to customers, sales of non-core assets and financing transactions. The Company’s primary uses of
cash include cash costs of coal production, capital expenditures, costs for development projects,
debt service costs and costs related to reclamation obligations. The Company’s ability to continue
to grow its business is dependent on its ability to continue to generate cash from its primary
sources in excess of its primary uses. Operating Activities Cash used by
operating activities for the three and six months ended June 30, 2009 was $3,003,436 and
$7,659,492, respectively. The Company’s operating loss was the primary reason for the use of cash,
which, for the six months ended June 30,2009, included the $3,000,000 payment to terminate a coal
sales contract with one of its customers. Changes in non-cash operating assets and liabilities
provided $888,388 of cash for the quarter ended June 30,2009, primarily resulting from a decrease
in accounts receivable, as sales in the last half of June 2009 were lower than sales in the last
half of March 2009. Trade accounts payable and accrued liabilities increased $1,773,144 for the
six months ended June 30,2009 primarily due to an increase in purchased coal activity during this
period. Investing Activities Investing activities resulted in a net cash
decrease of $4,785,003 and $10,725,937 for the three and six months ended June 30, 2009,
respectively. In the second quarter 2009, the Company invested $2,477,578 in short term
certificates of deposit in order to increase the yield on its short term investments. Payments for
mine development and mining rights of $1,182,983 and $1,720,693 for the three and six months ended
June 30,2009, respectively, were primarily for development costs for the Radio Hill, KO, Back in
Black, and Gryphon mines. The Company’s investing activities also included $3,307,259 incurred to
acquire the Petersburg Coal sublease in the first quarter 2009. Capital expenditures for
the three and six months ended June 30, 2009 were $1,720,315 and $7,672,731, respectively. For the
six months ended June 30,2009,
 $5,821,290 was invested in three trucks, a dozer and a loader that
were financed through term loans. The remaining $1,851,441 was primarily spent on the preparation
plant at the Briar Hill mine, and costs for relocating the Company’s maintenance and
administrative mine operations to a location centrally located to its Western Kentucky surface
operations.






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months Ended
June 30,2009 Financing Activities Financing activities used cash of $2,115,250
and $4,445,400 for the three and six months ended June 30, 2009, respectively. The majority of the
financing activities were payments on equipment financing and bank debt Coal Sales
Contract Revisions As at June 30, 2009, the Company had coal sales contract commitments
of approximately 5.3 million tons at a weighted average price of $34.65 that extend through 2012.
As at the filing of the MD&A, the Company’s coal sales commitments before adjustments for BTU or
transportation (if applicable in the contract) are detailed in the table below. The timing of the
commitments is based on renegotiated contracts, proposed terms and preliminary discussions with
customers about deferring some additional tonnage. Q3-04 2009 2010 2011 2012
Total Commitments (tons) 1,069,062 2,319,866 1,629,287 288,473 5,306,688 Avg. sales price
$34.20 $34.90 $34.95 $32.66 $34.65% of 11,500 BTU contracts 49% 43% 54% 74% 49%
Acquisitions Petersburg Coal Sublease In March 2009, the Company entered
into a sublease agreement with Petersburg Coal, LLC (“Petersburg”) to sublease mineral reserves
which are contiguous to its Gryphon Mining Complex, formerly known as the Pratt Mine. Under the
terms of the sublease, the Company paid $3,000,000 at closing, assumed $192,178 in liabilities,
and will pay an additional $3,000,000 upon satisfactory completion of certain contingencies,
including receipt of all required permits from Petersburg. The Company also incurred transaction
costs related to the sublease of $115,081, bringing the total cost of the sublease to
$6,307,259. A mineral reserve and mineral resource evaluation prepared in accordance with
National Instrument 43-101 (“NI43-101”) of the Gryphon Mining Complex was prepared as at April 1,
2009 by an independent geological and engineering consulting firm. Based on the report, at the
Gryphon Mining Complex the Company controls 68.4 million tons of proven and probable coal mineral
reserves, 3.7 million tons of underground measured and indicated coal resources, and 0.2 million
tons of inferred coal resources. The costs of the sublease were allocated to the
following identifiable assets: Prepaid royalties $172,413 Mining rights
6,134,846 $6^07,259 The Company is in the process of finalizing its valuation
of the assets acquired and liabilities assumed for this sublease. The above allocations are
preliminary estimates of fair value and may differ from the final allocation and the differences
may be material. The Company will finalize the allocations within one year of the execution of the
sublease.






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months Ended
June 30,2009 Outstanding Share Data As at August 14, 2009, the Company had
150,045,552 common shares issued and outstanding. In addition, there were 11,058,830 stock
options, 33,239,283 warrants and 2,514,286 brokers options (which entitle the holder to purchase
one common share and one half of one warrant) outstanding as at August 14,2009. If all options,
warrants, and brokers* options (including the subsequent exercise of the warrants purchased) were
exercised and issued, it would bring the fully diluted issued common shares to a total of
198,115,094, and would generate cash of approximately $74,000,000. Wim regard to the outstanding
stock options, under the terms of the Company’s stock option plan, the sale of the surface mining
assets and associated liabilities previously discussed could, depending on the final valuation of
the sale, cause all options outstanding to become fully vested. Subsequent Events
On July 28, 2009, the Company executed an amendment to a coal sales contract with one of its
customers. Under the original terms of the contract, shipments to this customer were for 11,500
BTU quality coal and scheduled to be completed by December 31,2009. The amendment terms extend the
period of time to fulfill the contracted tonnage shipments to December 31, 2012 and decrease the
minimum BTU guarantee to 11,400 BTU for coal shipped in 2009 and 2010. Related Party
Transactions The Company enters into transactions with shareholders and/or affiliated
entities that have some level of common ownership with the Company. A summary of the related party
transactions and balances follows for the six months ended June 30,2009 and 2008: Six
Months Ended 2009 2008 Expenses: Consulting fees $ — $156,000
Rent and miscellaneous — 32,925 Accounts receivable — 16,858 Accounts
payable — 3,741 The above expense amounts were paid to MHI Energy Partners, LLC, which
amounts were applied towards, among other things, salaries, overhead and benefits for individuals
who provided services. These transactions are also in the normal course of business, and are
recorded at the consideration established and agreed to by the related parties. David Wiley and
Timothy Fogarty were managing directors of MHI Energy Partners, LLC. David Wiley is currently an
officer and director of the Company and Phoenix, and Tim Fogarty resigned as a director of Phoenix
in September 2008. During the second quarter of 2008, the Company discontinued these payments to
MHI. Commitments and Contingent Liabilities In the normal course of business,
the Company makes various commitments and incurs certain contingent liabilities including
liabilities related to asset retirement obligations and financial obligations in connection with
mining permits that are not reflected in the accompanying consolidated balance sheet The Company
does not anticipate any material losses as a result of these transactions. In accordance with
Kentucky state law, the Company is required to post reclamation bonds to assure that reclamation
work is completed. Outstanding reclamation bonds related to surface mining operations totaled
approximately $12.5 million as at June 30, 2009 and approximately $11.0 million as at December
31,2008. These bonds are secured by letters of credit or certificates of deposit issued by a bank
equal to the amount of the outstanding reclamation bonds. The letters of credit are collateralized
by the restricted cash and certificates of deposit on die consolidated balance sheet of
$12,517,297 and 11,638,921 as at






 









 













	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months Ended
June 30,2009 June 30, 2009 and December 31, 2008, respectively. Pursuant to the surface
mining operation sale detailed in note 2, approximately $5,849,000 of the Company’s
cash-collateralized reclamation bonds will be replaced by the purchaser. As a result, as at June
30, 2009, the Company has classified $5,849,000 of the restricted cash and certificates of deposit
as a current asset The Company leases certain office space under a long-term operating
lease running through 2009. Future non-cancelable minimum lease commitments under this lease as at
June 30, 2009, payable in 2009, totaled $114,597. This lease is not related to the surface mining
operations held for sale. A significant amount of the Company’s surface and underground
coal reserves are controlled through leasing arrangements and non-cancellable royalty lease
agreements under which future minimum lease payments are due. In the ordinary course of
business, the Company enters into contracts to purchase diesel fiiel from local suppliers for
physical delivery at specified prices. Pursuant to these contracts, the Company does not own a
futures or options position in the purchased fuel. As at, and subsequent to, June 30, 2009, the
Company has executed purchase contracts for a total of 2,562,000 gallons to be delivered in 2009
and 2010 at a total cost of $5,672,407, or an average weighted price of $2.21 per gallon. These
fuel contracts are exclusively related to the surface mining operations held for sale. In
2007, the Company entered into a master coal purchase and sale agreement (the “Master Agreement”)
to purchase coal fines recovered and processed by Covol Fuels No. 2, LLC (“Covol”) from two coal
slurry reserve areas in Muhlenberg County, Kentucky. On July 6, 2009 the Company executed an
amendment to the Master Agreement (the “Amended Master Agreement”) revising the annual purchase
and sale tonnage commitments. The term of the Amended Master Agreement runs through the exhaustion
of the reserves (the ‘Term”). During the Term of the Amended Master Agreement, by July 1 of each
year, the Company and Covol will agree to the annual tonnage commitment (the Xommitment”) that
Covol will produce and that the Company will purchase for the next calendar year. For the calendar
year 2010 the Commitment cannot be less than 360,000 tons and for subsequent years the Commitment
cannot be less than 400,000 tons. The price to be paid by the Company for the coal fines is
dependent on the price at which the fines are sold by the Company to its customer, but not less
than $24.50 per ton. Additionally, the Company has the first right of refusal to purchase any tons
produced by Covol in excess of the Commitment, but up to 720,000 tons annually. This Master
Agreement is exclusively related to the surface mining operations held for sale. In June
2009, the Company entered into a coal supply agreement with an Illinois Basin producer to purchase
20,000 tons of coal per month from July 2009 through December 2009 at a purchase price of $39.00
per ton. Upon mutual agreement of the parties to the coal supply agreement, the term of the
agreement may be extended to December 31, 2010. This coal supply agreement is exclusively related
to the surface mining operations held for sale. As part of the Renfro Equipment Inc.
acquisition in July 2008, the Company agreed that if, by July 31, 2010, it acquires at least 1.5
million reserve tons as defined by National Instrument 43-101 (“NI 43-101”) due to the direct
efforts of the sellers (“Additional Reserves”), the Company will pay the sellers $1,000,000 for
the first 1.5 million tons of reserves, plus $0.50 per ton for each reserve ton in excess of 1.5
million. The acquisition closing documents define a specific territory from wh
ich the Additional
Reserves can be acquired. The acquisition of the Additional Reserves must be on terms and
conditions acceptable to the Company in its sole, reasonable discretion. As at June 30,2009, the
sellers had provided several mineral leases to the Company. However, the analysis and drilling
that is required to qualify these properties as reserve tons under the definition of M 43-101 is
in its early stages. Therefore, it is not yet probable that the sellers will deliver 1.5 million
reserve tons to the Company, so no liability has been currently accrued on the consolidated
balance sheet to the sellers. This commitment is exclusively related to the surface mining
operations held for sale.






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months Ended
June 30,2009 Business Environment and Risks The Company’s operations are subject
to the risks normally inherent in the operation and development of coal properties. There is no
assurance of developing economic coal reserves in commercial quantities. Operational risks include
weather, geologic anomalies, competition, potential transportation interruptions, a complex
regulatory regime and environmental and safety concerns. Financial and liquidity risks include
commodity price fluctuations, interest rates, and the costs of goods and services. The Company
uses a variety of means to help minimize its business risks. The Company’s risk exposures
and the impact on the Company’s financial instruments are summarized below: Credit Risk:
Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a
financial instrument fails to meet its contractual obligation. The Company had invested
approximately $15,630,000 of its cash and cash equivalents (including restricted cash and
investments) and short-term investments in a U.S. financial institution, which as at June 30,
2009, carried Standard and Poor’s investment ratings on their deposits of A-2 to BBB+. As at June
30, 2009, approximately $3,343,000 of the cash and cash equivalents balance was invested in a
money market fund managed by this financial institution, which is guaranteed until September 18,
2009 by the U.S. Treasury Department under the Temporary Guarantee Program for Money Market Funds.
The Company has not experienced any losses on its deposits with this financial institution.
The Company is also subject to credit risk from its trade accounts receivable. While economic
factors can affect credit risk, the Company manages risk by providing credit terms on a case by
case basis. Customers are primarily investment grade companies and quasi-governmental agencies. As
a result, the Company has not experienced any instances of non-payment. The Company also
invests in short-term investments issued by the United States government, such as Treasury bills
and Treasury notes. Historically, these types of investments have been AAA rated, so the Company
does not anticipate any risk related to default on these investments by the issuer. As at
June 30, 2009, the total fair value of assets subject to credit risk, including cash and cash
equivalents (including restricted cash and investments), short-term investments, and trade
accounts receivable is their carrying value of $36,579,666. Liquidity Risk; Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they come
due. The Company manages its liquidity by ensuring that there is sufficient capital to meet short
and long-term business requirements, after taking into account cash flows from operations and the
Company’s holdings of cash, cash equivalents and short-term investments. The Company also strives
to maintain sufficient financial liquidity at all times in order to participate in investment
opportunities as they arise, as well as to withstand sudden adverse changes in economic
circumstances. Management forecasts cash flows for its current and subsequent fiscal
years to predict future financing requirements. Future requirements are met through a combination
of credit commitments and access to capital markets. As at June 30, 2009, the Company had $20.8
million of cash, cash equivalents, and short-term investments. Interest Rale Risk:
Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of
fluctuations in interest rates. Financial assets and financial liabilities with variable interest
rates expose the Company to cash flow interest rate risk. The Company’s most significant interest
rate risk arises from its investments in marketable securities and cash equivalents. However, the
matu
rity on these instruments is generally less than ninety days, thereby mitigating the exposure
to the impact of changing interest rates. The Company’s long-term debt consists of only fixed rate
notes.






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months Ended
June 30,2009 Currency Risk The Company’s functional currency is the U.S. dollar and the
Company’s sales are denominated in U.S. dollars. As the Company operates in an international
environment, some of the Company’s financial instruments and transactions are denominated in
currencies other than the U.S. dollar. The results of the Company’s operations are subject to
currency transaction risk and currency translation risk. As at June 30, 2009, the Company had no
material financial instruments that were denominated in non U.S. currencies. Critical
Accounting Estimates The Company’s consolidated financial statements are prepared in
accordance with generally accepted accounting principles in Canada and, in preparing these
statements, management must make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses. The estimates and assumptions are believed to be
reasonable under the circumstances and are based on historical experience and current conditions.
The use of other assumptions could result in different estimates, and actual results may vary from
results based on these estimates. As events occur and additional information is obtained, these
estimates may be subject to change. Estimates are deemed critical when the Company’s financial
condition or results of operations could be materially impacted by a change in estimate. The
Company’s significant accounting policies are discussed in note A of the Company’s December 2008
consolidated financial statements. The following is a discussion of the critical accounting
estimates used to determine the financial results of the Company. Mining Rights. Mineral
Reserves and Mine Development Mining rights, mineral properties and development assets
include expenditures to acquire and develop mineral reserves, as well as development costs
incurred to develop new reserves in advance of production. Depletion of producing properties, and
amortization of mining rights and development costs, are based on units of production over the
estimated proven and probable reserves of the respective coal properties. The
determination of coal reserves requires a number of assumptions and estimates, including
geological sampling and modeling as well as estimates of future coal prices and future production
costs. Estimates of the reserves may change based on additional information obtained subsequent to
the assessment date. This may include data obtained from exploration drilling, significant changes
in the price of coal and changes in estimates of the cost of production. A change in the estimate
of reserves could result in a change in the rate of depletion, development amortization, or
impairment of the reserves, resulting in a write down. Mining rights and mine development
are tested for impairment when events or changes in circumstances indicate that their carrying
amount may not be recoverable. This impairment testing is based on estimated future undiscounted
cash flows to be realized from the Company’s mining operations. These future cash flows are
developed using assumptions mat reflect the long-term operating plans given management’s best
estimate of future economic conditions, such as revenues, production costs, and reserve estimates.
A change in these factors could result in a modification of the impairment calculation.
Future Income Taxes The Company is subject to Canadian tax and U.S. federal income
tax as well as income tax of multiple state jurisdictions. The tax years 2005 tiirough 2008 remain
open to examination for Canadian, U.S. federal income tax and various state income tax
matters. The expense for income taxes includes federal and state income taxes currently
payable and those deferred or prepaid because of temporary differences between the financial
statement and the tax basis of
assets and liabilities. As a result of losses from operations, the
Company has recorded a valuation allowance against its future tax assets as it does not believe it
is more likely than not these assets will be realized. Should these tax assets be realized, the
valuation allowance would be reduced accordingly.






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months Ended
June 30,2009 Asset Retirement Obligations The Company estimates its ARO
liabilities for final reclamation and mine closure based upon detailed engineering calculations of
the amount and timing of the future cash spending for a third party to perform the required work.
Spending estimates are escalated for inflation and then discounted at the credit-adjusted
risk-free rate. The Company records an ARO asset associated with the discounted liability for
final reclamation and mine closure. The obligation and corresponding asset are recognized in the
period in which the liability is incurred. The ARO asset is amortized on the units-of-production
method and the ARO liability is accreted to the projected spending date. As changes in estimates
occur (such as mine plan revisions, changes in estimated costs or changes in timing of the
performance of reclamation activities), the revisions to the obligation and asset are recognized
at the appropriate credit-adjusted risk-free rate. The Company also recognizes an obligation for
contemporaneous reclamation liabilities incurred as a result of surface mining. Contemporaneous
reclamation consists primarily of grading, topsoil replacement, and revegetation of backfilled pit
areas. A progression of the asset retirement obligations recorded on the consolidated
balance sheet is as follows: Total asset retirement obligations as at December 31,2007 $
3,757,353 Liabilities acquired 1,131,000 Liabilities incurred 166,083
Accretion 189,132 Liabilities settled (919,568) Total asset retirement
obligations as at December 31,2008 4324,000 Liabilities incurred 670,000
Accretion 146,805 Liabilities settled (214,754) Total asset retirement
obligations as at June 30,2009 4,926,051 Less current portion 2,300,000 Less
asset retirement obligations associated with assets held for sale 2,587,981 $38,070
Share-Based Compensation Compensation cost attributable to all share options granted
is measured at fair-value at the grant date using the Black-Scholes model and expensed over the
vesting period with a corresponding increase to stock options and warrants in shareholders’
equity. In determining the fair value, the Company makes estimates for expected volatility of the
shares as well as an estimated discount rate. Changes to these estimates could result in the
Mr-value of the share-based compensation to be less than or greater than the amount recorded,
Initial Adoption and Changes In Accounting Policies All accounting policies adopted
by the Company are in accordance with Canadian generally accepted accounting principles (“GAAP”).
The following financial reporting standards are applicable to the Company in 2009. New
Accounting Policies Goodwill and Intangible Assets: The CICA has issued a new standard,
CICA Section 3064, Goodwill and Intangible assets, which establishes revised standards for
recognition, measurement, presentation and disclosure of goodwill and intangible assets and is
effective January 1, 2009. Concurrent with the introduction of this standard, the CICA withdrew
EIC-27, Revenues and Expenses during the pre-operating period. This standard has had no material
impact on the Company’s consolidated financial statements.






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months Ended
June 30,2009 Financial Instruments: The Emerging Issues Committee (“EIC”) has issued
EIC-173, Credit Risk and the Fair Value of Financial Assets and Financial Liabilities, which
clarifies the application of credit risk when determining the fair value of financial assets and
liabilities. EIC-173 is effective for interim and annual financial statements for periods ending on
or after January 20, 2009. This standard has had no material impact on the Company’s consolidated
financial statements. Mining Exploration Costs: The EIC has issued EIC-174, Mining
Exploration Costs, which discusses the circumstances under which exploration costs may be
capitalized. Additionally, EIC-174 clarifies the timing for testing capitalized exploration costs
for impairment. EIC-174 is effective for interim and annual financial statements issued after March
27,2009. This standard has had no material impact on the Company’s consolidated financial
statements. Future Accounting Changes International Financial Reporting Standards
(“IFRS”): In 2006, the Canadian Accounting Standards Board (“AcSB”) published a new strategic plan
that will significantly affect financial reporting requirements for Canadian companies. In February
2008, the AcSB announced that Canadian GAAP for publicly accountable enterprises will be converged
with IFRS effective in calendar year 2011. The Company will adopt IFRS for the fiscal year
beginning January 1, 2011, with restatement for comparative purposes of amounts reported by the
Company for the fiscal year beginning January 1,2010. The Company is currently in the
planning phase of the conversion, which includes identifying potential differences between GAAP and
existing IFRS as at June 30, 2009, as well as proposed IFRS which may be in effect in 2011. The
Company is utilizing both internal and external resources to identify and ultimately quantify these
differences and the impact that they will have on accounting policies, information technology and
data systems, internal control over financial reporting, disclosure controls and procedures,
financial reporting, and business activities. Employees responsible for financial reporting have
attended IFRS training, have begun IFRS accounting policy development, and initiated development of
an IFRS project timeline Quantification of GAAP and IFRS differences has not yet been determined
due to the need to evaluate internal data and make final policy choices and elections.
Reclassiflcations: Certain of the 2008 figures have been reclassified to conform to the 2009
financial statement presentatioa Disclosure Controls and Procedures Disclosure
controls and procedures have been designed to ensure that information required to be disclosed by
the Company is accumulated and communicated to the Company’s management as appropriate to allow
timely decisions regarding required disclosure. For the fiscal year ended December 31, 2008, an
evaluation was commissioned by the Company under the supervision of the CEO and CFO and with the
participation of management of the effectiveness of the Company’s disclosure controls and
procedures as defined under the rules adopted by the Canadian securities regulatory authorities.
Based on this evaluation, and that there have been no material changes in disclosure controls and
procedures in 2009, the Company’s CEO and CFO have concluded as at June 30, 2009, that the
Company’s disclosure controls and procedures provide reasonable assurance that material information
related to the Company is made known to them for disclosure in these financial statements. It
should be noted that while the Company’s CEO and CFO believe that the Company’s disclosure controls
and procedures provide a reasonable level of assurance that they are effective, they do not expect
that the dis
closure controls and procedures or internal controls over financial reporting will
prevent all errors and fraud. A control system, no matter how well conceived or operated, can
provide only reasonable, not absolute, assurance that the objectives of the control system are
met






 









 












	Phoenix Coal Inc. Management’s Discussion and Analysis Three and Six Months Ended
June 30,2009 Internal Controls over Financial Reporting Internal controls over
financial reporting are designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external reporting purposes in
accordance with generally accepted accounting principles in Canada. Management is responsible for
establishing and maintaining adequate internal controls over financial reporting appropriate to the
nature and size of the business to provide reasonable assurance regarding the reliability of
financial reporting for the Company. However, any system of internal control over financial
reporting has inherent limitations and can provide only reasonable assurance with respect to
financial statement preparation and presentation. The Company uses the COSO control
framework. For the fiscal year ended December 31,2008, an evaluation was commissioned by the
Company under the supervision of the CEO and CFO and with the participation of management of the
effectiveness of the Company’s internal control over financial reporting. Based on this evaluation,
and that there have been no material changes in internal controls over financial reporting in 2009,
the CEO and CFO have concluded that the design and operation of the Company’s internal controls
over financial reporting were effective as at June 30, 2009. Management is continually monitoring
and revising its control procedures and processes. Due to the size of its finance staff, there is
not complete segregation of duties in the Company. However, for more complex areas of accounting
and accounting estimates, the CFO and Controller review each other’s work.






 









 









Schedule 4.7(d)(vii)




Leased
Real Property Disputes; Minimum Royalties


1. See attached list of royalties paid by the Phoenix Entities with respect to the Leased Real
Property that may be recouped (in accordance with the applicable AT Coal Leases) upon the mining of
the Leased Real Property.



2. In October 2004, a Notice of Judgment Lien was filed by The Huntington National Bank in the
Muhlenberg Circuit Court against Martha Blass (K.O. lessor). A settlement amount of $13,663.08 was
accepted by The Huntington National Bank, and monthly royalty payments to Martha Blass are now
being remitted to The Huntington National Bank until the full amount has been paid. As of July 31,
2009, the balance due to The Huntington National Bank is $9,868.04.








34









 












	Oxford Mining Company, LLC, Phoenix Coal Inc., Phoenix Coal Corporation, and Phoenix Newco,
LLC Acquisition Agreement Schedule Schedule 4.7 (d) (vii) Leased Real
Property Disputes and Royalties Advance Royalties as of July 31,2009 -All Recoupable under
terms of lease agreements Company Lessor Amount R&L Winn, inc. Loraine McFadden CundifF $
1,840 R&L Winn, Inc. Loraine McFadden Cundiff 51S R&L Winn, Inc. Loraine
McFadden Cundiff 5,760 R&L Winn, Inc. Loren R. and Kay Lee 15,000 R&L Winn, Inc.
Donaid and Ellen Lee 2,550 R&L Winn, Inc. JeffEubanks 600 R&L Winn, Inc. Tom
Eubanks 600 R&L Winn, Inc. Talmage and Jean Rogers 3,750 R&L Winn, Inc. James
Rogers 7,500 R&L Winn, Inc. Martha Rogers Haas 3,750 R&L Winn, Inc. Total
41,865 Evergreen Minerals Co., Inc. James A. and Connie Sue Wells 2,000 Evergreen
Minerals Co., Inc. Total 2,000 Charolais Mining Company, LLC Talmage and Jean Rogers
15,500 Charolais Mining Company, LLC James Rogers 15,500 Charolais Mining
Company, LLC Martha Rogers Haas 15,500 Charolais Mining Company, LLC Sue R. Johnson
15,500 Charolais Mining Company, LLC Howard H. Revlett 2,460 Charolais Mining
Company, LLC Total 64,460 C&R Coal Inc. Roger A. France 1,350 C&R Coal Inc.
Shirley Adler 2,800 C&R Coal Inc. Total 4,150 Renfro Equipment Inc. Jon Geibel
23,000 Renfro Equipment Inc. Louis & Brenda Baggett 1,000 Renfro Equipment Inc.
Lisa & John Fairchild 1,000 Renfro Equipment Inc. Terry McCay 1,000 Renfro
Equipment Inc. Total 26,000 Total Advanced Royalties $138,475






 









 








Schedule 4.7(e)




Owned Real Property


1. See Schedule 2.1(b)(iii), which is incorporated by reference in this Schedule 4.7(e).



2. In connection with the Fleeting Rights Agreement executed by James and Sue Markwell, the
Markwells are parties to an Option for Purchase of Surface Rights pursuant to which they have the
option to purchase the real estate described therein (including the Island Dock facility, which is
part of the Owned Real Property) for $1.00 in certain circumstances.






35









 










Schedule 4.7(f)




Out Leases


1. None.







36









 








Schedule 4.7(g)




Claims


1. None.






37









 








Schedule 4.8




Condition and Sufficiency of Assets


1. The Phoenix Entities have not repaired, and do not expect to repair, any of the 777 A trucks or
D-10 dozers (with 348 engines) that constitute part of the AT Fixed Assets.






38









 








Schedule 4.10(a)




Taxes


1. See attached.






39









 












	Oxford Mining Company, LLC, Phoenix Coal Inc., Phoenix Coal Corporation, and
Phoenix Newco, LLC Acquisition Agreement Schedule Schedule 4.10
(a) Tax Returns on Extension and Returns Filed after Due Date Tax
Returns on Extension I Phoenix Company Form Type Period Ending Extension
Date Federal — Consolidated Federal Form 1120 09/15/2009
Consolidated KY Form 720 KY -10/15/2009 Phoenix Coal Corporation
Consolidated IL Form IL-1120 12/31/2008 IL-10/15/2009 R&LWinn, Inc. Consolidated
returns listed above 12/31/2008 See above Crittenden County Coal, Inc.
Consolidated returns listed above 12/31/2008 See above Pact Resources LLC
(disregarded entity) Consolidated returns listed above 12/31/2008 See above
Evergreen Minerals Co., Inc. Consolidated returns listed above 12/31/2008 Sea
above Old Liberty Equipment Co., Inc. Consolidated returns listed above
12/31/2008 See above Maroon Reclamation, LLC (disregarded entity) Consolidated
returns listed above 12/31/2008 See above Phoenix Coal Processing, LLC
(disregarded entity) Consolidated returns listed above 12/31/2008 See above
Dynamic Separations, LLC (disregarded entity) Consolidated returns listed above
12/31/2008 See above Charolais Mining Company, LLC (disregarded entity)
Consolidated returns listed above 12/31/2008 See above Charolais Coal Sales, LLC
(disregarded entity) Consolidated returns listed above 12/31/2008 See above C &
R Coal Inc. Consolidated returns listed above 12/31/2008 See above Phoenix Coal
Inc. Consolidated returns listed above 12/31/2008 See above Renfro Equipment
Inc. Consolidated returns listed above 12/31/2008 See above Federal — Federal
Form 1065 09/15/2009 Schoate Mining Co., LLC KY Form 765 12/31/2008 I
KY-10/15/2009 Tax Returns Filed after Due Date I Date
Fjed/To Be Phoenix Company Form Type Period
Ending Filed Phoenix Coal Corporation [Amended form 1099 I 12/31/2008 I
9/30/2009 Canadian — T2 Corporation Income Tax Phoenix Coal Inc. Return
6/26/2008 7/7/2009 Federal Form 1120S Short period ending C & R Coal Inc. KY
Form 720S 07/31/08 9/15/2009 Federal Form 1120S Short period ending
Renfro Equipment Inc. KY Form 720S 07/31/08 9/15/2009 All returns will
be filed and copies provided to Buyer prior to the extension date of the respective tax
return. No tax estimates were due or have been paid on the 2008 federal or state tax
returns due to a significant tax loss for the 2008 reporting year.






 









 








Schedule 4.10(b)




Taxes


1. None.






40









 








Schedule 4.10(c)




Taxes


1. See attached.






41









 












	Oxford Mining Company, LLC, Phoenix Coal Inc., Phoenix Coal Corporation, and Phoenix Newco,
LLC Acquisition Agreement Schedule Schedule 4.10 (c) Tax Returns
Previously Audited, Assessments Pending on Audited Returns Phoenix Group Entity Audit
Audit Period Audit Conducted Phoenix Coal Corporation [Office of Surface Mining (OSM1)
[July 1, 2006 -March 31, 2009 I 2nd Qtr 2009 Schoata Mining Co., LLC Office of Surface
Mining (OSM1) January 1,2005 — March 31,2009 2nd Qtr 2009 R&LWinn, Inc. Office of Surface Mining
(OSM1) July 1, 2006 — March 31, 2009 2nd Qtr 2009 Crittenden County Coal, Inc. Office of
Surface Mining (OSM1) January 1, 2003 — March 31,2009 2nd Qtr 2009 Charolais Mining
Company, LLC Office of Surface Mining (OSM1) January 1, 2007 — March 31, 2009 2nd Qtr 2009 Phoenix
Coal Processing, LLC Office of Surface Mining (OSM1) January 1, 2007 — March 31, 2009 2nd Qtr
2009 C&R Coal Inc. Office of Surface Mining (OSM1) October 1, 2004 — March 31, 2009 2nd
Qtr 2009 Renfro Equipment Inc. Office of Surface Mining (OSM1) July 1, 2002 — March 31.
2009 2nd Qtr 2009 Dynamic Separations [Office of Surface Mining (OSM1) IJanuary 1, 2003 -April 1.
2009 | 2nd Qtr 2009 All OSM audits are being finalized. Sellers currently do not anticipate any
material adjustments resulting from these audits. Phoenix Coai Corporation Sales and Use
Tax October 1,2005 — June 30, 2009 To begin August 11,2009 Schoate Mining Co., LLC Sales
and Use Tax October 1, 2005 — June 30, 2009 To begin August 11, 2009 Old Liberty Equipment
Co., Inc. Sales and Use Tax January 1, 2005 — December 31, 2008 To begin August 11, 2009
Charolais Mining Company. LLC Sales and Use Tax January 1, 2007 — June 30. 2009 To begin August
11, 2009 Phoenix Coal Processing, LLC Sales and Use Tax January 1. 2007 — June 30, 2009 To
begin August 11, 2009 Schoate Mining Co., LLC [Severance Tax lOctober 1, 2005 — June 30,
2009 |To begin August 11, 2009






 









 








Schedule 4.10(d)




Taxes


1. None.






42









 








Schedule 4.10(e)




Taxes


1. There are no tax allocation or tax sharing arrangements. The Phoenix Group Entities, other than
Schoate Mining Co., LLC, file consolidated income Tax Returns at the Federal and State levels.






43









 








Schedule 4.10(f)




Taxes


1. For the year ending December 31, 2008, PCI is filing a Form 3115 to change the overall method of
accounting of its newly-acquired subsidiary, C&R Coal Company, Inc., from cash basis accounting to
accrual basis accounting. The Form 3115 will include a 481(a) taxable income adjustment of $83,247
which will be reported in income over a four year period by C&R Coal Company, Inc, with any tax
liability for such reporting of income being a liability of the Sellers.






44









 








Schedule 4.10(g)




Taxes


1. None.






45









 








Schedule 4.14(b)




Contracts; Defaults


1. Pursuant to that certain Employment Agreement dated May 1, 2007, by and between Matt Haaga and
PCC, Mr. Haaga is subject to certain non-competition and non-solicitation covenants in favor of
PCC.



2. Pursuant to that certain Employment Agreement dated August 10, 2008, by and between Thomas
Waters and PCC, Mr. Waters is subject to certain non-competition and non-solicitation covenants in
favor of PCC.



3. Pursuant to that certain Employment Agreement dated October 1, 2008, by and between Danny Wooton
and PCC, Mr. Wooton is subject to certain non-competition and non-solicitation covenants in favor
of PCC.







46









 








Schedule 4.14(d)




Contracts; Defaults


1. See attached list of notices of violation and field safety issues. The Sellers acknowledge that
the Buyer and the Acquired Phoenix Entities are not assuming as AT Liabilities any liabilities for
abatement or fines or penalties as to violations occurring prior to the Closing, including those
violations listed on the attachments to this Schedule 4.14(d).



2. The Phoenix Group Entities receive notices of non-compliance in the Ordinary Course of Business
from customers under the AT Coal Sales Agreements regarding the quality and quantity of coal
provided by such Phoenix Entities under the AT Coal Sales Agreements. Attached is a list of the
Phoenix Group Entities’ shortfalls under the AT Coal Sales Agreements as of July 31, 2009. Except
as provided on such attachment, there are currently no outstanding issues relating to the AT Coal
Sales Agreements.



3. For portions of the calendar year 2009, and for all of calendar years 2007 and 2008, Covol Fuels
No. 2, LLC (“Covol”) was in violation of the volume and quantity terms of its AT Coal Purchase
Agreement with Charolais Coal Sales, LLC. Attached is a list of Covol’s shortfall under such AT
Coal Purchase Agreement. Except as provided on such attachment, there are currently no outstanding
issues relating to the AT Coal Purchase Agreement with Covol.







47









 












	Schedule 4.14(d) cont’d R&lWlnn.hc. 8496049 193338 6/24/2009 104(a)
6/24/2009 C Y 77.1304 1,026.00 Proposed 1,026.00 0 R&LWlnn, Inc. 8496050 193338 6/24/2009
104(a) 6/24/2009 C N 77.701 224 Proposed 224 0 R&LWlnn, Inc. 8493553 181557 3/3/2009
5/14/2009 104(a) 3/3/2009 C Y 77.1103(d) 745 Closed 745 745 R&l Winn, Inc. 8493554 181557
3/3/2009 S/14/2009 104(a) 3/3/2009 C Y 77.1109(e) 745 Closed 745 745 R&LWInn,lnc 849355S
181557 3/3/2009 5/14/2009 104(a) 3/3/2009 C H 77.1109(c)(1) 150 Closed ISO 150 R&L Winn,
Inc. 8493556 1815S7 3/3/2009 5/14/2009 104(a) 3/3/2009 C Y 77.404(a) 745| Closed 74S| 745
Schoate Mining Co., IIC 8496055 7/8/2009 104(a) 7/8/2009 C Y 77.1104 Not Assessed Yet Schoate
Mining Co., Lie 8496056 7/B/2009 104(a) 7/8/2009 C Y 77.1605(1) Not Assessed Yet Schoate Mining
Co., liC 8493691 185353 3/23/2009 6/17/2009 104(a) 3/23/2009 C H 48J9(a) 162 Closed 162
162 Schoate Mining Co., UX 8493560 3/16/2009 107(a) 3/16/2009 O N/A Non-Assessable Schoate
Mining Co., UC 8493681 1853S3 3/16/2009 6/17/2009 104(a) 3/16/2009 C Y 77.1710(g) 1,337.001
Closed I 137.001 137.00 Schoate Mining Co., ILC 8493682 185353 3/16/2009 6/17/2009
104(a) 3/16/2009 C Y 77.1104 1,795.00 Closed 1,795.00 1,795.00 Schoate Mining Co., LLC
8492402 182304 3/4/2009 5/21/2009 104(a) 3/4/2009 C N 77.404(a) 150 Closed 150 150 Schoate
Mining Co., UC 8492405 182304 3/4/2009 5/21/2009 104(a) 3/5/2009 C N 77410(c) 150 Closed 150
ISO Schoate Mining Co., UC 8492406 182304 3/4/2009 5/21/2009 104(a) 3/11/2009 C N 77.1104
425 Closed 425 425 Schoate Mining Co., UC 8492407 182304 3/4/2009 5/21/2009 104(a)
3/5/2009 C N 77.1605(d) ISO Closed ISO 150 Schoate Mining Co., LIC 8492408 182304 3/4/2009
5/21/2009 104(a) 3/5/2009 C N 77.1104 176 Closed 176 176 Schoate Mining Co., UC 8493557
182304 3/4/2009 5/21/2009 104(a) 3/4/2009 C If 77.404(a) 807 Closed 807 807 Schoate Mining
Co., UC 8493260 182304 2/19/2009 5/21/2009 104(a) 2/20/2009 C Y 77.400(a) 745 Closed 745 745
Schoate Mining Co., UC 8493541 182304 2/19/2009 5/21/2009 104(a) 2/20/2009 C Y 77.1104 1,657.00
Closed 1,657.00 1,657.00 Schoate Mining Co.. UC 8493542 182304 2/19/2009 5/21/2009 104(a)
2/20/2009 C Y 77.1104 1,657.00| Closed 1,657.00| 1,657 Phoenix Coal Procaaint, UC
8496043 6/16/2009 104(a) 6/16/2009 C Y 77400(a) Not Assessed Yet PtoCTl CoatPn)c nln ,ac 8496044
6/16/2009 104(a) 6/18/2009 C N 71.403(a) Not Assessed Yet Phoenh Coal ProcaMlng. LLC 8496045
6/16/2009 104(a) 6/29/2009 C N 77.1202 Not Assessed Yet Pho.nl. CmtProctsIng, LLC 8493131
184124 3/16/2009 6/5/2009 104(a) 3/16/2009 C Y 77.1104 150) Closed I ISOl 150 PtoxCaal
Processing, UX 8493133 184124 3/16/2009 6/5/2009 104(a) 3A6/2009 C N 77.404(a) 100 Closed 100
100 Phoenix Coal Procuring. Lie 8493683 184124 3/16/2009 6/5/2009 104(a) 3/16/2009 C Y
77.400(a) 224 Closed 224 224 Phoanbe Coal Protesting, LLC 8493684 184124 3/16/2009
6/5/2009 104(a) 3/16/2009 c Y 77.701 224 Closed 224 224 Crittendcn County Coal Inc.
8494587 193091 6/22/2009 104(a) 6/23/2009 C N 100 Proposed 100 0 Crtttendan County Coal,
Inc. 8494588 193091 6/22/2009 104(a) 6/23/2009 C N 4L12 100 Proposed 100 0 Crttanden
County Coat Inc. 3860411 190244 5/13/2009 104(a) 5/13/2009 C N 77.1110 100 Closed 100 100
Otttandtn County Coal, Inc. 6695240 181319 2/26/2009 5/14/2009 104(a) 2/27/2009 C N 77.1104 100
dosed 100 100 CrittMden County C
oal Inc. 8489952 178644 1/12/2009 104(a) 1/12/2009 C Y
62.160(b)(2) “ 2431 In Contest 243 0 Renfro Equipment hie. 8493743 6/11/2009
104(a) 6/15/2009 C N 77.506-1 Not Assessed Yet Renfro Equipment Inc. 8493740 6/10/2009 104(a)
6/15/2009 C Y 77.506-1 Not Assessed Yet Renfro Equipment Inc. 8493741 6/10/20O9 104(a) 6/15/2009 C
N 77.506-1 Not Assessed Yet Renfro Equipment Inc. 8493742 6/10/2009 104(a) 6/15/2009 C N 77.506-1
Not Assessed Yet Renfro Equipment Inc. 8496041 6/10/2009 104(a) 6/10/2009 C Y 77.205(e) Not
Assessed Yet Renfro Equipment he 8496042 6/10/2009 104(a) 6/15/2009 C Y 77.502 Not Assassed Yet
Renfro Equipment Inc. 8493717 6/8/2009 104(a) 6/8/2009 C N 47.41(a) Not Assessed Yet Renfro
Equipment Inc. 8493718 6/8/2009 104(a) 6/8/2009 C Y 77.502 Not Assessed Yet Ranfro Equipment Inc.
8493719 6/8/2009 104(a) 6/10/2009 C N 77.502 Not Assessed Yet Renfro Equipment Inc. 8493720
678/2009 104(a) 6/8/2009 C Y 77.202 Not Assessed Yet C6R Coal Inc. 8491689 185561
3/17/2003 6/19/2009 104(a) 3/18/2009 C N 77.1104 lPOl Closed I 100| 100 C&R Coal Inc.
8491690 185561 3/17/2009 6/19/2009 104(a) 3/18/2009 C N 77.1104 100 Closed 100 100 C&R
Coal Inc. 8491691 185561 3/17/2009 6/19/2009 104(a) 3/18/2009 C N 77.1104 100 Closed 100 100
C&R Coal Inc. 8491692 18SS61 3/17/2009 6/19/2009 104(a) 3/18/2009 C Y 77.404(a) 362 Closed 362
362 C&R Coal he 8491693 185561 3/17/2009 6/19/2009 104(a) 3/18/2009 C Y 77.1104 362|
Closed 362 362 Phoenix Coal Corporation 8496065 8/10/2009 104(a) 8/10/2009 C Y
77.404(a) Not Assessed Yet Phoenix Coal Corporation 8496046 6/22/2009 104(a) 6/22/2009 C Y
77.205(a) Not Assessed Yet Phoenix Coal Corporation 8496047 6/22/2009 104(a) 6/22/2009 C Y
77.400(a) Not Assessed Yet Phoenix Coal Corporation 8496048 6/22/2009 104(a) 6/23/2009 C Y 77.1104
Not Assessed Yet Ovuol»li Mlnint Company, U£ No Phoanto Coal Proowlng. LLC No
Phoanix Coil ProceMlnt, IXC No PlrenteCcalProoimng.LlC 6691290 119337 4/30/2007
7/15/2007 104(a) 5/4/2007 C N TTAlOjcT $100.00 1 1 $100.00 * No State (DNR)
Non-Compliance’s written to any Company in 2009.






 









 












	Notice of Violation (Non-Compliance) History Schedule 4.14(d) Company Permit
Non-Comp # Date of NOV Abated Standard Reg Inspector Comment Fine Black Diamond Resources,
Inc. 854-0423 13-0407 3/10/2005 10/5/2007 Contemporaneous Reclamation KAR 12:020 Reclaim all areas $
1,200.00 Crittenden County Coal, Inc. 828-0001 13-0101 1/25/2006 7/2/2009 Method of
Operation KAR 8*10 RobertYonts Obtain Corps permit/resolve the cease and desist order/Ensure
Company stays out of watershed Black Diamond Resources, Inc. 854-02*2 13-0789
6/5/2006 6/8/2006 Water Monitoring KAR 16:100 Water Quality $2,300.00 Crtttenden
County Coal, Inc. 828-0001 13-0102 8/21/2006 9/20/2006 Water dually KAR 16:070 Robert Yonts
maintain sediment control berms Crittenden County Coal, Inc. 828-0001 13-0102 8/21/2006
10/5/2006 Backfilling and Grading KAR16:190 RobertYonts backfill and grade all rills/gullies $
1,000.00 Black Diamond Resources, Inc. 854-0243 13-0563 4/9/2007 1/20/2009 Water
Monitoring KAR 16:020 Daniel Bzenga Permit revision needed, off permit disturbance
Charolais Mining Company, UjC 889-0136 13-0174 S/25/2007 6/2S/2007 Use of Explosives
KAR16.120 BruceSampson KscOT«nueblastlngcijerattonsonirKMment#3untUabUstlr«rernediatlonplan
has been submitted and approved $5,000.00 Crittenden County Coal, Inc. 854-5038
13-0121 8/13/2007 9/24/2009 Off Permit Disturbance KAR 7:040 GregLogsden Permit off permit
disturbance Crittenden County Coal, Inc. 828-0001 13-0181 9/26/2007 7/24/2008 Backfilling
and Grading KAR 16:190 RobertYonts stabifee all erosion Crittenden County Coal, Inc.
828-0001 13-0181 9/26/2007 7/24/2008 Topsoll KAR 16*50 RobertYonts failed to finish grade and
seed Pennyrile Coal Company, Inc. 854-5026 13-0575 12/6/2007 12/20/2007 effluent
limitations — KP0ES KAR 5:065 Pennyrile Coal Company, Inc. 8S4-5026 13-0575 12/6/2007
12/20/2007 Water Monitoring KAR 18:070 Water Quality $12,350.00 Pennyrile Coal
Company, inc. 854-5025 13-0603 3/25/2008 S/27/2008 Water Monitoring KAR 18:070 Water Quality $
2,900.00 Pennyrile Coal Company, Inc. 854-5026 13-0603 3/25/2008 5/27/2008 Effluent
limitations-KPDES KAR 5:065 Pennyrile Coal Company, Inc. 854-5026 13-0603 3/25/2008
5/27/2008 Method of Operations KAR 83)10 Comply with minor revision #10 S 800.00 C&R Coal
Inc. 889-0124 13-O60S 4/2/2008 5/2/2008 Access Roads KAR 16:220 Cover haul road with rock 5
1,100.00 C&R Coal inc. 889-0124 13-0605 4/2/2008 7/7/2008 Contemporaneous Reclamation KAR
16:020 Backfill or advance pit on increment #4 $1,500.00 C&R Coal Inc. 889-0126 13-0767
4/2/2008 S/2/2008 Access Roads KAR 16320 BruceSampson S 1,000.00 C&R Coal Inc. 889*126
13-0767 4/2/2008 10/6/2008 Contemporaneous Rec KAR 164)20 BruceSampson $800.00 C&R
Coal Inc. 889-0126 13-0767 4/2/2008 4/16/2008 Diversion Ditches BruceSampson C&R Coal Inc.
889*126 13-0767 4/2/2008 4/16/2008 Sediment Control KAR 16:020 BruceSampson dean out basin #5
C&R Coal Inc. 889-0151 13-0034 8/19/2009 pending Effluent Limitations KAR 5:065 Josh Hankins
Sub standard water left permit-Basin 1 C&R Coal Inc. 889-01S1 13-0034 8/19/2009 pending
Water Quality KAR 16:080 Josh Hankins Sub standard water left permit-Basin 1 C&R Coal Inc.
889-0152 13-0035 8/19/2009 pending fctf luent limitations KAR 5:065 Josh Hankins Sub standard water
left permit-Basin 2 C&R Coal Inc. 88*0152 13-0035 8/19/2009 pending Water Quality KAR
16.-080 Josh Hankins Sub standard water left permit-Basin 2 C&R Coal Inc. 889-0152 13-0035
8/19/2009 pending Effluent Limitations KAR 5:065 Josh Hankins Sub standard water left permit-Basin
3 C&R Coal Inc. 889*152 13-0035 8/19/2009 pending Water Quality KAR 16:080 Josh Hankins
Sub standard water left permit-Basin 3 Schoate Mining Co., LLC 889-0134 13-0258 6/25/2008
7/24/2008 Sediment Control KAR 16*90 Robert Lacey Fix emergency spillway as designed and replace
with permanent spillway pipe Charolais Mining Company, LLC 889-0136 13-0007 9/24/2008
10/25/2
008 Impoundments KAR 16:100 BruceSampson Submit annual certifications Pennyrile
Coal Company, Inc. 854-5026 13*003 12/17/2008 1/16/2009 Water Monitoring KAR 18:110 Daniel Eteenga
Exceedance letter for 1st QJrDMR needed Black Diamond Resources, Inc. 854*243 13*011
12/18/2008 1/20/2009 Water Monitoring KAR 16:110 MikeVanover Exceedance letter for 2nd QJrDMR
needed Renfro Equipment Inc. 889*116 13*014 2/18/2009 Non-Cor. Use of Explosives KAR
16:120 MikeVanover Scale dtetanceviolated-vTolatlon Vacated 4/27/09 R&LWInn.lnc. 889*135
13*015 3/5/2009 9/14/2008 Method of Operation KAR 8:010 MikeVanover not all surface drainage passed
through sedimentation pond R&LWInn,lnc. 889*135 13*015 3/S/20OS 9/14/2009 WaterQuality
KAR16*70 MikeVanover not all surface drainage passed through sedimentation pond Phoenix
Coal Processing, LLC 854*253 13*020 3/11/2009 extended Backfilling and Grading KAR 16.-190
GregLogsdon Obtain perm* revision, re-increment Peyton pit Phoenix Coal Processing, LLC
854*253 13*020 3/11/2009 extended Contemporaneous Rec KAR 16:020 SregLogsdon back fill pit
R&LWInn,lnc 889*135 13*016 3/13/2009 9/14/2009 Sediment Basin KAR16.-090 MikeVanover approval
for onsita design changesto sediment basin Charolais Mining Company, LLC 889*136 13*012
3/18/2009 3/19/2O0S Effluent Limitations KAR 5:065 BruceSampson LowPH Schoate Mining Co.,
LLC 889*134 13*028 5/4/2009 Non-Cor. Use of Explosives KAR 16:120 Josh Hankins Ground vibration
exceeded-Agreed Order $1^00.00 Schoate Mining Co., LLC 889*134 13-0029 5/12/2009
flflilliiljjif Contemporaneous Rec KAR 16:020 Josh Hankins Supplemental assurance needed-Permit
Pending Schoate Mining Co., LLC 889*134 13*036 8/21/2009 pending Use of Explosives KAR
16:120 Josh Hankins CWiens Complaint-pre-blast survey not offered Charolais Mining
Company, LLC 889*136 13-0025 6/11/2009 not active Backfilling and Srading KAR 16:190 BruceSampson
Repair gullies Charolais Mining Company, LLC 889*136 13-002S 6/11/2009 not active
Diversion Ditches KAR 16*80 BruceSampson Repair diversion ditch Charolais Mining Company,
ac 889*136 13-002S 6/1L/20O9 6/12/2009 Water Quality KAR 16*70 BruceSampson WaterQuality
Phoenix Coal Corporation 889*141 13-0023 6/25/2009 7/24/2009 Water Quality KAR16*70 MikeVanover
Diversion Ditch not complete $1,200.00 Schoate Mining Co., LLC 889*134 13-02S8
6/25/2009 8/28/2008 Sedimentation Ponds KAR 16*90 Glenn Lacy Schoate Mining Co., LLC
889*134 13-0033 6/29/2009 Mon-Cor. Use of Explosives KAR 16:120 Josh Hankins Ground Vibration
-Reports not kept properly-Accessed $1600 $1,600.00 R&LWInn.lnc. 889*135 13*024 7/9/2009
7/10/2009 Water CtaaRty KAR 16*70 MikeVanover allowed seep -Accessed $2600 R&LWinn,lnc.
889*135 13*024 7/9/2009 7/10/2009 General Hydrologic Requirements KAR 16:060 MikeVanover allowed
seep R&LWinn,lnc. 889*135 13*024 7/9/2009 7/10/2009 Effluent limitations KAR 5*65
MikeVanover allowed seep S 2,600.00 R&LWmn,lnc. 889*135 13*027 7/9/2009 g|^^^^
Contemporaneous Rec KAR 16*20 MikeVanover began mining before posting assur. Bond-Permit
Pending R&LWinn,lnc 889*135 13*027 7/9/2009 8/10/2009 WaterQuality KAR 16*70 MikeVanover
failed to pass all surface drainage Renfro Equipment Inc. 889-0116 13*582 7/9/2003 j,
exte’noed||| Method of Operation KAR 8*10 MikeVanover Stream protection violated Phoenix
Coal Corporation 889*141 13*584 7/14/2009 gf^p^l^gCorroimporaneousRec KAR 16*20 MikeVanover
Supplemental assurance needed-Permit Pending Charolais Mining Company, LLC 889*136 13*777
7/14/2009 8/14/2009 Signs and Markers KAR 16*30 BruceSampson a partof permit perimeter not
marked Charolais Mining Company, LLC 889*136 13*777 7/14/2009 not active Off Permit
Disturbance KAR 7:040 BruceSampson permitting action to pick up approx 3.1 acres Phoenix
Coal Corporation 889*141 13*583 7/24/2009 Non-Cor. Use Of Explosives KAR 16:120 MikeVanover Ground
vibration exceeded






 









 












	Oxford Mining Company, IXC, Phoenix Coal Inc., Phoenix Coal Corporation, and Phoenix Newco,
L.LC Acquisition Agreement Schedule Schedule 4.14(d) Customer and
Purchased Coal Shortfalls Item 2: Jan-July 2009 Shortfall as of Sales
Contract Shortfall 2009 Obligation Obligation 2009 Delivered 7/31/2009 Big Rivers
R&LWmn, Inc. #465/522 180,000 105,000 64,780 40,220 Charolais Coal Sales #519 300,000
175,000 94,811 80,189 Charolais Coal Sales #520 200,000 116,667 172,472 (55,805)
Louisville Gas & Electric 1,200,000 700,000 85,638 614,362 Kentucky Utilities 290,509
169,464 41,042 128,422 Duke — Kentucky 100,000 58,333 52,580 5,753 Duke -Ohio
(Mar- Dec 2009) 169,300 84,650 86,811 (2,161) Item 3: Purchased Coal Contract Jan
- July 2009 Shortfall as of Shortfall 2009 Obligation Obligation 2009 Delivered 7/31/2009
Covol (per amendment) 515,000 300,417 171,363 129,054






 











 





Schedule 4.15



Environmental, Health and Safety Matters


1. See Item 1 on Schedule 4.14(d), which is incorporated by reference in this Schedule 4.15.







48









 








Schedule 4.17(a)



List of APE Employees


1. See attached list of APE Employees.






49









 












	Oxford Mining Company, LLC, Phosnix Coal Inc., Phoenix Coal Corporation, and Phoenix Newco, LtC
Acquisition Agreement Schedule Schedule 4.17 (a) APE Employee List Emp# last Name First Name Job
Title/Position Employer Current Work Location Pay Rate Annual/Hrly Hire Date Prod Bonus Vacation
Date of Signed Employment Agreement 0000247 Abbott Danny L Truck Schoate Briar Hill 18.00 1/15/2007
Yes 10 Days 0000131 Adams Keith L Parts Runner Charolals Cleaton l___18.00 1/2/2007 Yes 10
Days 0000212 Alexander Johnnie R Foreman C&R Jessup 65,000.00 1/1/2007 Yes 10 Days 0000013 Allen
James R. Service Schoate Briar Hill 19.00 12/29/2003 Yes 10 Days 0000332 Allen Paul W. Dozer
Schoate Briar Hill 19.00 6/16/2008 Yes 10 Days 0000082 Arnold Helen B. Mine Clerk Schoate Briar
Hill 10.00 11/25/2002 Yes 10 Days 0000083 Arnold GaryL Dozer Winn KO 19.00 10/9/2006 Yes 10 Days
0000303 Arnold Anthony D. Truck Winn Winn North 18,50 10/8/2007 Yes 10 Days 0000237 Baize Jordan S
Lab Piiuiiiiix Processing Island 18.00 1/1/2007 Yes 10 Days 0000263 Baize Danny R. Drill Winn K0
19.00 4/2/2007 Yes 10 Days 0000014 Baize, Jr. Claude Truck Schoate Briar Hill 18.50 3/27/2003 Yes
10 Days 0000366 Baker Justin M. Service Schoate Winn North 19.00 7/30/2008 Yes 10 Days 0000359
Baker Clint W. Service Renfro Jessup 19.00 7/21/2008 Yes 10 Days 0000396 Barnes ScottyL Service
Schoate Briar Hill 19.00 2/16/2009 Yes 10 Days 0000248 Bartlett Christophers. Mechanic Helper
Schoate Briar Kill 19.00 1/16/2007 Yes 10 Days 0000133 Bartlett Gregory J. Welder Charolals Cleaton
20.50 1/1/2007 Yes 10 Days 0000338 Beck MarkD. Grader Schoate Briar Hill 19.00 6/23/2008 Yes 10
Days 0000017 Beliles Robert E. Dozer Schoate Briar Hill 19.00 9/4/2001 Yes 10 Days 0000016 Belilies
David G. Shovel Schoate Briar Hill 19.00 7/21/2002 Yes 10 Days 0000002 Blalock Christopher
Maintenance Coordinator Charolals Cleaton 62,000.00 10/17/2006 Yes 10 Days 0000164 Boyd Hershel T
Service Schoate Radio Hill 20.00 1/1/2007 Yes 10 Days 0000019 Branson David A. Parts Runner Schoate
Briar Hill 18.50 4/20/2004 Yes 10 Days 0000294 Broaddus Jerry L Truck C&R KO 19.00 7/9/2007 Yes 10
Days 0000390 Brockman David W. Surveyor Schoate Cleaton 50,000.00 9/22/2008 10 Days 0000192 Brooks
ScottT Deckhand Phoenix Processing Island 19.50 1/1/2007 Yes 10 Days 0000214 Brown Gilbert I Drill
Winn Radio Hill 19.00 1/1/2007 Yes 10 Days 0000264 Brown Danny W. Truck C&R KO 18.00 4/2/2007 Yes
10 Days 0000213 Brown Donald Dozer Renfro Jessup 20.00 1/1/2007 Yes 10 Days 0000304 Bruce Michael
J. Dozer C&R KO 19.00 10/8/2007 Yes 10 Days 0000097 Burbage Tommy Service C&R K0 19.00 9/11/2006
Yes 10 Days 0000328 Burden Kevin R. Dozer Schoate Jessup 19.00 5/27/2008 Yes 10 Days 0000238
Burgett Charles E Lab Phoenix Processing Island 18.50 1/1/2007 Yes 10 Days 0000215 Buslck Jesse C
Dozer Schoate Radio Hill 19.00 1/1/2007 Yes 10 Days 0000137 Cain Jerry D. Electrician Phoenix
Processing Island 22.50 1/12/2007 Yes 10 Days 0000085 Cansler David Trackhoe Winn Winn North 20.00
1/8/2004 Yes 10 Days 0000334 Cardwell Jr. Glendon R. Drill Schoate Briar Hill 19.00 6/16/2008 Yes
10 Days 0000098 Carter James Shovel Schoate Briar Hill 19.00 9/11/2006 Yes 10 Days 0000422 Carter
RyanS. Truck Winn Winn North 17.00 6/8/2009 Yes 10 Days 0000202 Cartwrlght MlkelJ. Loader Winn Winn
North 19.50 5/4/2009 Yes 10 Days






 









 












	APE Employee Ust Emp# Last Name First Name Job Title/Position Employer Current Work Location Pay
Rate Annual/Hrly Hire Date Prod Bonus Vacation Date of Signed Employment Agreement 0000436 Carver
Richard P. Truck Renfro Jessup 18.00 7/28/2009 Yes 10 Days 0000003 Cates Christy Office Manager
Phoenbc Coal HQ 14.50 7/17/2006 10 Days 0000023 Clark Wendell R. Dozer Schoate Jessup 19.00
1/31/2006 Yes 10 Days 0000099 Clark Billy Don Drill Charolals Cleaton 20.00 1/15/2005 Yes 10 Days
0000024 Cobb ieffery D. Truck Schoate Briar Hill 18.00 11/8/2004 Yes 10 Days 0000302 Cobb Michael L
Truck Schoate KO 18.00 10/8/2007 Yes 10 Days 0000374 Cobb Martin R. Truck Renfro Jessup 18.00
8/1/2008 Yes 10 Days 0000203 Colwell Jimmie Loader Phoenix Processing Island 19.00 1/1/2007 Yes 10
Days 0000405 Coombs James A. AP Clerk Phoenix Coal HQ 14.25 4/27/2009 10 Days 0000286 Copeland
Arlesta L Mechanic Renfro Jessup 21.00 6/18/2007 Yes 10 Days 0000255 Copple Bobby T. Grader Schoate
Radio Hill 19.00 2/28/2007 Yes 10 Days 0000329 Cor urn Timothy W. Dozer Winn Radio Hill 19.00
5/27/2008 Yes 10 Days 0000172 Covlngton Marvin D Shovel Schoate Radio Hill 19.50 1/1/2007 Yes 10
Days 0000004 Coyle Barry Maintenance Director Phoenix Coal Cleaton 80,000.00 8/3/2006 15 Days
0000437 Crick Chad E. Truck Winn KO 18.00 8/3/2009 Yes 10 Days 0000373 Crick Lyndell R. General
Manager Renfro Jessup 75,000.00 8/1/2008 Yes 10 Days 0000295 Culbertson Alan W. General Manager-
Quaility & Logistics Phoenix Coal Cleaton 105,000.00 7/16/2007 15 Days 0000420 Culbertsort Alan B.
Pressure Washer Schoate Briar Hill 15.00 5/26/2009 Yes 10 Days 0000139 Cutlen Jimmie P. Welding
Foreman Charolais Cleaton 65,000.00 1/1/2007 Yes 10 Days 0000101 Cunningham Jimmy Maintenance
Supervisor C&R KO 65,000.00 1/15/2005 Yes 10 Days 0000399 Cuppett Robert R. Drill Schoate Jessup
19.00 2/23/2009 Yes 10 Days 0000258 Dame Calvin N. Foreman Phoenix Processing Schoate Prep Plant
65,000.00 3/5/2007 Yes 10 Days 0000086 Darnell Barry D. Mechanic Winn Winn North 21.50 9/18/2006
Yes 10 Days 0000026 Daugherty Jason B. Service Schoate Briar Hill 19.00 6/1/2005 Yes 10 Days
0000027 Daugherty JayC. Foreman Schoate Briar Hill 70,000.00 3/1/1999 Yes 10 Days 0000204 Daugherty
AlexR Loader Phoenix Processing Island 19.50 1/1/2007 Yes 10 Days 0000210 Daugherty Darlene F
Scalehouse Phoenix Processing Island 16.00 1/1/2007 Yes 10 Days 0000219 Daugherty Tommy J Mechanic
Phoenix Processing island 21.00 1/1/2007 Yes 10 Days 0000140 Daugherty Marlin J. Maintenance
Supervisor Charolais Cleaton 65,000.00 1/1/2007 Yes 10 Days 0000430 Daugherty Jr. Tommy J. Truck
Winn Winn North 35.00 6/8/2009 Yes 10 Days 0000292 Davis Mark A. AR Phoenix Coal HQ 51,000.00
7/5/2007 10 Days 0000438 Delg John C. Mechanic Schoate Briar Hill 21.00 8/4/2009 Yes 10 Days
0000028 Dockery Stanford W. Shovel Schoate Briar Hill 19.00 12/16/2002 Yes 10 Days 0000279 Doss
Billy J. Welder Schoate Schoate Prep Plant 20.00 4/30/2007 Yes 10 Days 0000362 Dunlap Duane R.
Mechanic Schoate Radio Hill 21.00 7/23/2008 Yes 10 Days 0000343 Dunn Gaylynn Dozer C&R KO 19.50
10/26/2006 Yes 10 Days 0000410 Dunning Samuel L Dozer Winn KO 19.00 5/4/2009 Yes 10 Days 0000118
Durham Randy D. General Manager Phoenix Processing Schoate Prep Plant 70,000.00 6/10/2005 Yes 10
Days 0000029 Edens Michael S. Engineer Phoenix Coal HQ 75,000.00 3/15/2002 10 Days 0000344 Edwards
James Loader C8!R Winn North 19.00 5/20/2002 Yes 10 Days 0000308 Elliott Michael A. Controller
Phoenix Coal HQ 165,000.00 10/29/2007 15 Days 0000300 Fain Melissa A. AP Clerk Phoenix Coal HQ
13.50 8/27/2007 10 Days






 









 












	APE Employee List Emp# last Name First Name Job Title/Position Employer Current Work Location Pay
Rate Annual/Hrly Hire Date Prod Bonus Vacation Date of Signed Employment Agreement 0OOO33S Faughn
£hadA. Truck Schoate Radio Hill 18.00 6/16/2008 Yes 10 Days 0000031 Fisher Donald R. Dozer Schoate
Briar Hill 19.00 11/7/2001 Yes 10 Days 0000032 Ford Brandon R, Mechanic Schoate Briar Hill 22.00
3/25/1999 Yes 10 Days 0000033 Ford David R. Loader Phoenix Processing Schoate Prep Plant 20.00
7/26/1999 Yes 10 Days 0000269 France Darren D. Mechanic Schoate Radio Hill 21.00 4/16/2007 Yes 10
Days 0000321 Franklin James T. Foreman Winn Radio Hill 65,000.00 3/24/2008 Yes 10 Days 0000143
Fuller Adrian C. Mechanic Charolais Cleaton 20.00 1/1/2007 Yes 10 Days 0000392 Gardner Benjamin J.
Truck Schoate Winn North 18.00 1/19/2009 Yes 10 Days 0000428 Garner Christopher T. Truck Winn Winn
North 15.00 6/8/2009 Yes 10 Days 0000346 Garris William R. Foreman C&R KO 70,000.00 12/12/2001 Yes
10 Days 0000393 Glffln Alan R. Truck Schoate Briar Hill 18.00 1/19/2009 Yes 10 Days 0000173 Glffln
Raymond R Dozer Schoate Radio Hill 19.00 1/1/2007 Yes 10 Days 0000222 Giffin Charles W General
Manager Schoate Briar Hill 80,000.00 1/1/2007 Yes 10 Days 0000223 Glffln TroyW Grader Renfro Jessup
19.00 1/1/2007 Yes 10 Days 0000144 Glora Christopher H. Mechanic Charolais Cleaton 20.00 1/1/2007
Yes 10 Days 000026S Goodaker Donald R Dozer Renfro Jessup 19.00 4/2/2007 Yes 10 Days 0000034 Groves
Johnny R. Truck Schoate Briar Hill 18,00 10/19/2004 Yes 10 Days 0000347 Groves JeffJ. Mechanic C&R
KO 21.50 2/8/2002 Yes 10 Days 0000388 Groves Scottie E. Service Renfro Jessup 19.00 9/12/2008 Yes
10 Days 0000280 Haaga Mathew A. COO Phoenix Coal HQ 250,000.00 5/1/2007 20 Days 12/5/2008 0000103
Haley tarry Dozer C&R KO 20.00 9/11/2006 Yes 10 Days 0000401 Hall Larry J. Mechanic C&R KO 2100
3/2/2009 Yes 10 Days 0000311 Hamilton Brian K Truck C&R KO 18.50 11/5/2007 Yes 10 Days 0000174
Hancock Ernie R Truck Schoate Radio Hill 18.00 1/1/2007 Yes 10 Days 0000441 Haney Terry N. Truck
Winn KO 18.00 8/10/2009 Yes 10 Days 0000035 Hardesty Kenneth E. Dozer Schoate Briar Hill 19.00
4/30/2001 Yes 10 Days 0000389 Harklns Chad S. Parts Runner Charolais Cleaton 17.00 9/12/2008 Yes 10
Days 0000087 Harper Scott Pumper Winn Briar Hill 19.50 1/13/2003 Yes 10 Days 0000104 Hatfleld
Samuel R. Loader C&R KO 19.00 9/11/2006 Yes 10 Days 0000145 Hawkins David L Mechanic Charolais
Cleaton 20.00 1/1/2007 Yes 10 Days 0000386 Hayden Jeffrey J. SVP Engineering Phoenix Coal HQ
185,000.00 9/1/2008 20 Days 0000356 Hicklin Edward G. Loader Schoate Jessup 19.50 7/7/2008 Yes 10
Days 0000283 Hicks Sally W. AP Manager Phoenix Coal HO. 15.00 5/14/2007 10 Days 0000146 Hicks, Jr.
Jerry R. Welder Charolais Cleaton 20.00 1/1/2007 Yes 10 Days 0000355 Holland Jeffrey R. Drill
Schoate Radio Hill 19.00 7/7/2008 Yes 10 Days 0000397 Holt William G. Loader C&R KO 18.00 2/16/2009
Yes 10 Days 0000240 Hopper DanaL Asst. Controller Phoenix Coal HQ 62,000.00 1/1/2007 10 Days
0000417 Hopper Thomas E. Mechanic Winn Winn North 21.00 5/12/2009 Yes 10 Days 0000429 Hosklns Jason
T. Truck Schoate KO 18.00 6/8/2009 Yes 10 Days 0000252 Howard Pamela D. Budgeting/Reporting Phoenix
Coal HQ 75,000.00 2/5/2007 15 Days 0000287 Huddleston Loman L Prep Plant Operator Phoenix
Processing Schoate Prep Plant 19.00 6/21/2007 Yes 10 Days 0000037 Hudson Larry R. Mechanic Schoate
Briar Hill 19.00 5/15/2006 Yes 10 Days






 









 












	APE Employee List Emp# Last Name First Name Job Title/Position Employer Current Work Location Pay
Rate Annua(/Hrly Hire Date Prod Bonus Vacation Date of Signed Employment Agreement 0000312 Hughlett
John D. Truck Schoate Briar Hill 18.00 11/5/2007 Yes 10 Days 0000371 Igleheart Murtry M. Mechanic
Renfro Jessup 21.00 8/1/2008 Yes 10 Days 0000039 Inglis Jonathan E. Mechanic Schoate Briar Hill
21.00 9/6/2006 Yes 10 Days 0000040 tnglis Sherman G. Grader Schoate Briar Hill 19.00 2/21/2005 Yes
10 Days 0000041 Inglis Travis W. Truck Schoate Briar Hill 18.00 11/3/2004 Yes 10 Days 0000256
Inglis Jordan W. Dozer Winn Briar Hill 19.00 2/28/2007 Yes 10 Days 0000257 Jackson Charles A. Truck
Schoate Radio Hill 18.50 2/28/2007 Yes 10 Days 0000435 Jackson Ronny F. Service Winn Winn North
19.00 7/28/2009 Yes 10 Days 0000415 Johnson Tony W. Service Helper Schoate Briar Hill 19.00
5/11/2009 Yes 10 Days 0000259 Johnson Brian S. Service C&R Winn North ,___19.00 3/5/2007 Yes 10 Days
0000370 Johnson Jeremy D. Truck C&R Winn North 18.00 8/4/2008 Yes 10 Days 0000385 Johnson Michael
Truck Renfro Island 19.00 8/25/2008 Yes 10 Days 0000226 Johnston Jimmy H Mechanic Charolais Cleaton
21.00 1/1/2007 ,Yes 10 Days 0000105 Jones James W. Trackhoe Schoate KO 19.00 9/11/2006 Yes 10 Days
0000120 Jones Jewell W. Loader Schoate KO 19.50 8/29/2005 Yes 10 Days 0000260 Jones Jeffery W.
Truck Schoate Briar Hill 18.00 3/12/2007 Yes 10 Days 0000394 Jones Michael L. Truck Schoate Winn
North 18.00 1/19/2009 Yes 10 Days 0000270 Jones Jeff E. Truck Winn KO 18.00 4/16/2007 Yes 10 Days
0000360 Jones Jr. William D. Truck Schoate Briar Hill 18.00 7/21/2008 Yes 10 Days 0000349 Jordan
Matthew Truck C&R Winn North 18.00 2/14/2005 Yes 10 Days 0000042 Kldd Dallas Loader Schoate Briar
Hill 19.00 4/19/1999 Yes 10 Days 0000043 Kinkade James T. Truck Schoate Jessup 18.00 10/27/2005 Yes
10 Days 0000350 Kirtley Leslie Truck C&R Winn North 18.00 4/25/2005 Yes 10 Days 0000271 Larklns
Marty Truck Schoate Radio Hill 18.00 4/16/2007 Yes 10 Days 0000351 Lear Steven E. Loader C&R KO
19.00 5/6/2002 Yes 10 Days 0000155 LeGrand James W Welder Schoate Briar Hill 21.00 1/1/2007 Yes 10
Days 0000044 Lindsey Charles R. Service Schoate Briar Hill 19.00 9/12/2002 Yes 10 Days 0000425
tinville Darren D. Mechanic Helper Schoate Radio Hill 21.00 6/8/2009 Yes 10 Days 0000431 LWIefleld
Jack 0. Backhoe Winn KO 17.00 6/15/2009 Yes 10 Days 0000231 Locke Walter L Drill Winn Winn North
15.00 1/1/2007 Yes 10 Days 0000152 Lynn Linda D Purchasing Charolais Cleaton 18.00 1/1/2007 Yes 10
Days 0000121 Marks Russell Loader Renfro Jessup 19.50 10/8/2005 Yes 10 Days 0000244 Martin James L.
Boat Pilot Phoenix Processing Island 65,500.00 1/1/2007 Yes 10 Days 0000246 Mason Jewell B. Service
Winn K0 19.50 1/2/2007 Yes 10 Days 0000241 May Melissa L. PR Manager Phoenix Coal HQ 15.00 1/1/2007
10 Days 0000106 Maynard Thomas D. Mechanic C&R KO 22.00 9/11/2006 Yes 10 Days 0000361 McDowell
Brian S. Dozer Schoate Radio Hill 19.00 7/21/2008 Yes 10 Days 0000404 McGowan Jr. Billy G. Mechanic
Renfro Jessup 21.00 4/20/2009 Yes 10 Days 0000123 McPherson Anthony D. Prep Plant Operator Phoenix
Processing Schoate Prep Plant 19.50 8/6/2005 Yes 10 Days 0000047 McRoy Terry R. Service Winn Winn
North 20.00 7/10/2009 Yes 10 Days 0000426 Messamore Jason S. Mechanic Renfro Jessup 21.00 6/8/2009
Yes 10 Days 0000416 Miller Craig S. Truck Schoate Radio Hill 18.00 5/11/2009 Yes 10 Days






 









 












	APE Employee List Emp« Last Name First Name Job Title/Position Employer Current Work Location Pay
Rate Annual/Hrly Hire Date Prod Bonus Vacation Date of Signed Employment Agreement 0000229 Mitchell
Marvin E Foreman Winn KO 70,000.00 1/1/2007 Yes 10 Days 0000048 Morris Donald W. Backhoe Schoate
Briar Hill 19.50 1/19/2004 Yes 10 Days 0000150 Nelson Johnny B Mechanic Charolais Cleaton 21.00
1/1/2007 Yes 10 Days 0000177 Newberry Andrew L Loader Schoate Wlnn North 19.00 1/1/2O07 Yes 10 Days
0000315 Nixon Mark A. Mechanic Wlnn Winn North 21.50 11/5/2007 Yes 10 Days 0000412 Noel Robert A.
Loader Winn KO 19.00 5/4/2009 Yes 10 Days 0000050 Oakley Carlis L. Trackhoe Schoate Briar Hill
19.00 6/5/2006 Yes 10 Days 0000006 Parks Richard E Reg. Compliance Manager Phoenix Coal HQ
60,000.00 3/6/2006 10 Days 0000052 Patton BeauS. Prep Plant Operator Phoenix Processing Schoate
Prep Plant 19.00 11/20/2006 Yes 10 Days 0000125 Patton Bruce Foreman Phoenix Processing Schoate
Prep Plant 65,000.00 7/15/2005 Yes 10 Days 0000383 Payne Randall C. Dozer 5choate Briar Hill 19.50
9/2/2008 Yes 10 Days 0000306 Payton Adam W. Dozer Winn Winn North 19.50 10/8/2007 Yes 10 Days
0000179 Pennington Archie Dozer Schoate Radio Hill 19.00 1/1/2007 Yes 10 Days 0000278 Perry Hudson
W. Backhoe Schoate Briar Hill . 19.50 4/30/2007 Yes 10 Days 0000398 Pharrls Kenneth D. Loader
Schoate Briar Hill 19.00 2/16/2009 Yes 10 Days 0000364 Phelps Jeffrey H. Dozer Schoate Briar Hill
19.00 7/22/2008 Yes 10 Days 0000427 Phelps Jeremy A. Truck Schoate Briar Hill 15.00 6/8/2009 Yes 10
Days 0000007 Phillips GaryR Director of Human Resources Phoenix Coal HQ 95,000.00 10/24/2005 15
Days 0000209 Pierce Robert W General Manager Phoenix Processing Island 65,000.00 1/1/2007 Yes 10
Days 0000369 Plunkett Franklin D. Mechanic Schoate Radio Hill 21.00 8/4/2008 Yes 10 Days 0000301
Pool Jesse L Service Schoate Radio Hill 19.00 9/24/2007 Yes 10 Days 0000274 Porter Jason W. Truck
Schoate Radio Hill 20.00 4/23/2007 Yes 10 Days 0000432 Powell Robert E. Prep Plant Operator Phoenix
Processing Schoate Prep Plant 17.00 6/15/2009 Yes 10 Days 0000418 Rabe Mitchell W. Service Winn
Winn North 21.00 5/11/2009 Yes 10 Days 0000057 Rager Ulburn L Dozer Schoate Briar Hill 19.50
3/1/1999 Yes 10 Days 0000352 Rager Tommy Welder C&R KO 20.00 11/15/2006 Yes 10 Days 0000341
Reynolds Randall L Truck Schoate Jessup 19.00 6/23/2008 Yes 10 Days 0000421 Reynolds William R.
Dozer Schoate Briar Hill 19.00 6/8/2009 Yes 10 Days 0000060 Rhye Anthony R. Loader Schoate Briar
Hill 19.00 1/3/2005 Yes 10 Days 0000233 Rickard Christopher L General Manager Winn KO 75,000.00
1/1/2007 Yes 10 Days 0000402 Robinson Jonathan S. Truck Schoate Briar Hill 17.00 3/30/2009 Yes 10
Days 0000151 Robinson Gerald B. Mechanic Charolais Cleaton 21.50 1/1/2007 Yes 10 Days 0000379
Rogers Jonathan L Foreman C&R KO 52,000.00 2/7/2001 10 Days 0000367 Ruddell William A. Truck
C8>R Jessup 18.50 7/30/2008 Yes 10 Days 0000184 Rushing, Jr. Charles W General Manager Schoate
Winn North 80,000.00 1/1/2007 Yes 10 Days 0000062 Scott Steven l___Dozer Schoate Briar Hill 19.50
6/19/2006 Yes 10 Days 0000063 Shain Ertest A. Mechanic Schoate Briar Hill 21.00 2/21/2005 Yes 10
Days 0000064 Shetton Shawn D. Truck Schoate Jessup 18.00 9/18/2006 Yes 10 Days 0000363 Shelton
Archie W. Mechanic Schoate Briar Hill 21.00 7/23/2008 Yes 10 Days 0000089 Shepherd William Truck
Wlnn KO 18.00 3/9/2006 Yes 10 Days 0000353 Shields MarkC. Mechanic C&R KO 21.00 8/1/2007 Yes 10
Days 0000208 Simms TroyL Crusher Operator Schoate Briar Hill 19.00 1/1/2007 Yes 10 Days






 









 












	APE Employee List Emp# last Name First Name Job Title/Position Employer Current Work Location Pay
Rate Annual/Hrly Hire Date Prod Bonus Vacation Date of Signed Employment Agreement 0000442 Smith
JanetL Account Staff Asst Phoenix Coal HQ 18,00 8/10/2009 10 Days 0000254 Smith Wendell R. Foreman
Schoate Winn North 75,000.00 2/19/2007 Yes 10 Days 0000090 Smith Derek Dozer Winn Winn North 19.50
3/10/2004 Yes 10 Days 0000108 Smith Danny R. Loader Winn KO 20.00 4/6/2005 Yes 10 Days 0000091
Sparks Michael D. Truck Wlnn KO 18,00 8/6/2005 Yes 10 Days 0000439 Spurlin Jeffrey T. Dozer Winn KO
19.00 8/3/2009 Yes 10 Days 0000067 Stacer Billy Service Schoate Briar Hill 19.00 1/11/1999 Yes JO
Days 0000068 Stalllns Ronald W. Loader C&R Winn North 19.00 4/18/2005 Yes 10 Days 0000293 Stanley
RoyD. Loader Schoate Briar Hill 19.50 7/9/2007 Yes 10 Days 0000230 Stanley GlenG Backhoe Schoate
Radio Htll 19.00 1/1/2007 Yes 10 Days 0000092 Stogner Bill Drill Winn KO 19.50 1/8/2004 Yes 10 Days
0000273 Stone Timothy W. Truck Schoate Radio Hill 18.00 4/23/2007 Yes 10 Days 0000093 Stone Ricky
D. Service Winn KO 19.00 10/10/2006 Yes 10 Days 0000413 Storms Joshua D. Truck Winn Winn North
18.00 5/4/2009 Yes 10 Days 0000407 Storms David C. Dozer Renfro Winn North 19.00 4/27/2009 Yes 10
Days 0000433 Strader Adam D. Truck Renfro Jessup 17.00 6/15/2009 Yes 10 Days 0000009 Taylor Harold
A Director of Safety Phoenix Coal Cleaton 65,000.00 8/22/2006 15 Days 0000440 Taylor Jason L.
Mechanic Schoate Radio Hill 21.00 8/3/2009 Yes 10 Days 0000408 Terry Ricky A. Loader Schoate Radio
Hill 19.00 4/27/2009 Yes 10 Days 0000317 Tlngtey Morris A. Dozer Charolais KO 22.00 11/5/2007 Yes
10 Days 0000285 Tinsley Eddie O. Drill Charolais Cleaton 20.00 6/13/2007 Yes 10 Days 0000250
Townsell Larry G. Dozer Renfro Jessup 20.00 1/29/2007 Yes 10 Days 0000070 Tucker Terry W. Truck
Schoate Briar Hill 18.50 9/20/2002 Yes 10 Days 0000403 Utley Scottie R. Pumper Schoate Radio Hill
19.00 3/30/2009 Yes 10 Days 0000414 Vance Stanley R, Truck Wlnn Winn North 18.00 5/4/2009 Yes 10
Days 0000071 Vender Darrel B. Mechanic Helper Schoate Briar Hill 19.00 8/23/2004 Yes 10 Days
0000072 Vender JayW. Mechanic Schoate Briar Hill 21.00 10/18/1999 Yes 10 Days 0000073 Vender JohnP
Maintenance Supervisor Schoate Briar Hill 75,000.00 1/25/1999 Yes 10 Days 0000075 Vincent GeneT
Dozer Schoate Briar Hill 19.00 7/24/2006 Yes 10 Days 0000076 Ward Bryan A. Mechanic Helper Schoate
Briar Hill 19.50 4/20/2005 Yes 10 Days 0000077 Ward Michael S. Loader Phoenix Processing Schoate
Prep Plant 19.00 4/8/2002 Yes 10 Days 0000115 Wardlaw John M. Loader Charolais K0 20.00 7/28/2009
Yes 10 Days 0000382 Waters Thomas E. SVP of Sales Phoenix Coal Louisville 185,000.00 8/15/2008 20
Days 8/10/2008 0000111 Weaver GradyT. Grader C&R Winn North 19.50 2/16/2005 Yes 10 Days 0000368
West Dustln Truck Schoate Radio Hill 18.00 8/4/2008 Yes 10 Days 0000078 West Eddie D. Foreman
Schoate Briar Hill 65,000.00 9/12/2002 Yes 10 Days 0000291 West Adam W. Dozer Winn KO 19.00
6/20/2007 Yes 10 Days 0000395 Westbrook CarlB. Dozer Schoate Radio Hill 19.00 1/19/2009 Yes 10 Days
0000372 Whitfield EricW. Drill Renfro Jessup 19.00 8/1/2008 Yes 10 Days 0000079 Whltten Kenny L
Grader Schoate Briar Hill 19.00 4/28/2006 Yes 10 Days 0000375 Williams leroy Loader Renfro Jessup
19.00 8/1/2008 Yes 10 Days 0000081 Wilson Brlce L Dozer Schoate Briar Hill 20.00 7/15/2002 Yes 10
Days






 









 












	APE Employee List Emp# Last Name First Name Job Title/Position Employer Current Work Location Pay
Rate Annual/Hrly Hire Date Prod Bonus Vacation Date of Signed Employment Agreement 0000400 Winters
Tony D. Dozer C&R Wlnn North 19.00 2/23/2009 Yes 10 Days 0000157 Winton Jr. GradyL Welder Schoate
Briar Hill 20.50 1/1/2007 Yes 10 Days 0000239j Woodruff William N Lab Manager Phoenix Processing
Island 20.00 1/1/2007 Yes 10 Days 0000158 Woolsey James W. Welder Charolais Cleaton 20.50 1/1/2007
Yes 10 Days 0000011 Wooton Danny SVP of Ope rations Phoenix Coal HQ 200,000.00 10/11/2006 15 Days
10/1/2008 0000319 Wooton Kaberon K. VP of Mine Development Phoenix Coal HQ 115,000.00 11/26/2007 15
Days 0000096 Wynn Stan Dozer Winn KO 20.00 7/20/2006 Yes 10 Days 0000113 York James Truck Driver
Charolais Qeaton 20.00 9/11/2006 Yes 10 Days






 









 








Schedule 4.17(b)



Arrangements for APE Employees


1. See Schedule 4.14(b), which is incorporated by reference in this Schedule 4.17(b).






50









 








Schedule 4.18



Labor Relations; Compliance


1. See attached list.






51









 












	Kentucky Employed Mutual Insurance ___, Vi -1 A 250 West Main Street, Suite 900
FOJ.lCyxlO <ier Lexington, KY-40507 Claim Loss Run Detail Agunt: a Craig Kiddle Company Zsa
Insured: Phoenix Coal Corporation SO BOX S4S, 121S tfebo Hd Ste A, Madiaonville, Kt, 42*31-0549
Madisonville, Si, 42431 Asa 0 t CiMan Location Claia ___, , . Seportad Sat* Claimants Sire Sate
Status Medical Tivtiinm i t“Y Kxpenaa Total 1005 Highway 8X4 086195 09/20/2008 STACER, BILLY D
pr/iflHn 154.63 0.00 54.70 209.31 Xne 09/20/2056 Ofi/OB/aoos IS4.63 0.00 S4.70 209.13 M Climbing up
on traekhoe to service it. Servicing the traekhoe. Xnjuryed party was climbing 19 00 the traekhoe
to service It when be Celt a pain ia his left shoulder and seek. 0.00 0.08 0.00 0.00 0.00 0.00 0.0Q
0.00 0.00 0.00 *• 0.00 Suhco O.OO appo 100S Highway 814 086300 0S/23/20B8 RILKX, BRaDLBX E CLOSED
163.26 1949.£4 SB.80 2171.70 Xnc 09/25/2008 01/01/2007 163.26 1949.64 58.80 2171.70 Sd Stocking on
dio Bulldozer Tracks. Rigging cables on D10 Bulldozer. Injuryed party was working on the
DIO Bulldozer. When he got ready to dismount the dozer he stepped on a rock rolling bin right
ankle. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 O.OO 0.00 0.00 &*¦ 0.00 subro 0.00 appo 1005 Highway 814
083854 06/05/2008 BLUE, JOHH L OSES 7500.00 16128.51 726.05 243S4.56 Xnc 06/17/2008 04/09/2007
29S8.4B 1605.68 232.20 4796.36 M Driving 777 truck hauling rock out of pit. Driving 777 truck
hauling rock out o£ pit. Injuryed party was hauling rock out of the pit when he ran over a hole ,
causing thr truck to Jam his lower hack. 4541.52 0.00 O.OO 14522.83 0.00 0.00 4S3.BS 0.00 0.00
19558.20 kaa 0.00 Suhro 0.00 appo






 









 












	Kentucky Employers* Mutual Insurance . ,  —  250 West Main Street, Suite 900 POllCyftOXCi(C)!?
Lexington, KY-40507 Claim Loss Run Detail Agent: J Crsig Riddle Company Inc Xnsuredi Phoenix Coal
Corporation PO Scnc S43, 1215 Sebo Rd Ste K, H»diBQnvill , Kt, 42*31-0549 BadiSoovilla, KX. 42431
ec Due* claaa location Claim , .4 n,fc, Claimant Hire Date Status MMiesl ludeamity
Kapense Total 1005 Highway 614 080840 01/31/3009 KYSN, STWI C CMSBD 0.00 0.00 0.00 0.00 lac
02/04/200S 07/01/2006 0.00 o.oo 0.00 O.OO M EE was climbing Cat EHR Boiex to start work When he
slipped and Cell backwards onto his back. o.oo 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Reg
0.00 Sidsro 0.00 appo 7309 £ Highway 814 087250 11/0S/ZOOB SHELTOtt, ARCHIE OWN 4000.00 0.00 100.00
41C0.00 Inc ii/07/aooi 07/23/2008 1391.18 D.00 48.90 1440.08 ra Putting transmission in mechanic
truck. Patting transmission in mechanic truck. Party was putting a transmission In the mechanic’s
truck using a. null cable to help lift Che trawtnisiom into place, the cable brake and the
transmission tell striking the party on 2608.82 O.OO O.OO 0.0s 0.00 0.00 51.10 0.00 O.OO 2659.92
Res O.OO Sl»bro 0.00 appo 1005 Highway 814 098290 01/06/3009 HATCH, KORRIS A OTHR 2SO0.00 0.00
100.00 2600.00 lac 01/07/2009 01/01/1007 15S.42 0.00 57.60 213.02 M Climbing down off a Bulldotar.
Climbing down off the Bulldozer. Injuryed party had just finished his shift when he climbed down
off hia Bull closer. He turned back around to gat his hard hat when his feet ntuck in the mud
causing hia injury. 2344.58 0.00 0.00 0.00 0.00 0.00 42.40 O.OO 0.00 2386.98 Res 0.00 Subrol 0.00
appo 1 100S Highway 814 088459 01/14/2009 DDN&AP, DKOHE R OPEB 2500.00 O.OO 100.00 2600.00 Ine ]
01/15/2009 07/23/2008 360. 4 0.00 51.80 412.44 Pd Putting a trunox ball in the back of a mechanic
truck. Changing out a trunor ball on a bull dozer. Injuryed party was setting a trunor ball into
the back of a mechanic truck when it slipped and fell an his left finger on his left hand. 2139.36
0.00 0.00 0.00 0.00 0.00 48.20 0.00 0.00 2187.56 Res 0.00 Subrol 0.00 appo | Print Date 03/10/09
11.-18:14 SM 1 1 Page IS Of 17






 









 












	Kentucky Emptoycre” Mutual Insurance 250 West Main Sttcet, Suite 900 Lexington, KY-40507
Policy-holder Claim Loss Run Detail Jkerenf. J Craig Riddle Company Inc twnmdi Phoenix Coal
Corporation PO Box 549, 1215 Hebo Rd Ste A, MadlKonville, KX, 42431-0S49 Madisonville, KT, 42431
Ace Date Claimant Class looatiTM CUlm ^^^^D.t. Hi^^t. ««*» Medical ladaanity Bcpeaea Total 3724
Highway 814 088652 01/23/3009 BR0M3D0B, JSRRT I OSES 2800.00 0.00 100.00 2600.00 oh
01/24/2009 07/09/2007 216.00 o.oo 48.90 264.90 Pd j Cleaning around « belt. Mien aecidant occurred
injuryed party had cleaned around the belt, Re reached down to picfc up a piece of rock lying on
the ground and his back went out. 2284.00 0.00 0.00 o.oo o.oo o.oo 51.10 O.OO 0.00 2125-10 K«S 0.00
Subro 0.00 appo 1005 Highway 814 009126 02/16/2009 OUTRE, CHRISTOPHER R OPBS 7S0.0O 0.00 100.00
850.00 Ine 02/17/2009 01/01/2007 0.00 0.00 0.00 0.00 Pd Trying to move the I-beam Working on a turn
crusher I-beam was in place but did not suite the injuryed party. Re grabbed it and was trying to
pull it a few inches whan he felt a pull in his chest and shoulder. 710.00 0.00 0.00 0.00 0.00 0.00
100.00 o.oo 0.00 850,00 mem 0.00 Snbro 0.00 appo Total For Policy Period 10/23/2001 — 10/23/2009
656.24 12250.00 2123.24 10126.76 0.00 0.00 o.oo 0.00 100.70 500.00 207.20 292.80 , Open Closed
Total Had Only Claims 5 s Total Indemnity claims 0 0 Total Claims S 5 Total Paid For Cloned Total
incurred For Open Total Paid For Cpon 756.94 12750.00 2330.44 10419.Se Total Reserve For Open
Total Paid Closed * Total Incurred Open 12906.24 o.oo 600.70 13506.94





 









 





Schedule 4.19(a)



Employee Benefits



Sellers’ ERISA Covered Employee Benefit Plans



     1. Retirement Plan: Phoenix Coal Corporation 401(k) Retirement Savings Plan (note:
consummation of the Acquisition Transaction is expected to constitute an event permitting
distribution of participant account balances from the Phoenix Coal Corporation 401(k) Retirement
Savings Plan).



     2. Dental Plan: Health Resources, Inc. Dental Health Options



     3. Vision Plan: VSP Vision Care



     4. Life Insurance Plan: Humana Life Insurance



Health Coverage




     Sellers offer health insurance coverage through Impact Trust.



Sellers’ Stock Option and Voluntary Non-ERISA Plans, Certain Payroll Practices and 

Fringe Benefits




1. Stock Option Plan: Phoenix Coal Inc. 2008 Stock Option Plan




2. Voluntary Insurance: AFLAC Voluntary Insurance Plan (cancer, specified health event,
personal accident, personal sickness, short term disability and hospital protection)




3. Holiday Pay




4. Vacation Pay




5. Bereavement and Jury Duty Pay




6. Vehicle Allowance




7. Company Credit Card




8. Cell Phone Allowance




9. Tool Allowance




10. Fuel Reimbursement



52









 





Schedule 4.19(b)



Employee Benefits


1. None.







53









 








Schedule 4.19(e)



Employee Benefits


1. As a general rule, an annual report (Form 5500) should be filed for each welfare plan that
covers at least 100 participants as of the beginning of a plan year. The Dental Plan, Vision Plan,
and Life Insurance Plan have not been reported on Form 5500. It is possible that an annual report
also is (over)due to be filed for a prior health insurance arrangement. The Department of Labor
(“DOL”) provides for a Delinquent Filer Voluntary Compliance Program under which Sellers plan to
and will prior to the Closing pay a reduced civil penalty and voluntarily comply with the DOL
annual reporting requirements for welfare plans.







54









 








Schedule 4.19(g)



Employee Benefits


1. None.







55









 








Schedule 4.20(a)



Compliance with Legal Requirements


1. See Item 1 on Schedule 4.14(d), which is incorporated by reference in this Schedule 4.20(a).







56









 








Schedule 4.20(b)



Governmental Authorizations


1. See Schedule 2.1(b)(viii), which is incorporated by reference in this Schedule 4.20(b).



2. See Schedule 2.1(c)(iii)-2, which is incorporated by reference in this Schedule 4.20(b).







57









 








Schedule 4.20(d)



Mining Applications


1. See attached list of Mining Applications.






58









 












	Schedule 4.20(d) 8*109*50 PM .  — $essup&& = . . 7. waiver acres ill
Sciioute 43iV- Kil.Gharolais- Star . ?i -P.&Q1 . Vaught 7 pRenfro Giebel II -
        .R&Q . Rose France Charpiais Vogtie North KDSMRE Expectedlssuance. v.- . Preparer
889-0146r4 McEwen 889-0134A3 HDR 889-0148 Marshall Miller 889-0149 McEwen 889-0130 j 5110 .
ErMC2 889-0153 . wo      ,, ErMC2 889-0137 2Q<1 BrlsSsfiMlillsIistiS Reviewer Joe Lydon West
Johnson Darcie Jarman Tessa Monday Preliminary Application na 12408 applied 331 applied 318 8807
applied 329 Not Started Comp Application submitted 5722 submitted 325 submitted 522 apply 91 apply
815 submitted 528 Not Started Completeness Review AAA 6409 def itr recd 623 def Itr recd 617
Public Notice 610 — 709 Technical Review began 675 Tech Response partial tech Itr 729 2nd Tech
Review tech Itr recd 820 Tech Response Cultural Resources arch done, bat done bat done, good bat
done, good 1401 Status li Hiiiilii . »4 i)W3-.g od= . ..apply 815 i , ,,, <4Pp cat-~8
Preblast Survey Blasting Notice Corps of Engineers Preparer m&flffilflffllM LRL20081437-gjd
*,r-vsri 3109-,-  —  —  HDR LRL-2009-526-gjd J i x.lM15Q9 -.v on** , J>n201_1-. .
WetlandMcEwen — . 5110 i aesjaittSBaifBaasnjBBB HDR i1m Wetland Services HDR Wetland
Services Reviewer George Delancey George DeLancey Rob Brown Delineation Status 101008 1215708
125708 121508 11408 71508 Delineation Confirmed 1016708 111708 JD letter applied 1121 applied
112008 404 Application Status applied 22 applied 417 apply 91 applied 618 Not Started Review period
complete W&38&BBsx88&flx& Logging? Tech Response applied 219 2nd Tech Response submitted 5718
3rd4th Response submitted 76,722,727 Public Notice 320-418 Protested Sierra Club 418 Response to
protest Mine License submitted 518 na 193 acre* liSiiiiia mmmmm ,. 54b acres Road Bonding Done
Ground Control Plan







 









 








Schedule 4.20(e)



Company Surety Bonds


1. See attached list of Company Surety Bonds.






59









 












	Phoenix Coal, Inc. 8262009 PHOENIX COAL INC. GENERAL BOND SUMMARY Schedule 4.20(e) Outstanding
** Company ProjectMine Permit No. Acres Bond Amount Black Diamond Resources, Inc. Coiltown 854-0243
265.5 $744,300 Black Diamond Resources, Inc. West Hopkins 854-0208 207.1 $278,200 Charolais Mining
Company., LLC Graham #5 889-0136 512.6 $933,000 Crittenden County Coal, Inc. Tex No. 1 828-0002
205.7 $708,300 Crittenden County Coal, Inc. Providence No. 1 854-5038 496.8 $1,173,000 Phoenix Coal
Processing, LLC Stoney Point 854-0253 115.3 $331,600 Pennyrile Coal Co., Inc. Fies Area 854-5026
71.8 $428,000 Phoenix Coal Processing, LLC River Queen Slurry 889-8004 0.0 $0 R&L Winn, Inc. Back
In Black 889-0135 429.7 $1,205,400 Schoate Mining Co., LLC Briar Hill 889-0134 1,655.1 $3,164,100
Phoenix Coal Corporation K.O. Mine 889-0141 224.0 $654,200 Pact Resources, LLC Pratt Mine 917-5019
8.0 $35,400 Renfro Equipment Inc. Jessup Mine 889-0146 190.0 $771,300 CCC LC @ 1st United Bank Misc
$103,500 Released June 2009 $0 Heritage Petroleum Misc $150,000 C & R Coal, Inc. B.C. South & Mud
Pit 889-0150 413.6 $883,800 C & R Coal, Inc. Ebeneezer 889-0151 125.0 $317,500 C & R Coal, Inc.
Beech Creek 889-0152 187.5 $443,800 TOTALS 5,107.7 $12,221,900 ** Standard Letters of Credit
beneficiary is Commonwealth of Kentucky, Natural Resources Environmental Protection Cabinet Road
Bond # Permit* County Bond Amt B8850237 02-02911508-07 Hopkins $50,000 B8850240 02-089175189-08
Muhlenberg $200,000 1208979 02-0621752693-09 Muhlenberg $300,000 B8850239 02-043150331-2008
McClean $200,000







 









 








Schedule 4.21(a)



Legal Proceedings; Orders


1. None.






60









 








Schedule 4.21(c)



Legal Proceedings; Orders


1. None.







61









 








Schedule 4.21(d)



Legal Proceedings; Orders


1. None.







62









 








Schedule 4.21(e)



Legal Proceedings; Orders


1. None.







63









 








Schedule 4.22(a)



Insurance


1. See attached list of insurance.






64









 












	Schedule 4.22(a) Phoenix Coal Inc. — Insurance Policies Summary 2009 Coverage Company
Policy Date Policy Number Commercial Property American Resources 6809-6810 CFA0025004 Encroachment
Bond Old Republic 51109-51110 1208979 Package (GL 8b Equipment) Chubb 5109-5110 35848860
Umbrella Chubb 5109-5110 79851274 401(k)Bond Cincinnati Insurance 31209-31212 B80991835 P & I
(Tugboat) Inland Marine Underwriters 11009- 11010 N5JH60760 Directors & Officers Chubb 11108- 11109
8210-9136 Business Auto American Resources 11408- 11409 BAA0159103 Workers Compensation KEMI 102308
- 102309 359418








 









 








Schedule 4.22(b)



Insurance


1. None.






65









 








Schedule 4.22(c)



Insurance




	1.	 	See attached.




66









 











	Schedule 4.22 (c) Insurance Loss Runs Auto Coverage Effective Date 114 Current Policy Year
Prior Year Prior Year -1 $0.00 $1,565.58 $0.00 Package, Gl* & EQ 51 $141.00 $52,128.00 $29,416.00
Umbrella 51 $0.00 $0.00 $0.00 Commercial Property 68 $0.00 $0.00 $0.00 Workers Comp 1023 $13,506.94
$43,193.32 $176,274.11 D&0,EPL,FL 1027 $0.00 $0.00 $0.00 P&l (Boat & Harbor) 110 $0.00 $0.00 $0.00
Pollution 51 $0.00 $0.00 $13,647.94 $96,886.90 $205,690.11







 









 








Schedule 4.22(d)



Insurance


1. See attached. With respect to the insurance coverage exceptions for the Kenny Vaught and Rogers
Brothers leases described on the attachment hereto, the Phoenix Group Entities will, on or prior to
September 8, 2009, increase their insurance coverage so as to comply with the insurance
requirements in such leases.






67









 









Schedule 4.22 (d) (i)

Insurance Coverage Exceptions




Exceptions to Insurance Requirements per Sales Contracts





Duke Energy-Kentucky:




At the Island Dock facility, Duke Energy-Kentucky requires pollution liability coverage.
Phoenix does not maintain pollution liability coverage at Island Dock.




At the Island Dock facility, Phoenix Coal maintains the following coverages at a
$1,000,000 threshold; Duke Energy-Kentucky requires $10,000,000 as follows:




Duke Energy-Kentucky requires seller to maintain, or cause to be procured and
maintained, Statutory Longshore and Harbor Workers’ Compensation Act Insurance or
Statutory State Workers’ Compensation or Jones Act (Maritime Employers Liability),
whichever is applicable; Comprehensive Marine Liability insurance, including, but not
limited to, Protection and Indemnity Liability, Jones Act (Maritime Employers
Liability), Pollution Liability, Full Collision Liability, Marine Operators Liability,
Marine Contractual Liability, Wharfinger Liability, Towers’ Liability, Hull and Cargo
Legal Liability and Cost of Removal of Wreck and Cargo (including voluntary or
statutory), where applicable, covering the docks and fleets at all Delivery Points
utilized by Seller in an amount not less than $10,000,000 per occurrence.



Exceptions to Insurance Requirements per Lease Agreements





Jon Geibel (8/25/05)




Per Lease agreement, Phoenix is to maintain $5,000,000 in Umbrella Coverage; current
coverage is $4,000,000




Kenny Vaught(11/4/08)




Per Lease agreement, Phoenix is to maintain $10,000,000 in General Liability Coverage in
case of multiple party personal death and injury; current General Liability Coverage is
$5,000,000.




Rogers Brothers (7/17/06)




Per Lease agreement, Phoenix is to maintain $10,000,000 in General Liability Coverage in
case of multiple party personal death and injury; current General Liability Coverage is
$5,000,000.



 









 





Schedule 4.24



Relationships with Related Persons


1. Ricky Kirk, a director of PCI, engages in the Surface Mining Business in Eastern Kentucky and
West Virginia.







68









 








Schedule 4.27




Customers and Suppliers



1. The applicable Phoenix Entities declared force majeure under all of their coal supply agreements
in December 2008. Duke Ohio contested this declaration and proceeded to initiate arbitration. The
parties settled the matter in March 2009. There are at present no continuing issues in this
regard.



2. Jones Trucking, a former supplier of transportation services for the Phoenix Entities, is
requiring the Phoenix Entities to post a letter of credit prior to providing future services to the
Phoenix Entities.



3. The applicable Phoenix Entities have experienced quality and quantity issues in connection with
the performance of the AT Coal Sales Agreement with Louisville Gas & Electric Company. The
applicable Phoenix Entities have experienced quantity issues in connection with the performance of
the AT Coal Sales Agreement with Western Kentucky Energy Corp. There are at present no continuing
issues with either of these customers, except as provided in Item 4 below on this Schedule 4.27.



4. See Item 2 on Schedule 4.14(d), which is incorporated by reference in this Schedule 4.27.



5. See attached list of customers.






69









 












	Schedule 4.27 Top Five Customers Top Five Customers per Year 2008 2007 2006 Western Kentucky
Energy X X X Louisville Gas & Electric X X Duke Energy — Kentucky X X Duke Energy-Ohio X Tampa
Electric X X X Kentucky Utilities X Renfro Equipment, Inc. X Coal Network, Inc. X Knight Hawk, LLC
X







 









 








Schedule 6.1



Operation of Business


1. None.






70









 








Schedule 6.12



Designated Post-Closing Obligations


Without limiting any general obligations of the parties pursuant to the Acquisition Agreement to
work cooperatively with each other to implement the Acquisition Transaction, the parties shall take
or cause to be taken the following specific post-closing actions and fulfill the following specific
post-closing obligations in coordination with each other:




     Road Bond




	 	•	 	Promptly following the Closing and in all events within seven (7) days after the
Closing, in order to permit the Remaining Phoenix Entities to obtain the release and
return to them following the Closing of the road bond listed on Schedule 2.1(b)(viii), the
Buyer will post a substitute bond or other collateral with respect thereto which will
enable the Remaining Phoenix Entities to obtain such release and return upon approval of
such substituted bond or other collateral.





     Customers




	 	•	 	Promptly following the Closing Date, notify all Surface Mining Business customers (a)
of the Acquisition Transaction and (b) that all payments related to any period after the
Closing Date shall be made in accordance with payment and contact information to be
designated by the Buyer.
	 
	 	•	 	Coordinate with the Buyer to provide/download all customer information and all open
customer purchase orders for the Surface Mining Business as directed by the Buyer.





     Vendors




	 	•	 	Promptly following the Closing Date, notify all Surface Mining Business vendors (a) of
the Acquisition Transaction and (b) that all invoices related to any period after the
Closing Date shall be made in accordance with the contact information to be designated by
the Buyer.





     Accounts/Utility/Insurance Transfers




	 	•	 	As requested by the Buyer, assist with transfer of the following items to the extent
permitted and as designated by the Buyer and/or provide information requested by the Buyer
to allow the Buyer or the Acquired Company to establish similar arrangements for
themselves:






	 	o	 	Utility accounts at the Cleaton shop and the surface mining sites
	 
	 	o	 	Surface Mining Business telephone accounts (cell, data, land lines, etc.)
	 
	 	o	 	Registration of titles to Fixed Assets (as applicable)




71









 






	 	o	 	Wharfingers liability insurance
	 
	 	o	 	Workers’ compensation insurance





     Records




	 	•	 	Maintain the original manual and/or electronic copies of accounting and tax files
related to the Surface Mining Business, including but not limited to accounts payable
files, for all required statutory periods. Should the Sellers or their Affiliates cease
operations or otherwise wish to dispose of the files, the Sellers shall notify the Buyer
and arrange for the transfer of these files to the Buyer or as designated by the Buyer, at
the expense of the Buyer.





     Payments/Prorations




	 	•	 	With respect to any utility or other miscellaneous charges relating to the Surface
Mining Business for time periods beginning before the Closing Date and ending after the
Closing Date that are not expressly allocated between the Parties by the Acquisition
Agreement or other agreements between the Parties and are not otherwise allocated by an
arrangement mutually acceptable to the Sellers and the Buyer, the Sellers, on the one
hand, and the Buyer and the Acquired Company, on the other hand, shall allocate each such
charge between themselves on a prorated basis, with the prorated share of the Sellers to
be based upon the percentage of the time period to which such charge relates that has
expired as of the end of the Closing Date. The Party who receives any such charge
directly or via one of its affiliates shall be obligated to calculate the allocation and
provide the other Parties with sufficient detail to support the allocation calculations.





     Employees




	 	•	 	With respect to employees of the Phoenix Entities hired by the Buyer immediately
following the Closing, the Sellers shall continue the employment thereof through the close
of business on the Closing Date and, in connection with such employment, pay and furnish
benefits to (or cause their Affiliates to pay and furnish benefits to) such employees in
accordance with their standard payroll and benefit practices. In addition, the Sellers
shall pay (or cause their Affiliates to pay) to such employees September production
bonuses due them in accordance with the historical practices of the Sellers and their
Affiliates.
	 
	 	•	 	The Sellers shall cause each Phoenix Entity who employed Surface Mining Business
employees during 2009 to report the wages of each of its employees on IRS Form W-2 but no
Phoenix Entity shall include on any such Form W-2 any of the wages paid by the Acquired
Company or its Affiliates following the Closing (which the Buyer shall cause to be
separately reported by the Acquired Company or its applicable Affiliates).




72









 











     Post-Closing Action Items Regarding Completion of Pre-Closing Reorganization




	 	•	 	The Sellers and the Buyer shall comply with the requirements of the attached document
titled “Post-Closing Action Items Regarding Completion of Pre-Closing Reorganization.”






	 	•	 	The consent to assignment of the Non-Competition Agreement dated July 31, 2008 by and
among Phoenix Coal Corporation, Stuart K. Renfro and Robin R. Renfro shall not be required
to be executed and delivered by the Closing and shall instead be pursued diligently and
completed within a reasonable period of time by the Sellers at their expense following the
Closing.





     Post-Closing Abatement Matters




	 	•	 	The abatement matters with respect to Citation #s 13-0027, 13-0029 and 13-0584 shall
not be required to be completed by the Closing and shall instead be pursued diligently and
completed within a reasonable period of time by the Sellers at their expense following the
Closing.




     Post-Closing
Governmental Authorizations Matters




	 	•	 	The Sellers and the Buyer shall comply with the requirements
of the Letter Agreement dated September 30, 2009 executed by the
Buyer, the Sellers, and the Acquired Phoenix Entities executing
thereon.






     AT Technology Assets




	 	•	 	Notwithstanding anything to the contrary in the Acquisition Agreement, the parties will
deal with the AT Technology Assets on a post-Closing basis as provided in the Transition
Services Agreement.





     Consents




	 	•	 	Consents for assignment shall be pursued diligently and secured in a reasonable period
of time by the Sellers at their expense following the Closing with respect to the
Cooperative Agreement, dated May 27, 2009, by and between the Department of Highways,
Transportation Cabinet, Commonwealth of Kentucky and Phoenix Coal Corporation.
	 
	 	•	 	Consents for assignment shall be pursued diligently by the Sellers at their expense
following the Closing with respect to the following agreements:






	 	1.	 	Coal Supply Agreement, dated September 16, 2009, by and between American Coal
Company and Charolais Coal Sales, LLC.




73









 






	 
	 	2.	 	Strip Coal Mining Lease, dated October 20, 1967, by and between Ayrshire
Collieries Corporation and Sentry Royalty Company (assigned to Evergreen Mineral Co.,
Inc.).
	 
	 	3.	 	Mineral Lease, dated December 4, 1947, by and between Ayershire Collieries
Corporation and Talmage Rogers (assigned to Evergreen Mineral Co., Inc.).
	 
	 	4.	 	Surface & Coal Lease Agreement, dated July 31, 2004, by and between R&L Winn,
Inc. and Tom McDonald Heirs, et al.
	 
	 	5.	 	Surface Mining Lease Agreement, dated July 31, 2004, by and between R&L Winn,
Inc. and Billy & Patsy Kirtley
	 
	 	6.	 	Coal Mining Lease Agreement, dated July 17, 2006, by and between R&L Winn,
Inc. and Martha Rogers Haas, et al.
	 
	 	7.	 	Coal Mining Lease, dated April 15, 2003, by and between R&L Winn, Inc. and
Virginia Avaneil McDonald et al.
	 
	 	8.	 	Surface Coal Mining Lease/Sublease Agreement, dated August 3, 2006, by and
between Gerald A. & Judith Ann Liles, Joseph P. Liles and Renfro Equipment Inc.
	 
	 	9.	 	Mineral Coal Mining Lease, dated September 13, 2006 by and between Gerald A.
& Judith Ann Liles, Joseph P. Liles and Renfro Equipment Inc.






74