exv10w1



 




Exhibit  10.1





Dated as of December 31, 2005




Arch Coal, Inc.



and


Magnum Coal Company

 


PURCHASE AND SALE AGREEMENT


 


 









 





TABLE OF CONTENTS




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






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






Schedules





                    The following schedules are attached hereto:




                    Accounting Policies

                               Schedule 1.1(a)




                     Apogee Properties

                              Schedule 1.1(b)




                     Catenary Properties

                               Schedule 1.1(c)




                     Form Statement

                              
Schedule 1.1(d)




                     Hobet Properties

                               Schedule 1.1(e)




                     Arch Individuals with Knowledge

                               Schedule 1.1(f)




                     Material Books and Records

                               Schedule 1.1(g)




                     Robin Properties

                               Schedule 1.1(h)




                     TC Sales Agreements

                               Schedule 1.1(i)




                     Company Governmental Approvals and Consents

                               Schedule 4.1(d)




                     Capacity; Organization

                               Schedule 4.2.1(c)




                     Coal Mining Interests and Real Property

                               Schedule 4.2.4(a)

                               Schedule 4.2.4(b)




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                               Schedule 4.2.4(c)(1)

                               Schedule 4.2.4(c)(2)

                               Schedule 4.2.4(e)

                               Schedule 4.2.4(f)




                     No Conflicts/Consents

                               Schedule 4.2.5(b)

                               Schedule 4.2.5(c)




                     Governmental Approvals and Filings

                               Schedule 4.2.6




                     Absence of Changes

                               Schedule 4.2.9




                     Undisclosed Liabilities

                               Schedule 4.2.10




                     Taxes

                               Schedule 4.2.11




                     Legal Proceedings

                               Schedule 4.2.12(a)

                               Schedule 4.2.12(b)




                     Compliance with Laws

                               Schedule 4.2.13




                     Benefits Plans; ERISA

                               Schedule 4.2.14(a)(i)

                               Schedule 4.2.14(a)(ii)

                               Schedule 4.2.14(a)(iii)

                               Schedule 4.2.14(b)

                               Schedule 4.2.14(g)

                               Schedule 4.2.14(h)

                               Schedule 4.2.14(j)

                               Schedule 4.2.14(k)

                               Schedule 4.2.14(m)

                               Schedule 4.2.14(n)

                               Schedule 4.2.14(o)




                     Tangible Personal Property

                               Schedule 4.2.16(a)(1)

                               Schedule 4.2.16(a)(2)

                               Schedule 4.2.16(a)(3)




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                     Contracts

                               Schedule 4.2.18(a)

                               Schedule 4.2.18(b)




                     Licenses

                               Schedule 4.2.19(1)

                               Schedule 4.2.19(2)




                     Insurance

                               Schedule 4.2.20(1)




                     Affiliate Transactions

                               Schedule 4.2.21(1)

                               Schedule 4.2.21(2)

                               Schedule 4.2.21(3)




                     Employees; Labor Relations

                               Schedule 4.2.22




                     Environmental Matters

                               Schedule 4.2.23




                     Substantial Customers and Suppliers

                               Schedule 4.2.24(a)

                               Schedule 4.2.24(b)(1)

                               Schedule 4.2.24(b)(2)

                               Schedule 4.2.24(b)(3)




                     Bank and Brokerage Accounts

                               Schedule 4.2.25




                     Directors and Officers; Powers of Attorney

                               Schedule 4.2.26(1)

                               Schedule 4.2.26(2)




                     Accounts Receivable

                               Schedule 4.2.27




                     Reclamation Bonds

                               Schedule 4.2.31(1)

                               Schedule 4.2.31(2)




                     Sufficiency of Assets

                               Schedule 4.2.33





iv









 






                     Arch Consents

                              
Schedule 5.3




                     Carryover Tonnage

                               Schedule 6.2(p)




                     Miscellaneous Bonds

                               Schedule 8.1(a)




                     Indemnification

                               Schedule 10.3(d)




                     Outstanding Tax Claims relating to Arch Companies

                               Schedule 11.2(c)




Exhibits




The following Exhibits are attached hereto:




                    
Exhibit A — Apogee Properties

                     Exhibit B — Blue Creek Lease Agreement (Lease and Memo of Lease)

                     Exhibit C — Blue Creek Option to Purchase

                     Exhibit D — Catenary Properties

                     Exhibit E — Hobet Properties

                     Exhibit F — Master Coal Sales and Services Agreement

                     Exhibit G — Permit Assignment and Assumption Agreements

                     Exhibit H — Transition Services Agreement





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PURCHASE AND SALE AGREEMENT



THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made and entered into on this 31st day of
December, 2005, by and between Arch Coal, Inc., a Delaware corporation (“Arch”) and Magnum Coal
Company, a Delaware corporation (the “Company”) (each, individually, a “Party,” together, the
“Parties”).




RECITALS



WHEREAS, Arch, the Company, ArcLight Energy Partners Fund I, L.P. (“ArcLight”) and Tim Elliott
(collectively, the “MCA Parties”) entered into a Master Contribution Agreement (“Master
Contribution Agreement”) dated as of October 7, 2005 pursuant to which Arch, Tim Elliott and
ArcLight were going to contribute certain assets to the Company.



WHEREAS, the MCA Parties have entered into an agreement dated December 30, 2005 pursuant to which
the MCA Parties have consented to the Company and Arch entering into this Agreement and which
provides for the termination of the MCA Parties’ rights under the Master Contribution Agreement
upon the Closing (as defined below) of the transactions contemplated under this Agreement;



WHEREAS, the Company desires to purchase certain assets from Arch and Arch desires to sell certain
assets to the Company;



WHEREAS, in furtherance of accomplishing the objectives and purposes set forth in the preceding
recital, except as otherwise expressly provided for herein, the following actions will be taken on
or prior to the Closing Date (together with all related actions, the “Arch Reorganization
Transactions”):





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




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




NOW, THEREFORE, in consideration of their mutual undertakings and agreements hereunder, and for
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement undertake and agree as follows:




ARTICLE I

Definitions; Interpretation; Schedules




     1.1 Definitions.



          The following capitalized terms have the meanings given below:




          “A.T. Massey Coal Company Case” means the case of A.T. Massey Coal Company, et al. v. JO ANNE
B. BARNHART, COMMISSIONER OF SOCIAL SECURITY, et al., pending in the USDC, D. Maryland., Civil No.:
RDB 03-3389.




          “Accountant” has the meaning assigned to such term in Section 3.2(c).




          “Accounting Policies” means those policies set forth on Schedule 1.1(a) attached hereto.




          “Accounting Records” has the meaning assigned to such term in Section 3.2(a).




          “Actions or Proceedings” means any action, suit, proceeding, arbitration or Governmental or
Regulatory Authority investigation or audit.




          “Actual Closing Working Capital Statement” has the meaning assigned to such term in Section
3.2(a).




          “Adjusted Closing Working Capital” has the meaning assigned to such term in Section 3.2(a).




          “Adjusted Closing Working Capital Statement” has the meaning assigned to such term in Section
3.2(a).




          “Affiliate” means, with respect to a specified Person, another Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by or is under common
control with the Person specified (and for this purpose, the term “control” means the power to
direct the management and policies of such Person (directly or indirectly), whether through
ownership of voting securities, by Contract or otherwise (and the terms “controlling” and
“controlled” have meanings correlative to the foregoing).




2









 








          “Agreement” has the meaning assigned to such term in the preamble.




          “Allegheny” means Allegheny Land Company, a Delaware corporation.




          “Ancillary Documents” means the Transition Services Agreement, the Blue Creek Lease and Option
Agreement, the Master Coal Sales and Services Agreement and the Conveying Documents.




          “Apogee” means Apogee Coal Company, LLC, a Delaware limited liability company and its
predecessor, Apogee Coal Company, a Delaware corporation.




          “Apogee Properties” means the properties identified as being owned, leased or subleased by any
Arch Company on the maps attached hereto as Exhibit A and the facilities located thereon and the
equipment the book value of which is in excess of $100,000 identified as being owned, leased or
subleased by Apogee on Schedule 1.1(b).




          “Apogee VEBA” has the meaning assigned to such term in the preamble.




          “Arch” has the meaning assigned to such term in the preamble.




          “Arch Benefit Plan” has the meaning assigned to such term in Section 4.2.14.




          “Arch Coal Sales” means Arch Coal Sales Company, Inc., a Delaware corporation.




          “Arch Companies” means Catenary, Hobet, Apogee, Robin Land and TC Sales.




          “Arch Companies Plans” has the meaning assigned to such term in Section 4.2.14(a).




          “Arch Companies Plans Employees” has the meaning assigned to such term in Section 4.2.14(a).




          “Arch Credit Agreement” means the credit agreement between Arch, PNC Bank, National
Association, as administrative agent, Citicorp USA, Inc., JPMorgan Chase Bank, N.A. and Wachovia
Bank, National Association, as co-syndication agents, and Fleet National Bank as documentation
agent and various lenders, dated December 22, 2004 in relation to a $700 million revolving credit
facility.




          “Arch Equity Interests” means 100% of the membership interests of each of Robin Land, TC
Sales, Catenary, Apogee and Hobet.




          “Arch ERISA Entities” has the meaning assigned to such term in Section 4.2.14.




          “Arch Guarantees” has the meaning assigned to such term in Section 8.1.




          “Arch Holding Companies” means each of the holding companies that will be formed prior to the
Closing as parent companies of Apogee Coal Company, Catenary
Coal


3









 






Company, and Hobet Mining, Inc., each of which will be a Delaware corporation and a direct or
indirect wholly-owned Subsidiary of Arch.




          “Arch Material Adverse Effect” means a material adverse effect on the performance, operations,
business, property, assets, liabilities, or condition (financial or otherwise) of the Arch
Companies taken as a whole; provided that the term “Arch Material Adverse Effect” shall exclude any
effect (a) resulting from changes in general United States economic and political conditions
(including changes in commodity prices, interest rates and/or currency exchange rates), or
applicable Law and generally accepted accounting principles that do not disproportionately affect
the Arch Companies, or (b) resulting from changes affecting companies in the United States coal
mining industry generally, in each case, that do not disproportionately affect the Arch Companies.




          “Arch Mine Properties” means the mines located on the Apogee Properties, the Catenary
Properties and the Hobet Properties.




          “Arch Plans” has the meaning assigned to such term in Section 4.2.14(a).




          “Arch Reorganization Transactions” has the meaning assigned to such term in the preamble to
this Agreement.




          “Arch Taxes” has the meaning assigned to such term in Section 11.2.




          “Arch Unaudited Financial Statements” has the meaning assigned to such term set forth in
Section 4.2.8 (b).




          “Arch VEBA Contributions” means the aggregate contributions made by Hobet Mining, Inc. and
Apogee Coal Company, or their successor entities, to the Hobet VEBA and the Apogee VEBA,
respectively.




          “ArcLight” has the meaning assigned to such term in the preamble.




          “Ark Land” means Ark Land Company, a Delaware corporation.




          “Assets and Properties” of any Person, means all assets and properties of every kind, nature,
character and description (whether real, personal or mixed, whether tangible or intangible, whether
absolute, accrued, contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, owned, leased or subleased by such Person, including without limitation cash, cash
equivalents, Investment Assets, accounts and notes receivable, chattel paper, documents,
instruments, general intangibles, Licenses, real estate, equipment, inventory, goods and
Intellectual Property.




          “Audited Financial Statement Date” means, as to any Person, the last day of the most recent
fiscal year of such for which audited financial statements are delivered pursuant to this
Agreement.




          “Basket” has the meaning assigned to it in Section 10.3(a).




4









 








          “Benefits Covered Employee” means any former employee of one of Arch of Kentucky, Arch of
Alabama, Sharples Coal Company, Zapata Coal Company, Arch of Illinois, Arch on the Green, Old
Hickory Coal Company or Dal-Tex Coal Company who (1) by virtue of their employment by one of the
foregoing entities under the NBCWA or its predecessor agreements is, or becomes entitled to receive
retiree medical benefits (“Union Employees”), or (2) is a former salaried employee of one of the
foregoing entities who is currently receiving retiree medical benefits by virtue of that
employment.




          “Blue Creek Lease” means the Lease Agreement and Option to Purchase to be entered into between
Ark Land and Robin Land, in substantially the forms attached as Exhibits B and C.




          “Books and Records” means, with respect to each Arch Company, all files, documents,
instruments, papers, books and records pertaining thereto, including without limitation financial
statements, Tax Returns and related work papers and letters from accountants, budgets, pricing
guidelines, personnel records, ledgers, journals, deeds, title policies, minute books, stock
certificates and books, stock transfer ledgers, Contracts, Licenses, customer lists, computer files
and programs, retrieval programs, operating data and plans and environmental studies and plans.




          “Cap” has the meaning assigned to it in Section 10.3(a).




          “Capital Lease” means, as applied to any Person, any lease of property, whether real, personal
or mixed by that Person as lessee which, in conformity with GAAP, is or should be accounted for as
a capital lease on the balance sheet of that Person.




          “Cash
Balance” has the meaning assigned to such term in Section 6.2(j).




          “Catenary” means Catenary Coal Company, LLC, a Delaware limited liability company and its
predecessor, Catenary Coal Company, a Delaware corporation.




          “Catenary
Properties” means the properties identified as being owned, leased or subleased by
any Arch Company on the maps attached hereto as Exhibit D and the facilities located thereon and
the equipment the book value of which is in excess of $100,000 identified as being owned, leased or
subleased by Catenary on Schedule 1.1(c).




          “CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, and the rules and regulations promulgated thereunder.




          “CERCLIS” means the Comprehensive Environmental Response and Liability Information System, as
provided for by 40 C.F.R. §300.5.




          “Change
in Control” has the meaning assigned to such term in Section 11.3.




          “Closing” has the meaning assigned to such term in Section 5.1.




          “Closing
Date” means December 31, 2005.




5









 








          “Closing Date Balance Sheet ” has the meaning assigned to such term in Section 3.2(a).




          “Closing VEBA Contribution” means an amount equal to $15,000,000 less the Initial Cash
Payment.




          “Closing Working Capital” shall mean an amount equal to Current Assets less Current
Liabilities of the Arch Companies on a consolidated basis.




          “Coal Act” means the Coal Industry Retiree Health Benefit Act of 1992, 26 U.S.C. §§9701, et
seq.




          “Coal Act Benefits” means any and all liabilities of the Company and/or its Affiliates with
respect to the Benefits Covered Employees under the Coal Act.




          “Coal Sales Agreements” mean the Coal Sales Agreement between Infinity Coal Sales, LLC as
agent for the Company and Arch Coal Sales Company, Inc. dated January 1, 2006 with respect to low
ash and the Coal Sales Agreement between Infinity Coal Sales, LLC as agent for the Company and Arch
Coal Sales Company, Inc. dated January 1, 2006 with respect to high ash.




          “Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.




          “Common Stock” has the meaning assigned to such term in Section 4.1.




          “Company” has the meaning assigned to such term in the preamble.




          “Company Material Adverse Effect” means a material adverse effect on the performance,
operations, business, property, assets, liabilities, or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole; provided that the term “Company Material Adverse
Effect” shall exclude any effect (a) resulting from changes in general United States economic and
political conditions (including changes in commodity prices, interest rates and/or currency
exchange rates), or applicable Law and generally accepted accounting principles that do not
disproportionately affect the Company and its Subsidiaries, or (b) resulting from changes affecting
companies in the United States coal mining industry generally, in each case, that do not
disproportionately affect the Company and its Subsidiaries.




          “Confidentiality Agreement” means the Agreement of Confidentiality entered into on the 30th
day of November, 2005 by and between Arch and the Company.




          “Contract” means any agreement, lease, sublease, license, deed of trust, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract (whether written or oral).




          “Conveying Documents” means every deed, bill of sale, security or other conveyance document
executed in connection with the transactions contemplated by this Agreement.




6









 








          “Covered
Employee” has the meaning assigned to such term in Section 6.3.




          “Current
Assets” shall mean those items set forth as current assets on the Form Statement
under the heading ”Current Assets.”




          “Current Liabilities” shall mean those items set forth as current liabilities on the Form
Statement under the heading “Current Liabilities.”




          “Damages” has the meaning assigned to such term in Section 10.3.




          “Effective
Time” shall mean 11:59 p.m. EST on the Closing Date.




          “Employee Benefits” means the Coal Act Benefits and the Workers’ Compensation Benefits.




          “Environmental
Claim” means, with respect to any Person, any written notice, claim, demand or
other communication (collectively, a “claim”) by any other Person alleging or asserting such
Person’s liability for investigatory costs, cleanup costs, Governmental or Regulatory Authority
response costs, damages to natural resources or other property, personal injuries, fines or
penalties arising out of, based on or resulting from (a) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by such Person, or (b)
circumstances forming the basis of any violation, or alleged violation, of any Environmental Law.
The term “Environmental Claim” shall include, without limitation, any claim by any Governmental or
Regulatory Authority for enforcement, cleanup, removal, response, remedial or other actions or
damages pursuant to any applicable Environmental Law, and any claim by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting
from the presence of Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.




          “Environmental Law” means any Law or Order relating to the regulation or protection of human
health, safety or the environment (including Surface Mining Control and Reclamation Act of 1977, as
amended (or any comparable state statute)) or to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or
wastes into the environment (including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes.




          “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder.




          “ERISA Affiliate” means each member of a controlled group (as defined in ERISA Section
4001(a)(14)(A)) of which an entity is a member and which is under common control (within the
meaning of ERISA Section 4001(a)(14)(B) and the regulations thereunder) with such entity.




7









 









          “Execution
Date” means the date by which the last party hereto has
executed this Agreement.




          “Executive Officer” means, as to any Person, any authorized officer of such Person.




          “FAS 106 Benefits” means those post-retirement medical benefits which are required to be
reflected on the balance sheet of a Person pursuant to Financial Accounting Standard 106.




          “Form Statement” means the form Working Capital Statement attached hereto as Schedule 1.1(d).




          “GAAP” means generally accepted accounting principles in effect in the United States from time
to time including, where appropriate, generally accepted auditing standards, including, without
limitation, the pronouncements and interpretations of appropriate accountancy administrative
bodies, applied on a consistent basis both as to classification of item and amounts.




          “Governmental or Regulatory Authority” means any court, tribunal, arbitrator, authority,
agency, commission, official or other instrumentality of the United States, any foreign country or
any domestic or foreign state, county, city or other political subdivision.




          “Hazardous Material” means (A) any petroleum or petroleum products, flammable explosives,
radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam
insulation and transformers or other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls (PCBs); (B) any chemicals or other materials or substances which are now
included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,”
“extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants”
or words of similar import under any Environmental Law; and (C) any other chemical or other
material or substance, exposure to which is now limited or regulated by any Governmental or
Regulatory Authority under any Environmental Law.




          “Hobet
” means Hobet Mining, LLC, a West Virginia limited liability company and its
predecessor, Hobet Mining, Inc. a West Virginia corporation.




          “Hobet
Properties” means the properties identified as being owned, leased or subleased by any
Arch Company on the maps attached hereto as Exhibit E and the facilities located thereon and the
equipment the book value of which is in excess of $100,000 identified as being owned, leased or
subleased by Hobet on Schedule 1.1(e)




          “Hobet VEBA” has the meaning assigned to that term in the preamble.




          “HSR Act” means Section 7A of the Clayton Act (Title II of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended) and the rules and regulations promulgated thereunder.




8









 








          “Incentive Compensation Accrual” has the meaning assigned to that term in Section 3.1(a).




          “Incentive Compensation Amount” has the meaning assigned to that term in Section 3.1(b).




          “Income Taxes” means any Taxes imposed upon or measured by net income or gross income
(excluding any Tax based solely on gross receipts) including any interest, penalty or additions
thereto.




          “Indebtedness” means and includes, as to any Person, without duplication, (a) obligations for
borrowed money which has been incurred in connection with the acquisition of property or assets or
for the deferred payment of the cost of construction or improvement thereof or for the deferred
purchase price of property (other than current accounts payable), (b) obligations secured by a Lien
or other charge upon property or assets of such Person, (c) obligations for the deferred purchase
price of property created or arising under any conditional sale or other title retention agreement
with respect to property acquired notwithstanding the fact that the rights and remedies of the
seller, bank or lessor under such agreement in the event of default are limited to repossession or
sale of the property (d) obligations (other than obligations under any lease which is not a Capital
Lease in accordance with GAAP and obligations in an amount equal to the demand component of any
contract providing for usual and customary, utility services, including gas, water, electricity and
wastewater treatment services) to purchase any property or services made regardless of whether such
property is delivered or such services are performed, except that no obligation shall constitute
Indebtedness solely because the contract provides for liquidated damages or reimbursement of
expenses following cancellation, (e) all Indebtedness of any other Person guaranteed by such
Person, (f) all Capital Leases entered into or assumed, (g) obligations in respect of letters of
credit but, only to the extent that, the letter of credit does not support an obligation already
included in Indebtedness or which would constitute a current account payable of such Person, (h)
all obligations of such Person to purchase securities (or other property) which arise out of or in
connection with the sale of the same or substantially similar securities (or property) and (i) all
obligations in respect of any hedging agreement.




          “Indemnified Party” has the meaning assigned to such term in Section 10.3 (i).




          “Indemnifying Party” has the meaning assigned to such term in Section 10.3(h).




          “Initial Cash Payment” has the meaning assigned to such term in Section 3.1(a).




          “Intellectual Property” means all patents and patent rights, trademarks and trademark rights,
trade names and trade name rights, service marks and service mark rights, service names and service
name rights, brand names, inventions, processes, formulae, copyrights and copyright rights, trade
dress, business and product names, logos, slogans, trade secrets, industrial models, processes,
designs, methodologies, computer programs (including all source codes) and related documentation,
technical information, manufacturing, engineering and technical drawings, know-how and all pending
applications for and registrations of patents, trademarks, service marks and copyrights.




9









 








          “Investment Assets” means, as to any Person, all debentures, notes and other evidences of
Indebtedness, stocks, securities (including rights to purchase and securities convertible into or
exchangeable for other securities), interests in joint ventures and general and limited
partnerships, mortgage loans and other investment or portfolio assets owned of record or
beneficially by such Person and issued by any Person other than such Person (other than trade
receivables generated in the ordinary course of business of such Person).




          “Knowledge” or “Known” means as to Arch, the actual knowledge of any of the individuals listed
on Schedule 1.1(f) and what such individual would reasonably be expected to have known after
reasonable inquiry within the scope of such individual’s job responsibilities.




          “Land Management Software” means the proprietary software systems developed by Arch and known
as Land Management System (LMS), Real Property System, and various Microsoft Excel models which
are used by Arch to manage and track its leased and owned properties, including without limitation,
to compute production royalties, minimum royalties, and wheelage charges, as well as existing
programs which permit interfacing with Ellipse. The Land Management Software includes, where
applicable and available, source code, executable code, data base structures, and any
documentation, in each case, in such form as is, and to the extent it is, existing as of the date
hereof. For clarification, the Land Management Software does not include FoxPro, Microsoft Access,
or Microsoft Excel.




          “LTD Individuals” has the meaning assigned to such term in Section 4.2.14(s).




          “Laws” means any and all laws, statutes, ordinances, rules or regulations promulgated by a
Governmental or Regulatory Authority.




          “Liabilities” means all Indebtedness, obligations and other liabilities of a Person (whether
absolute, accrued, contingent, fixed or otherwise, or whether due or to become due).




          “Licenses” means all licenses, permits, certificates of authority, authorizations, approvals,
registrations, franchises and similar consents granted or issued by any Governmental or Regulatory
Authority.




          “Lien” means any mortgage, pledge, assessment, security interest, lease, lien, adverse claim,
levy, charge or other encumbrance of any kind, or any conditional sale contract, title retention
contract or other contract to give any of the foregoing.




          “Loss” or “Losses” means any and all damages, fines, fees, penalties, deficiencies, losses and
expenses (including without limitation interest (at the rate of interest per annum publicly
announced from time to time by Citibank, N.A. as its prime rate in effect at its principal office
in New York City plus one percent from the date the Loss occurred through the date of payment in
full thereof), court costs, reasonable fees of attorneys, accountants and other experts or other
expenses of litigation or other proceedings or of any claim, default or assessment).




          “MCA Parties” has the meaning assigned to such term in the preamble.




10









 








          “Master Coal Sales and Services Agreement” means the Master Coal Sales and Services Agreement
to be entered into between Arch Coal Sales and TC Sales, in substantially the form attached hereto
as Exhibit F.




          “Master Contribution Agreement” has the meaning assigned to such term in the preamble.




          “Material Books and Records” means the Books and Records identified on Schedule 1.1(g).




          “Mine Properties” means the Arch Mine Properties.




          “Miscellaneous Bonds” has the meaning assigned to it in Section 8.1(a).




          “Multiemployer Plan” means multiemployer pension or benefit plans within the meaning of
Section 3(37) of ERISA or Sections 9702(a)(3)(C) or 9712(a)(2)(C) of the Code.




          “NBCWA” means the National Bituminous Coal Wage Agreement of 2002, any amendments thereto, and
all documents incorporated by reference therein.




          “NPL” means the National Priorities List under CERCLA.




          “Notice of Dispute” has the meaning assigned to such term in Section 3.2(c).




          “Option” means with respect to any Person means any security, right, subscription, warrant,
option, “phantom” stock right or other Contract that gives the right to (i) purchase or otherwise
receive or be issued any membership interests of such Person or any security of any kind
convertible into or exchangeable or exercisable for any membership interests of such Person or (ii)
receive or exercise any benefits or rights similar to any rights enjoyed by or accruing to the
holder of membership interests of such Person, including any rights to participate in the equity or
income of such Person or to participate in or direct the election of any directors or officers of
such Person or the manner in which any membership interests of such Person are voted.




          “Order” means any writ, judgment, decree, cessation order, notice of violation requiring steps
to abate a violation, injunction or similar order of any Governmental or Regulatory Authority.




          “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any
successor entity performing similar functions.




          “Party” or “Parties” have the meaning assigned to such terms in the preamble.




          “Permit Assignment and Assumption Agreements” means one or more Permit Assignment and
Assumption Agreements in substantially the form of Exhibit G.




          “Permitted Lien” means (a) any Lien for Taxes not yet due or delinquent or being contested in
good faith by appropriate proceedings for which adequate reserves have been


11









 







established in accordance with GAAP, (b) pledges and deposits made in the ordinary course of
business in connection with workman’s compensation, unemployment insurance and social security
benefits, (c) deposits made in the ordinary course of business securing the performance of bids,
trade contracts, leases, statutory obligations, surety, customs and appeal bonds and other
obligations of like nature incurred as or incidental to and in the ordinary course of business, (d)
any statutory Lien arising in the ordinary course of business by operation of Law with respect to a
Liability that is not yet due or delinquent, (e) any imperfection of title or similar Lien, (f) any
terms and conditions included in any Contracts relating to the applicable Assets and Properties,
(g) easements, zoning restrictions, rights-of-way, encroachments and similar encumbrances on real
property imposed by law or arising in the ordinary course of business or which are necessary or
desirable in connection with the business or the development thereof and (h) any Lien that would be
apparent from a physical inspection of the applicable Assets and Properties; provided (i) that the
term “Permitted Lien” shall not include any Lien securing Indebtedness and (ii) in the case of
Liens described in clauses (e), (f), (g) and (h) above, such Liens individually or in the aggregate
with other such Liens do not materially impair the value of the Assets and Properties subject to
such Lien or the use of such Assets and Properties in the conduct of the business of any of the
Arch Companies.




          “Person” means any natural person, corporation, general partnership, limited partnership,
proprietorship, other business organization, trust, union, association or Governmental or
Regulatory Authority.




          “Plan” means any employment, bonus, incentive compensation, deferred compensation, pension,
profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation
rights, phantom stock, leave of absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, accident, disability, sick pay, workmen’s compensation or other insurance,
severance, separation, fringe benefit or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including, but not limited to, any “employee
benefit plan” within the meaning of Section 3(3) of ERISA.




          “Purchase Price” has the meaning assigned to such term in Section 3.1(a).




          “Reclamation Bonds” means all cash (or cash equivalent), letters of credit and surety bonds
posted by or for the benefit of any of the Arch Companies to secure the performance of their
respective reclamation or other obligations pursuant to, in connection with or as a condition of
the licenses held by any of them, as set forth on Schedule 4.2.31(1).




          “Release” means any release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor environment, including,
without limitation, the movement of Hazardous Materials through ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata.




          “Retention Agreements” means the retention agreements relating to those employees of Hobet,
Apogee and Catenary, a list of whom has been previously provided to the Company by Arch, that
remain employees immediately after giving effect to the Closing and under which the aggregate
liability to all such employees does not exceed $2,197,871.




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          “Retirement Account Plan” has the meaning assigned to such term in Section 4.2.14(t).




          “Robin Land” means Robin Land Company, LLC, a Delaware limited liability company that will be
formed prior to Closing.




          “Robin Properties” means those properties described on Schedule 1.1(h).




          “Securities Act” means the Securities Act of 1933, as amended.




          “Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.




          “Specified Arch Affiliates” means Ark Land, Allegheny, Arch Coal Sales and the Arch Holding
Companies.




          “Subsidiary” means, with respect to any Person (the “Parent”) at any date, any corporation,
limited liability company, partnership, association or other entity the accounts of which would be
consolidated with those of the parent in the parent’s consolidated financial statements if such
financial statements were prepared in accordance with generally accepted accounting principles in
the United States as of such date, as well as any other corporation, limited liability company,
partnership, association or other entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are, as of such date,
owned, controlled or held, or (b) that is, as of such date, otherwise controlled, by the parent or
one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.
Unless otherwise specified, “Subsidiary” includes direct and indirect Subsidiaries.




          “Tax Benefit” has the meaning assigned to such term set forth in Section 11.2(e).




          “Tax Return” means any return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any such document prepared on a consolidated, combined or
unitary basis and also including any schedule or attachment thereto, and including any amendment
thereof.




          “Taxes” means all taxes, including all charges, fees, duties, levies or other assessments in
the nature of taxes, imposed by any federal, state, local or foreign law or Governmental or
Regulatory Authority, including income, gross receipts, excise, property, sales, gain, use,
license, custom duty, unemployment, inheritance, corporation, capital stock, transfer, franchise,
payroll, withholding, social security, minimum estimated, profit, gift, severance, value added,
disability, premium, recapture, credit, occupation, service, leasing, employment, stamp, goods and
services, ad valorem, utility, utility users and other taxes, and shall include interest, penalties
or additions to tax (whether or not disputed) attributable thereto or attributable to any failure
to comply with any requirement regarding Tax Returns.




          “TC Sales” means TC Sales Company, LLC, a Delaware limited liability company that will be
formed prior to Closing.




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          “TC Sales Agreements” means those agreements described on Schedule 1.1(i).




          “Transition Services Agreement means the Transition Services Agreement to be entered into
between Arch and the Company in substantially the form attached hereto as Exhibit H.




          “Unaudited Financial Statement Date” means, as to any Person, June 30, 2005.




          “Underlying Assets” means, as to the Arch Equity Interests, the Assets and Properties of each
of the Arch Companies.




          “Union Employees” has the meaning assigned to such term in the definition of Benefits Covered
Employees.




          “Warranty Breach” has the meaning assigned to such term in Section 10.3.




          “Weir” means Weir International Mining Consultants, Inc.




          “Workers’ Compensation Benefits” has the meaning assigned to such term in Section 10.3(h).




     1.2 Interpretation.



          In this Agreement:





     (a) the definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined;




     (b) whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms;




     (c) the words “include”, “includes” and “including” shall be deemed to be followed by
the phrase “without limitation”;




     (d) the word “will” shall be construed to have the same meaning and effect as the word
“shall”;




     (e) any definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other document as,
from time to time, amended, supplemented, restated or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth therein);




     (f) any reference herein to any Person shall be construed to include such Person’s
successors and permitted assigns;




     (g) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular provision
hereof;



14









 






     (h) all references herein to Sections and Schedules shall be construed to refer to
sections of, and Schedules to, this Agreement unless otherwise indicated; and




     (i) the headings used in this Agreement are for convenience of reference only and are
not to affect the construction of or to be taken into consideration in interpreting this
Agreement.



     1.3 Schedules and Exhibits.



          The Schedules and Exhibits listed in the Table of Contents are attached hereto. Each of such
Schedules and Exhibits constitutes an integral part of this Agreement and is incorporated by
reference herein and any reference to this “Agreement” shall include such Schedules and Exhibits.




ARTICLE II

Purchase and Sale; Funding of VEBAs




     2.1 Purchase and Sale of Arch Equity Interests.



          Upon the terms and subject to the conditions of this Agreement, on the Closing Date, Arch
agrees to sell, convey, transfer or deliver (or cause the sale, transfer, conveyance or delivery)
to the Company, free and clear of all Liens, all of its or their respective right, title and
interest in, to and under the Arch Equity Interests and the Company hereby agrees to purchase and
accept such Arch Equity Interests and rights relating thereto.




     2.2 Funding of VEBAs.



          Arch shall or shall cause each of Apogee and Hobet to, contribute $7,500,000 to each of the
Apogee VEBA and the Hobet VEBA, respectively, for the purpose of paying certain FAS 106 Benefits to
the those Benefits Covered Employees who are Union Employees, in accordance with the applicable
Trust Agreements with PNC Bank, N.A. The funding of the Arch VEBA Contributions shall be done in
accordance with Section 5.1.




ARTICLE III

Purchase Price




     3.1 Purchase Price.



          (a) The purchase price (“Purchase Price”) that the Company shall pay to Arch and/or the Arch
Holding Companies, as directed by Arch, for all the Arch Equity Interests and the other rights of
the Company hereunder shall be an amount (the “Initial Cash Payment”) equal to $15,000,000 less (i)
an amount equal to $2,256,000 which represents the aggregate amount of accrued payroll for the Arch
Companies through December 31, 2005 for the payroll to be paid on January 4, 2006 and (ii) $680,000
(the “Incentive Compensation Accrual”), as adjusted pursuant to Section 3.1(b), if applicable,
Section 3.2, and Section 6.3(d) if applicable, below.




          (b) Within 90 days of the Closing Date, Arch shall calculate the amount of

15









 








incentive compensation that would have been payable (the “Incentive Compensation Amount”)
under the Arch annual incentive compensation plan, based upon the performance parameters approved
by the Board of Directors of Arch for the 2005 plan year. In the event the Incentive Compensation
Amount is in excess of $680,000, Arch shall pay such excess amount to the Company and the Purchase
Price shall be decreased accordingly. Any such excess amount shall be paid in immediately
available funds within five (5) business days of the determination of the Incentive Compensation
Amount.




     3.2 Working Capital Adjustment.



          (a) Within 60 calendar days after the Closing, Arch shall prepare and deliver to the Company
(i) an audited balance sheet as of the Effective Time (the “Closing Date Balance Sheet”), (ii) a
calculation of Closing Working Capital as of the Effective Time (the “Actual Closing Working
Capital Statement”), and (iii) a calculation of the Closing Working Capital as reflected in the
Actual Working Capital Statement, adjusted in accordance with Section 3.2(b) (the “Adjusted Closing
Working Capital Statement”). The Adjusted Closing Working Capital Statement shall reflect the
Closing Working Capital as adjusted in accordance with Section 3.2(b) (the “Adjusted Closing
Working Capital”). The Closing Date Balance Sheet and the Actual Closing Working Capital Statement
shall be prepared in accordance with GAAP in a manner consistent with the Accounting Policies and
shall be calculated using the same line items as those set forth in the Form Statement. To the
extent GAAP or the provisions of Section 3.2(a) or Section 3.2(b) permit alternate treatments of
any item, the particular treatment used for purposes of this Section 3.2 shall be that used in the
preparation of the unaudited balance sheet prepared by Ernst & Young LLP in connection with the
financial statements titled “Arch Coal, Inc. Contributed Properties Financial Statements dated June
30, 2005” (including the Accounting Policies).




          (b) The Adjusted Working Capital shall mean the Closing Working Capital reflected on the
Actual Closing Working Capital Statement, adjusted as follows: increased by (i) all amounts paid
by Arch on or prior to the Closing Date as advance royalties due in January 2006 and payable to
Dingess Rum, ACIN or Kelly Hatfield, (ii) all current medical and other benefits claims that are
incurred but not recorded, and (iii) all accrued incentive compensation amounts, and decreased by
net pension assets. For clarification, the Cash Balance provided for in Section 6.2(d)(j) shall
not be factored into the calculation of Adjusted Working Capital in any way.




          (c) The Company shall have access to and the right to copy such books and records, including
Arch’s accountants work papers and files, as the Company deems reasonably necessary to confirm the
Closing Date Balance Sheet, and the calculation of the Adjusted Closing Working Capital
(collectively such books and records referred to as the “Accounting Records”).




          (d) If the Company disputes any amounts reflected on the Closing Date Balance Sheet, the
Closing Working Capital Statement or the Adjusted Closing Working Capital Statement as delivered by
Arch, the Company shall so notify Arch in writing (“Notice of Dispute”) not more than 60 calendar
days after the date which is the later of the date that the Company receives the Closing Date
Balance Sheet, the Closing Working Capital Statement, the

16









 








Adjusted Closing Working Capital Statement and/or the Accounting Records, specifying in reasonable
detail any points of disagreement. If the Company fails to deliver a Notice of Dispute within such
60-day period, the Company shall be deemed to have accepted the Closing Working Capital Statement
and the Adjusted Closing Working Capital Statement. Upon receipt of the Notice of Dispute, Arch
shall promptly consult with the Company with respect to such points of disagreement in an effort to
resolve the dispute. If any such dispute cannot be resolved by Arch and the Company within 30
calendar days after Arch receives the Notice of Dispute, they shall refer the dispute to
PricewaterhouseCoopers LLP (“Accountant”) as an arbitrator to finally determine, as soon as
practical, and in any event within 30 calendar days after such reference, all points of
disagreement with respect to the Closing Working Capital Statement and the Adjusted Closing Working
Capital Statement. For purposes of such arbitration, each of Arch and the Company shall submit a
proposed Closing Working Capital Statement and Adjusted Closing Working Capital Statement. The
Accountant shall apply the accounting and other principles set forth in this Section 3.2 and shall
otherwise conduct the arbitration under such procedures as Arch and the Company may agree or,
failing such agreement, under the Commercial Rules of the American Arbitration Association then
prevailing. The fees and expenses of the Accountant pursuant to this Section 3.2(c) shall be borne
50% by Arch and 50% by the Company. Each Party shall be solely responsible for any fees and
disbursements of its independent auditors and attorneys in connection with this Section 3.2. All
determinations by the Accountant shall be final, conclusive and binding with respect to the Closing
Working Capital Statement and Adjusted Closing Working Capital Statement.




          (d) Based on the Adjusted Closing Working Capital Statement as finally determined under this
Section 3.2, if the Adjusted Closing Working Capital is greater than $10,465,000, the Purchase
Price shall be increased on a dollar for dollar basis and the amount of the difference shall be
paid by the Company to Arch and/or the Arch Holding Companies, as designated by Arch, by wire
transfer within two (2) business days of the final determination of the Closing Working Capital.
In the event the Adjusted Closing Working Capital as finally determined under this Section 3.2 is
less than $10,465,000 the Purchase Price shall be decreased on a dollar for dollar basis and the
amount of the difference shall be paid by Arch to the Company by wire transfer within two (2)
business days of the final determination of the Closing Working Capital.




ARTICLE IV

Representations and Warranties; Limitations




     4.1 Company Representations.



          The Company represents and warrants to Arch:





     (a) The Company is a corporation duly organized, validly existing and in good standing
under the Law of the State of Delaware. The Company has full power and authority to execute
and deliver this Agreement and any Ancillary Documents to which it is a party, to perform
its obligations hereunder and thereunder, as applicable and to consummate the transactions
contemplated hereby and thereby, as applicable. The Company is duly qualified to do
business as a foreign corporation and is in good standing



17









 






in each jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified could not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.




     (b) The execution and delivery by the Company of this Agreement and any Ancillary
Documents to which it is a party, and the performance by the Company of its obligations
hereunder and thereunder, as applicable, have been duly and validly authorized and no other
action on the part of the Company is necessary.




     (c) Each of this Agreement and each of the Ancillary Documents to which it is a party,
has been duly and validly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company, enforceable against the Company in accordance
with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors’ rights generally and subject, as to enforceability, to
equitable principles of general application (regardless of whether enforcement is sought in
a proceeding in equity or at law)).




     (d) Except as set forth in Schedule 4.1(d), no consent, approval or action of, filing
with or notice to any Governmental or Regulatory Authority or any other Person on the part
of the Company is required in connection with the execution, delivery and performance of
this Agreement or any Ancillary Documents to which it is a party or the consummation of the
transactions contemplated hereby or thereby.




     (e) The execution and delivery by the Company of this Agreement and any Ancillary
Documents to which it is a party do not, and the performance by it of its obligations under
this Agreement and any Ancillary Documents to which it is a party and the consummation of
the transactions contemplated hereby and thereby, as applicable, will not:




     (i) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or bylaws of the
Company;




     (ii) conflict with or result in a violation or breach of any term or provision
of any Law or Order applicable to it or its Assets and Properties to the extent that
such conflict, violation or breach would reasonably be expected, individually or in
the aggregate, to result in a Company Material Adverse Effect; or




     (iii) (A) conflict with or result in a violation or breach of, (B) constitute
(with or without notice or lapse of time or both) a default under, (C) require the
Company to obtain any consent, approval or action of, make any filing with or give
any notice to any Person as a result or under the terms of, (D) result in or give to
any Person any right of termination, cancellation, acceleration or modification in
or with respect to, (E) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments under, or
(F) result in the creation or imposition of any Lien upon the



18









 






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



     4.2 Arch Representations.



          Arch represents and warrants to the Company:




     Capacity; Organization




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






(b) On the Closing Date, each of the Arch Companies will be a limited
liability company duly formed, validly existing and in good standing under
the Laws of its jurisdiction of organization.




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



     Authority




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






19










 







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



     Membership Interests




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





     Coal Mining Interests and Real Property




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




20









 






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






(b) Except as set forth in Schedule 4.2.4(b), at the time of Closing the
ownership or leasehold rights described in paragraph (a) above will afford
the Arch Companies the right to extract and sell coal from the Arch Mine
Properties (with respect to leased or subleased property, as to coal covered
by such leases or subleases) in a manner consistent with how the Arch Mine
Properties are currently being operated and as they were operated during the
period covered by the Arch Unaudited Financial Statements. As of Closing,
the real property described in Schedule 4.2.4(a) includes all real estate
ownership and leasehold rights necessary to fully pursue all mining and
reclamation activities authorized under the Licenses currently held by the
Arch Companies.




(c) Each lease or sublease referred to in clause (ii) of paragraph (a) above
is a legal, valid and binding agreement, enforceable in accordance with its
terms, of an Arch Company and, to the Knowledge of Arch, of each other
Person that is a party thereto (subject to applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors’
rights generally and subject, as to enforceability, to equitable principles
of general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)), and except as set forth in Schedule
4.2.4(c)(1), there is no, and none of Arch, any Arch Company or any of the
Specified Arch Affiliates has received notice of any, default (or any
condition or event which, after notice or lapse of time or both, would
constitute a default) or termination thereunder or in respect thereof. No
Arch Company owes any brokerage commissions with respect to any such leased
space. The amounts of prepaid royalties and rentals available for
recoupment as of November 30, 2005 are listed by lease on Schedule
4.2.4(c)(2).




(d) Arch has delivered or made available to the Company prior to the
execution of this Agreement true and complete copies in all material
respects of (i) all deeds and similar documents, and all amendments thereof,
with respect to the real property shown on Schedule 4.2.4(a)(i),



21









 







and (ii) all leases and subleases (including any amendments and renewal
letters) and, to the extent reasonably available, all other documents
referred to in clause (i) of this paragraph (d) with respect to the real
property shown on Schedule 4.2.4(a)(ii).




(e) Except as disclosed in Schedule 4.2.4(e), no tenant or other party in
possession of any of the real properties owned by the Arch Companies, has
any right to purchase, or holds any right of first refusal to purchase, such
properties.




(f) Except with respect to the real property leased to others set forth in
subsection (ii) of Schedule 4.2.4(a), and except as disclosed in Schedule
4.2.4(f), the improvements on the real property identified in subsections
(i) and (ii) of Schedule 4.2.4(a) are in good operating condition and in a
state of good maintenance and repair, ordinary wear and tear excepted, are
adequate and suitable for the purposes for which they are presently being
used and there are no condemnation or appropriation proceedings pending or,
to the Knowledge of Arch, threatened against any of such real property or
the improvements thereon.



     No Conflicts




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






(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or bylaws of
Arch or any of the Arch Holding Companies;




(b) subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in Schedule 4.2.5(b), conflict with
or result in a violation or breach of any term or provision of any Law or
Order applicable to Arch or any Arch Company or any of their respective
Assets and Properties to the extent that such conflict, violation or breach
would reasonably be expected, individually or in the aggregate, to result in
an Arch Material Adverse Effect; or




(c) except as set forth on Schedule 4.2.5(c), (i) conflict with or result in
a violation or breach of, (ii) constitute (with or without notice or lapse
of time or both) a default under, (iii) require Arch or any Arch Company to
obtain any consent, approval or action of, make any filing with or give any
notice to any Person as a result or under the terms of, (iv) result in or
give to any Person any right of termination, cancellation, acceleration or
modification in or with respect to, (v) result in or give to any Person any
additional rights or entitlement to increased, additional, accelerated or
guaranteed payments under, or (vi) result in the creation or imposition of



22









 







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



     Governmental Approvals and Filings




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





     Books and Records




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






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



     Financial Statements




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






(a) the actual audited financial statements titled “Arch Coal Inc.
Contributed Properties Financial Statements” for each of the fiscal years
ended December 31, 2002, December 31, 2003 and December 31, 2004, together
with a true and complete copy of the report on such audited information by
Ernst & Young LLP, and




(b) the actual unaudited financial statements titled “Arch Coal, Inc.
Contributed Properties Combined Financial Statements” for the nine month
period ended (i) September 30, 2004 and (ii) September 30, 2005 (such
financial statements in clause (ii) shall be referred to as the “Arch
Unaudited Financial Statements”) prepared by Ernst & Young LLP; and



23









 






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



     Absence of Changes




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






(a) (i) any increase of more than $5,000,000 (calculated on an annualized
basis) in the aggregate salaries, wages or other compensation of officers,
employees or consultants of the Arch Companies; (ii) any adoption, entering
into or becoming bound by any Plan, employment-related Contract or
collective bargaining agreement, or amendment, modification or termination
(partial or complete) of any Plan, employment-related Contract or collective
bargaining agreement, except to the extent required by applicable Law; or
(iii) any entering into an agreement or making of a representation to
employees of the Arch Companies or any request or demand by employees of the
Arch Companies to provide future increases in benefit levels (or create new
benefits) with respect to any Plan, under circumstances which make it
reasonable to expect that such increases would be granted or such benefits
created;




(b) any declaration, setting aside or payment of any dividend or other
distribution in respect of the equity interests of any Arch Company, or any
direct or indirect redemption, purchase or other acquisition by any Arch
Company of any such equity interests or of any Option with respect to any
Arch Company;




(c) any authorization, issuance, sale or other disposition by any Arch
Company of any equity interests of or Option with respect to any Arch
Company, or any modification or amendment of any right of any holder of any
outstanding equity interests of or Option with respect to any Arch Company;




(d) (i) any incurrence by the Arch Companies of Indebtedness in an aggregate
amount exceeding $8,000,000 (net of any amounts discharged



24









 







during such period), or (ii) any voluntary purchase, cancellation,
prepayment or complete or partial discharge in advance of a scheduled
payment date with respect to, or waiver of any right of any Arch Company
under, any Indebtedness of or owing to any Arch Company;




(e) any physical damage, destruction or other casualty loss (whether or not
covered by insurance) affecting any of the plant, real or personal property
or equipment of any Arch Company in an aggregate amount exceeding
$5,000,000;




(f) any material change in (i) any pricing, investment, accounting,
financial reporting, inventory, credit, allowance or Tax practice or policy
of any Arch Company, (ii) any method of calculating any bad debt,
contingency or other reserve of any Arch Company for accounting, financial
reporting or Tax purposes, or any change in the fiscal year of any Arch
Company;




(g) any write-off or write-down of or any determination to write off or
write down any of the Assets and Properties of any Arch Company in an
aggregate amount exceeding $5,000,000 other than depreciation in the
ordinary course of business of such Arch Company);




(h) any acquisition or disposition of, or incurrence of a Lien (other than a
Permitted Lien) on, any Assets and Properties of any Arch Company, other
than in the ordinary course of business consistent with past practice;




(i) any (i) amendment of the operating agreement of any Arch Company, (ii)
recapitalization, reorganization, liquidation or dissolution of any Arch
Company or (iii) merger or other business combination involving any Arch
Company and any other Person;




(j) other than in the ordinary course of business consistent with past
practice, any entering into, amendment, modification, termination (partial
or complete) or granting of a waiver under or giving any consent with
respect to (i) any Contract that is required to be disclosed in the Schedule
4.2.18(a) or (ii) any License held by any Arch Company;




(k) capital expenditures or commitments for additions to property, plant or
equipment of the Arch Companies constituting capital assets in an aggregate
amount exceeding $10,000,000;




(l) any commencement or termination by any Arch Company of any line of
business;




(m) any transaction by any Arch Company with Arch, and officer, director or
Affiliate (other than any Arch Company) of Arch (i) outside the



25









 







ordinary course of business consistent with past practice or (ii) other than
on an arm’s length basis;




(n) any transaction by any Arch Company involving (i) the sale, lease,
transfer or other disposal of any of its Assets and Properties, except for
inventory sold in the ordinary course of business, or (ii) the waiver or
release of any right of substantial value;




(o) any change in the relations with any Arch Company’s employees, agents,
customers or suppliers or with any Governmental or Regulatory Authority or
any self-regulatory organizations that would be reasonably likely,
individually or in the aggregate, to result in an Arch Material Adverse
Effect;




(p) any institution, settlement or agreement to settle any Action or
Proceeding involving any Arch Company or any of their respective Assets and
Properties, business or operations outside of the ordinary course of
business consistent with past practice;




(q) (i) any failure by any Arch Company to replenish its respective
inventories and supplies in a normal and customary manner consistent with
its prior practice and prudent business practices prevailing in the
industry, (ii) any purchase commitment in excess of the normal, ordinary and
usual requirements of its business or at any price in excess of the current
market price or on terms more onerous than those usual and customary in the
industry, or (iii) any change in its selling, pricing, advertising or
personnel practices inconsistent with its prior practice and prudent
business practices prevailing in the industry;




(r) any change in the banking or safe deposit arrangements of any Arch
Company;




(s) any labor union organizing activity, any actual or threatened employee
strikes, work stoppages, slow-downs or lock-outs, or any material change in
any Arch Company’s relations with such Arch Company’s employees, customers,
agents or suppliers or with any Governmental or Regulatory Authority;




(t) any transfer or granting of rights under, or entering into any
settlement regarding the breach or infringement of any License or
Intellectual Property rights or modified any existing rights with respect
thereto;




(u) additional contingent liabilities in an aggregate of $5,000,000 or more;




(v) additional bonding obligations in the aggregate of $5,000,000;



26









 






(w) any entering into of a Contract to do or engage in any of the foregoing
after the Execution Date;




(x) any other transaction involving or development affecting any Arch
Company outside the ordinary course of business consistent with past
practice;




(y) any material change in the working capital balance of the Arch Companies
in the aggregate; or




(z) any notice from Ernst & Young of (A) any material deficiencies in the
design or operation of internal controls that could materially adversely
affect the ability of Arch to record, process, summarize and report financial
data, or any material weaknesses in internal controls or (B) any fraud,
whether or not material, that involves management or other employees who have
a significant role in the internal controls of Arch.



     No Undisclosed Liabilities




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





     Taxes




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






(a) Each Arch Company has filed all Tax Returns required to be filed by it,
and it duly paid in full all Taxes owed by it (whether or not shown on such
Tax Returns). All such Tax Returns were complete and correct in all
material respects.




(b) Each Arch Company has complied in all material respects with all
applicable Laws relating to the withholding of Taxes (including withholding
of Taxes pursuant to Sections 1441, 1442, 1446, 3121 and 3406 of the Code or
similar provisions under any state or foreign laws), has withheld and timely
and properly paid over to the relevant Governmental or Regulatory Authority
all amounts required to be



27









 







withheld under such laws, and has timely filed all Tax Returns with respect
to such withholding.




(c) No election has been filed by or on behalf of any Arch Company to be
treated as an association taxable as a corporation for federal income tax
purposes (or any similar state, local or foreign tax purposes).




(d) No Arch Company is a party to or bound by, or has any obligation under,
any Tax sharing agreement, Tax indemnification agreement or similar contract
or arrangement, or has any liability or obligation to any Person as a result
of, or pursuant to, any such agreement, contract or arrangement.




(e) There are no outstanding requests, agreements, consents or waivers to
extend the statute of limitations applicable to the assessment of any Taxes
or deficiencies against any Arch Company or against any consolidated,
combined or unitary tax group of which it is or has been a member.




(f) There are no Liens for Taxes (other than Permitted Liens) with respect
to any of the Assets or Properties of any Arch Company.



     Legal Proceedings




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






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



     Compliance With Laws




	 	4.2.13	 	Except as disclosed in Schedule 4.2.13:





28









 






(a) each Arch Company is, and at all times since December 31, 2001 has been,
in compliance with all existing Laws and Orders now or hereafter applicable
to their Assets and Properties, business or operations in all material
respects and none of Arch, any Arch Company or any of the Specified Arch
Affiliates is or has at any time within the last four years been, or has
received any notice that it is or has at any time within the last four years
been, in violation of or in default under, in any material respect, any Law
or Order applicable to any Arch Company or any of their respective Assets
and Properties, business or operations;




(b) neither the ownership nor use of each Arch Company’s Assets and
Properties nor the conduct of its business conflicts with any material right
of any other Person or violates, or without the giving of notice or the
passage of time, or both, will violate, conflict with, or result in a
default under any Lien, License, Contract, Law or Order to which such Arch
Company is a party or by which it may be bound or affected, except to the
extent that such conflict or violation could not reasonably be expected,
individually or in the aggregate with other conflicts or violations, to
result in an Arch Material Adverse Effect, or any terms or provisions of
such Arch Company’s limited liability company agreement or certificate of
incorporation and bylaws, as the case may be, as presently in effect.



     Benefit Plans; ERISA




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




29









 






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






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



30









 







the Arch Benefit Plans currently maintained but also with respect to any
employee benefit plan, program, agreement or arrangement subject to Title IV
of ERISA to which contributions were made (or were required to be made)
during the preceding four-year period); (vii) none of the Arch Benefit Plans
nor any trust created thereunder or with respect thereto has engaged in any
“prohibited transaction” or “party in interest transaction” as such terms
are defined in Section 4975 of the Code and Section 406 of ERISA which could
subject the Arch Companies or the Company to a tax or penalty on prohibited
transaction or party in interest transactions pursuant to Section 4975 of
the Code or Section 502(i) of ERISA; (viii) none of the Arch Companies or
the Specified Arch Affiliates have received any written notice of any matter
pending (other than routine qualification determination filings) with
respect to any of the Arch Benefit Plans before the Internal Revenue
Service, the Department of Labor or the PBGC.




(c) The only Multiemployer Plans to which the Arch ERISA Entities contribute
to or have contributed to during the last four calendar years (or is or have
been obligated to contribute to) are: United Mine Workers of America 1974
Pension Plan; United Mine Workers of America 1950 Pension Plan; United Mine
Workers of America 1993 Benefit Plan and Trust; United Mine Workers of
America Combined Benefit Fund; and the United Mine Workers of America 1992
Benefit Plan. With respect to each such Multiemployer Plan: (i) no event
has occurred that would give rise to any withdrawal liability on the part of
the Arch ERISA Entities; (ii) none of Arch ERISA Entities (or their
predecessors) has received any written notice that such Multiemployer Plan
is in “reorganization” (within the meaning of Section 4241 of ERISA), that
increased contributions may be required to avoid a reduction in plan
benefits or the imposition of an excise tax, or that the Multiemployer Plan
is or may become “insolvent” (within the meaning of Section 4241 of ERISA);
(iii) none of the Arch ERISA Entities (or their predecessors) has received
any written notice that a Multiemployer Plan is a party to any pending
merger or asset or liability transfer under Part 2 of Subtitle E of Title IV
of ERISA and (iv) none of the Arch ERISA Entitles (or their predecessors)
has received any written notice that the PBGC has instituted proceedings
against the Multiemployer Plan.




(d) None of the Arch ERISA Entities has been notified of the assessment of,
nor have the Arch ERISA Entities incurred, withdrawal liability under
Subtitle E of Title IV of ERISA or termination liability under Subtitle D of
Title IV of ERISA.




(e) The Arch ERISA Entities have complied in all material respects with the
applicable requirements of Section 4980B of the Code, Sections 601-609 of
ERISA, or any local Law of similar effect.



31









 






(f) None of the Arch Companies, their predecessors, or any related person to
either within the meaning of Section 9701(c) of the Code has any current or
past unpaid liability under Section 9704 or Section 9712 of the Code.




(g) Except as set forth in Schedule 4.2.14(g), neither the Arch Companies,
their predecessors nor any related person to the Arch Companies or their
predecessors within the meaning of Section 9701(c) of the Code currently
have any liability for premiums or benefits under either Sections 9704, 9711
or 9712 of the Code.




(h) Except as set forth in Schedule 4.2.14(h), each of the Arch Benefit
Plans is, and its administration and operation is and has been since
inception, in all material respects in compliance with, and no Arch ERISA
Entity has received any claim or notice that any such Arch Benefit Plan is
not in compliance with, all applicable Laws or Orders and prohibited
transactions exemptions, including the requirements of ERISA, the Code, the
Age Discrimination in Employment Act, the Equal Pay Act and Title VII of the
Civil Rights Act of 1964, and the terms of such Arch Benefit Plan or any
related trust agreement, insurance contract or other funding instrument. No
event has occurred, and there exists no condition or set of circumstances in
connection with any Arch Benefit Plan, under which the Company or any Arch
Company, directly or indirectly (through any indemnification agreement or
otherwise), could reasonably be expected to be subject to any risk of
material liability under Section 409 of ERISA.




(i) Each Arch Benefit Plan that is intended to afford any benefit related to
Taxes to any Arch Company or any other Person complies with the requirements
of the applicable provisions of the Code or other Laws required in order to
provide such Tax benefit to such Arch Company or such Person. (A) As of the
Execution Date, all contributions and other payments required to be made by
Arch ERISA Entity or any other Person to any Arch Benefit Plan with respect
to any period ending before or at or including the Execution Date have been
made or reserves adequate for such contributions or other payments have been
or will be set aside therefor in accordance with GAAP; and (B) as of the
Closing Date, all contributions and other payments required to be made by
Arch ERISA Entity or any other Person to any Arch Benefit Plan with respect
to any period ending before or at or including the Closing Date will have
been made or reserves adequate for such contributions or other payments have
been or will be set aside therefor in accordance with GAAP. There are no
material outstanding liabilities of any Arch Benefit Plan other than
liabilities for benefits to be paid, in the ordinary course, to participants
of such Arch Benefit Plan and their beneficiaries in accordance with the
terms of such Arch Benefit Plan.



32









 






(j) Neither the execution of this Agreement nor the completion of the
transaction contemplated by this Agreement will (i) except as set forth in
Schedule 4.2.14(j), result in or cause the establishment, payment,
acceleration, vesting, an increase in or funding of a benefit under any Arch
Benefit Plan, (ii) result in a violation of the fiduciary duties of Section
404 of ERISA, the prohibited transaction rules of Section 406 of ERISA or
Section 4975 of the Code, or (iii) result in a payment that will be
nondeductible to the Company or any Arch Company or subject to Tax under
Code Section 280G or 4999.




(k) Except as set forth in Schedule 4.2.14(k) or for the Arch Benefit Plans
required to be maintained pursuant to the NBCWA, the Coal Act or the
memorandum of understanding between the United Mine Workers of America and
Apogee covering the Guyan mine, each Arch Company has the right to modify or
terminate non-pension benefits to employees, former employees, directors or
other Persons (other than benefits required to be provided under Section 601
et seq. of ERISA) under any Arch Benefit Plan without incurring any
additional benefit cost.




(l) Complete and correct copies of the following documents have been
furnished to the Company prior to the execution of this Agreement:




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






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



33









 







disqualification of any Arch Benefit Plan or the imposition of penalties or
excise taxes with respect to the Arch Benefit Plans by the Internal Revenue
Service, the Department of Labor, the PBGC or any other Governmental or
Regulatory Authority.




(n) Except as set forth on Schedule 4.2.14(n), none of the Arch ERISA
Entities has any formal plan or commitment, whether legally binding or not,
to create any additional benefit plan or modify or change any existing Arch
Benefit Plan that would affect any current or former employee of the Arch
Companies (or their predecessors).




(o) Except as set forth in Schedule 4.2.14(o), no Arch Benefit Plan provides
benefits, including without limitation death or medical benefits (whether or
not insured), with respect to current or former employees of the Arch
Companies (or their predecessors) beyond their retirement or other
termination of service, other than (i) coverage mandated solely by
applicable Law, (ii) death benefits or retirement benefits under any
“employee pension benefit plan” as defined in Section 3(2) of ERISA, (iii)
deferred compensation benefits accrued as liabilities on the books of the
Arch Companies, or (iv) benefits the full costs of which are borne by the
current or former employee or his or her beneficiary.




(p) Except with respect to changes required by applicable Law, there has
been no adoption of, amendment to, written interpretation or announcement
(whether or not written) relating to, or change in employee participation or
coverage under, any Arch Benefit Plan that would increase materially the
expense of maintaining such Arch Benefit Plan above the level of the expense
incurred in respect thereof shown on the actual audited Arch Companies
Financial Statements for the fiscal year ended December 31, 2004.




(q) To the Knowledge of Arch, no representations or communications, oral or
written, with respect to the participation, eligibility for benefits,
vesting, benefit accrual or coverage under any Arch Benefit Plan have been
made that are not in accordance with the terms and conditions of the Arch
Benefit Plans.




(r) As of the Closing Date, Arch will have provided to the Company duly
executed copies of the trust documents and any amendments thereto relating
to the Hobet VEBA and the Apogee VEBA.




(s) (i) The Arch Companies Plans do not sponsor, maintain or contribute to
any long term disability Plan or otherwise provide long term disability
benefits to any Arch Companies Plans Employees as of the Closing Date. (ii)
Except for those individuals, a list of whom has previously been disclosed to
the Company (the “LTD Individuals”), Arch and the Arch Plans will retain the
obligation to provide long term disability



34









 







benefits to individuals receiving such benefits as of the Closing Date and no
liabilities with respect thereto shall pass to the Arch Companies.




(t) The Arch Coal, Inc. Retirement Account Plan (“Retirement Account
Plan”) provides an annual cash balance credit (as defined in the plan) to the
notional account under the Retirement Account Plan for each participant who
is credited with a year of service for the plan year. Therefore, for the
2005 plan year, a Covered Employee will receive an annual cash balance credit
if he or she is credited with at least 1,000 hours of service under the
Retirement Account Plan and is otherwise an eligible participant under the
terms of the plan. Interest credits (as defined in the plan) are credited to
each notional account under the Retirement Account Plan as of the last day of
each month (prior to the crediting of any annual or transition credits). For
a vested participant, interest credits continue each month until he or she
receives a distribution of his or her account. For a nonvested participant,
interest credits stop when he or she terminates employment.



     Reserved




	 	4.2.15	 	[Intentionally Omitted.]





     Tangible Personal Property; Investment Assets




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




35









 






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






(b) No Arch Company owns any Investment Assets.



     Intellectual Property Rights




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





     Contracts




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






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




(ii) all Contracts with any Person containing any provision or covenant
prohibiting or limiting the ability of any Arch Company to engage in
any business activity or compete with any Person or prohibiting or
limiting the ability of any Person to compete with any Arch Company;




(iii) all partnership, joint venture, shareholders’ or other similar
Contracts with any Person;



36









 







(iv) all Contracts relating to Indebtedness of any Arch Company in
excess of $5,000,000;




(v) all Contracts with distributors, service providers, dealers,
manufacturer’s representatives, sales agencies or franchisees that
involve aggregate annual payments in excess of $5,000,000;




(vi) all Contracts relating to (A) the future disposition or
acquisition of any Assets and Properties, other than dispositions or
acquisitions in the ordinary course of business consistent with past
practice or in connection with the Arch Reorganization Transactions,
and (B) any merger or other business combination other than the Arch
Reorganization Transactions;




(vii) all Contracts between or among any Arch Company, on the one hand,
and Arch or any officer, director or Affiliate (other than any Arch
Company) of Arch on the other hand;




(viii) all collective bargaining or similar labor Contracts;




(ix) all Contracts that (A) limit or contain restrictions on the
ability of any Arch Company to declare or pay dividends on, to make any
other distribution in respect of or to issue or purchase, redeem or
otherwise acquire its membership interests, to incur Indebtedness, to
incur or suffer to exist any Lien, to purchase or sell any Assets and
Properties, to change the lines of business in which it participates or
engages or to engage in any business combination or (B) require any
Arch Company to maintain specified financial ratios or levels of net
worth or other indicia of financial condition;




(x) as of the Execution Date, all coal sales and transportation
agreements that will be assigned to TC Sales or will be subject to the
Master Coal Sales and Services Agreement; and




(xi) all other Contracts (other than Arch Benefit Plans, leases listed
on subsection (ii) of Schedule 4.2.4(a) and the items set forth on
Schedule 4.2.16(a)(1) and insurance policies listed in Schedule 4.2.20)
that (A) involve the payment or potential payment, pursuant to the
terms of any such Contract, by or to any Arch Company of more than
$5,000,000 annually and (B) cannot be terminated within 90 days after
giving notice of termination without resulting in any material cost or
penalty to any Arch Company.




(b) Each Contract required to be disclosed in Schedule 4.2.18(a) is in full
force and effect and constitutes a legal, valid and binding agreement of
such Arch Company, enforceable in accordance with its terms enforceable
against each in accordance with its terms, (subject to applicable
bankruptcy, reorganization, insolvency, moratorium or similar



37









 







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



     Licenses




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






(a) each License required to be obtained for the current stage of
development of the Arch Mine Properties has been duly obtained and validly
issued, is in full force and effect, is final and not subject to appeal and
held in the name of an Arch Company and is free from conditions or
requirements the compliance with which would, individually or in the
aggregate, reasonably be expected to have an Arch Material Adverse Effect;




(b) each License relating to the Arch Mine Properties will be issued in the
name of or assigned to an Arch Company on the Closing Date;




(c) each applicable Arch Company is in compliance with each such License,
except to the extent that noncompliance could not be reasonably likely,
individually or in the aggregate, to have an Arch Material Adverse Effect;




(d) none of Arch, any of the Arch Companies, or any of the Specified Arch
Affiliates has received any notice that it is, in default (or with the
giving of notice or lapse of time or both, would be in default) under any
such License;




(e) (i) Arch has no actual knowledge of any specific reason that any
Licenses that have been applied for but not obtained by the Execution Date,
and are required to be obtained within next six months will not be



38









 







obtained in due course (for purposes of this clause (e), “actual knowledge”
means the actual knowledge of those individuals included in the definition
of Knowledge); and




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



     Insurance




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





     Affiliate Transactions




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






39










 







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





Employees; Labor Relations





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






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



Environmental Matters





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




40









 












In addition, except as set forth in Schedule 4.2.23 (with paragraph
references corresponding to those set forth below) and except for such
matters as could not, individually or in the aggregate, be reasonably likely
to result in an Arch Material Adverse Effect, to Arch’s Knowledge:




(a) Within the past four years, (i) no Order has been issued, (ii) no
Environmental Claim has been filed, (iii) no penalty has been assessed, (iv)
to the Knowledge of Arch, no investigation or review is pending or
threatened by any Governmental or Regulatory Authority with respect to any
alleged failure by any Arch Company to have any License required under
applicable Environmental Laws in connection with the conduct of the business
or operations of any Arch Company or with respect to any generation,
treatment, storage, recycling, transportation, discharge, disposal or
Release of any Hazardous Material generated by any Arch Company, (v) none of
Arch, any Arch Company or any Specified Arch Affiliate has received written
notice of any such investigation or review, and (vi) to the Knowledge of
Arch, there are no facts or circumstances in existence which could
reasonably be expected to form the basis for any such Order, Environmental
Claim, penalty or investigation.




(b) Except as set forth on Schedule 4.2.23(b), no Arch Company currently
owns, operates or leases a treatment, storage or disposal facility requiring
a permit under the Resource Conservation and Recovery Act, as amended, or
under any other comparable state or local Law; and, without limiting the
foregoing, (i) no Arch Company is aware of the existence of, or currently
uses, any underground storage tanks located on any property owned, leased or
used by an Arch Company; and (ii) in the past four years, there have been no
Releases of Hazardous Materials in a reportable quantity under, or in
violation of, any Environmental Law into the environment or under any real
property now owned, leased or used by any Arch Company which would be
reasonably likely individually or in the aggregate to result in an Arch
Material Adverse Effect.




(c) No Arch Company currently transports or arranges for the transportation
of any Hazardous Material to any location that any Arch Company has
Knowledge is (i) listed on the NPL under CERCLA, (ii) listed for possible
inclusion on the NPL by the Environmental Protection Agency in CERCLIS or on
any similar state or local list or (iii) the subject of enforcement actions
by federal, state or local Governmental or Regulatory Authorities that may
lead to Environmental Claims against any Arch Company.




(d) No site or facility currently owned, operated or leased by any Arch
Company is listed or to the Knowledge of Arch, proposed for listing on the
NPL, CERCLIS or any similar state or local list of sites requiring
investigation or clean-up.



41









 






(f) No Liens have arisen under or pursuant to any Environmental Law on any
site or facility currently owned, operated or leased by any Arch Company,
and no federal, state or local Governmental or Regulatory Authority action
has been taken in the past four years or, to the Knowledge of Arch, is in
process that could subject any such site or facility to such Liens, and no
Arch Company would be required to place any notice or restriction relating
to the presence of Hazardous Materials at any site or facility owned by it
in any deed to the real property on which such site or facility is located.




(g) There have been no environmental investigations, studies, audits, tests,
reviews or other analyses conducted outside the ordinary course of business
consistent with past practice in the past four years that are in the
possession of, any Arch Company in relation to any site or facility now or
previously owned, operated or leased by any Arch Company which have not been
delivered to the Company prior to the execution of this Agreement.




(h) Each of the Arch Companies (i) has carried out all reclamation with
respect to their coal mining and processing operations required to date by
law and (ii) in the past four years, has received no notice asserting or
claiming the existence of seepage, leaks, breakthroughs or other events that
could result in harm to health, safety or the environment with respect to
any surface impoundment or sealed deep mine.



Substantial Customers; Material Suppliers





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






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



42









 





Bank and Brokerage Accounts





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





Directors and Officers; No Powers of Attorney





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





Accounts Receivable





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





Inventory





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




43









 






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





Brokers





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





Disclosure





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





Reclamation Bonds





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




44









 











Absence of Certain Business Practices





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





Sufficiency of Assets





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





No Other Representations





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





4.3 Waiver of Known Breaches.





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



45









 







and the effect of such breach is a failure of any condition to the Waiving
Party’s obligations set forth in Article V and the Waiving Party proceeds with the
Closing, the Parties shall discuss such circumstances and, unless the Parties
otherwise agree in writing, the Waiving Party shall be deemed to have waived such
breach and the Waiving Party and its successors, assigns and Affiliates shall not be
entitled to be indemnified pursuant to Section 10.3, to sue for damages or to assert
any other right or remedy for any losses arising from any matters relating to such
condition or breach, notwithstanding anything to the contrary contained herein or in
any certificate delivered pursuant hereto.




     (b) Each of Arch and the Company shall promptly notify the other Party of, and
furnish each of them with any information that Party may reasonably request with
respect to, the occurrence, to such Party’s actual knowledge, of any event or
condition or the existence of any fact that would cause any of the conditions to
such Party’s obligation to consummate the transactions contemplated by this
Agreement not to be fulfilled, including any breach by any party of any
representation, warranty or covenant contained in this Agreement or any Ancillary
Document.



ARTICLE V

Closing Conditions




     5.1 Closing.



          (a) The closing (the “Closing”) of the purchase and sale of the Arch Equity Interests shall
take place on December 31, 2005, after satisfaction of the conditions set forth in this Article V,
or at such other time as Arch and the Company shall mutually agree, and it will be effective as of
the Effective Time.




          (b) The Parties shall have a pre-closing (the “Pre-Closing”) on December 30, 2005, or at such
other time as the parties shall mutually agree, at the offices of Bryan Cave LLP, St. Louis,
Missouri, at which the Parties shall exchange all documents and other items required to be
delivered at the Closing (collectively, the “Closing Deliveries”). Bryan Cave LLP shall hold any
Closing Deliveries delivered by or on behalf of the Company in escrow on behalf of the Company and
Freshfields, Bruckhaus and Deringer LLP shall hold any Closing Deliveries delivered by or on behalf
of Arch in escrow on behalf of Arch. Once the Pre-Closing has taken place and the Closing
Deliveries have been exchanged into escrow, the Closing shall be deemed to have occurred as soon as
it is 11:59 p.m. EST on December 31, 2005. At such time, the Closing Deliveries shall be deemed to
be released out of escrow without any further action by any party.




          (c) In connection with the Closing, on the first business day following the Closing (and as
soon as reasonably possible on such date), the Company shall pay the Initial Cash Payment, and Arch
shall pay the Closing VEBA Contribution, to PNC Bank, N.A., each in immediately available funds,
and such funds shall be applied as follows: $7,500,000 to fund the Hobet VEBA and the remaining
$7,500,000 to fund the Apogee VEBA as satisfaction in full of Arch’s obligation pursuant to Section
2.2.




46









 








     5.2 General Conditions.



          The obligation of the parties hereto to consummate the transactions contemplated by this
Agreement is subject to the fulfillment of each of the following conditions:





     (a) There shall not be in effect on the Closing Date any Order or Law
restraining, enjoining or otherwise prohibiting or making illegal the consummation
of any of the transactions contemplated by this Agreement or which could reasonably
be expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement to the parties hereto, and there shall
not be pending or threatened on the Closing Date any action or proceeding in, before
or by any Governmental or Regulatory Authority which could reasonably be expected to
result in the issuance of any such order or the enactment, promulgation or deemed
applicability to any law.




     (b) All consents, approvals and actions of, filings with and notices to any
Governmental or Regulatory Authority necessary to permit the parties hereto to
perform their respective obligations under this Agreement and to consummate the
transactions contemplated hereby and thereby (i) shall have been duly obtained, made
or given, (ii) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (iii) shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or
Regulatory Authority necessary for the consummation of the transactions contemplated
by this Agreement, including under the HSR Act, shall have occurred.




     (c) Such executive officers and directors of the Arch Companies as are
designated by the Company shall have tendered, effective at the Closing Date, their
resignations as such officers and directors.




     (d) The Arch Companies shall have assumed all obligations and liabilities under
the Arch Companies Plans and all obligations of Arch and/or its Affiliates
thereunder, except as expressly provided for herein.




     (e) The Company shall have received a consent, in a form reasonably acceptable
to the Company, from Shonk permitting future changes of control with
respect to certain leases of the Company or its Subsidiaries.



     5.3 Conditions of Obligations of Company.



          In addition to the conditions set forth in Section 5.2, the obligation of the Company to
consummate the transactions contemplated by this Agreement is subject to the fulfillment of each of
the following further conditions:





     (a) Arch shall deliver to Company such duly executed Conveying Documents as the
parties and their respective counsel shall deem reasonably necessary or appropriate
to vest in the Company all right, title and interest in, to and under the Arch
Equity Interests.



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     (b) The representations and warranties of Arch in this Agreement and the
Ancillary Documents (i) that are qualified as to materiality (or with the term “Arch
Material Adverse Effect”) shall be true and complete and (ii) that are not so
qualified shall be true and complete in all material respects, as of the Closing
Date as though made on the Closing Date, except to the extent such representations
and warranties expressly relate to an earlier date (in which case such
representations and warranties qualified as to materiality (or with the term “Arch
Material Adverse Effect”) shall be true and complete, and those not so qualified
shall be true and complete in all material respects, on and as of such earlier
date), and the Company shall have received a certificate to that effect, dated the
Closing Date, from an Executive Officer of Arch.




     (c) Except as provided in Section 5.1(c), Arch shall have performed or complied
in all material respects with all obligations and covenants required by this
Agreement to be performed or complied with by it by the time of the Closing, and the
Company shall have received a certificate to that effect, dated the Closing Date,
from an Executive Officer of Arch.




     (d) All consents (or in lieu thereof waivers) listed on Schedule 5.3 (a) shall
have been obtained, (b) shall not be subject to the satisfaction of any condition
that has not been satisfied or waived and (c) shall be in full force and effect.




     (e) The Company shall have received a legal opinion in form and substance
reasonably satisfactory to the Company.




     (f) Each of the Arch Reorganization Transactions shall have occurred.




     (g) Arch shall have delivered to the Company a recently-dated, long-form
certificate of the Secretary of State of the State of Delaware with respect to the
good standing of Apogee Coal Company and Catenary Coal Company and a recently-dated
certificate of existence from the Secretary of State of the State of West Virginia
with respect to Hobet Mining, Inc.




     (h) Arch shall have delivered to the Company a copy of the Certificate of
Formation certified by the Delaware Secretary of State for each of TC Sales and
Robin Land, as well as the limited liability company agreement of each of TC Sales
and Robin Land.




     (i) Arch shall have converted each of Apogee Coal Company, Catenary Coal
Company and Hobet Mining, Inc. into a limited liability company in accordance with
applicable Laws and shall have delivered a copy of the limited liability agreement
of each of them to the Company.




     (j) There shall not be threatened, instituted or pending any action or
proceeding by any Person before any court or Governmental or Regulatory Authority,
domestic or foreign, (i) seeking to restrain, prohibit or otherwise interfere with
the ownership or operation by the Company or any of its Affiliates



48









 







of all or any material portion of the Arch Equity Interests, the Underlying
Assets or the business or assets of the Company or any of its Affiliates or to
compel Company or any of its Affiliates to dispose of all or any material portion of
the Arch Equity Interests, the Underlying Assets or of the Company or any of its
Affiliates or (ii) seeking to require divestiture by the Company or any of its
Affiliates of any Arch Equity Interests or the Underlying Assets or the business or
assets of the Company or any of its Affiliates.




     (k) Since the Execution Date, nothing shall have occurred that has had or could
reasonably be expected to have an Arch Material Adverse Effect.




     (l) The Company shall have received such other certificates, instruments and
documents both in confirmation of the representations and warranties of Arch and in
furtherance of the transactions contemplated by this Agreement and the Ancillary
Documents as the Company or its counsel may reasonably request.




     (m) Arch shall have delivered to the Company evidence that the Arch Companies
have been fully released (or arrangements therefor satisfactory to the Company shall
have been made) from any and all Liabilities of any kind under or in respect of the
Arch Credit Agreement, and none of the Assets and Properties of the Arch Companies
are subject to any Liens securing the Liabilities under the Arch Credit Agreement
(or arrangements therefor satisfactory to the Company shall have been made).




     (n) Each of the Blue Creek Lease and the Master Coal Sales and Services
Agreement shall have been duly executed by the parties thereto and the Company shall
have received a copy thereof.




     (o) The Company shall have received a copy of each of the Coal Sales
Agreements, duly executed by Arch Coal Sales Company, Inc.




     (p) The Company shall have received the Transition Services Agreement, duly
executed by Arch.



     5.4 Conditions of Obligations of Arch.



          In addition to the conditions set forth in Section 5.3, the obligation of Arch to consummate
the transactions contemplated by this Agreement is subject to the fulfillment of each of the
following further conditions:





     (a) The representations and warranties of the Company in this Agreement and the
Ancillary Documents (i) that are qualified as to materiality (or with the term
“Company Material Adverse Effect”) shall be true and complete and (ii) that are not
so qualified shall be true and complete in all material respects as of the Closing
Date as though made on the Closing Date, except to the extent such representations
and warranties expressly relate to an earlier date (in which case such
representations and warranties qualified as to materiality (or with the



49









 







term “Company Material Adverse Effect”) shall be true and complete, and those
not so qualified shall be true and complete in all material respects, on and as of
such earlier date), and Arch shall have received a certificate to that effect, dated
the Closing Date and executed by an Executive Officer of the Company.




     (b) The Company shall have performed or complied in all material respects with
all obligations and covenants required by this Agreement to be performed or complied
with by the Company by such time, and Arch shall have received a certificate to that
effect, dated the Closing Date and executed by an Executive Officer of the Company.




     (c) Arch shall have received a legal opinion in form and substance reasonably
satisfactory to Arch.




     (d) The Company shall have delivered to Arch a certificate of an Executive
Officer of the Company attaching a long-form certificate of the Secretary of State
of Delaware with respect to the good standing of the Company. Arch shall have
received all documents it may reasonably request relating to the existence and
authority of the Company, all in form and substance reasonably satisfactory to Arch.




     (e) There shall not be threatened, instituted or pending any action or
proceeding by any Person before any court or Governmental or Regulatory Authority or
agency, domestic or foreign, (i) seeking to restrain, prohibit or otherwise
interfere with the ownership or operation by the Company or any of its Affiliates of
all or any material portion of the business or assets of the Company or any of its
Affiliates or to compel Company or any of its Affiliates to dispose of all or any
material portion of assets or equity of the Company or any of its Affiliates or (ii)
seeking to require divestiture by the Company or any of its Affiliates of the
business or assets of the Company or any of its Affiliates.




     (f) Arch shall have received such other certificates, instruments and documents
both in confirmation of the representations and warranties of the Company and in
furtherance of the transactions contemplated by this Agreement and the Ancillary
Documents as Arch or its counsel may reasonably request.




     (g) Without prejudice to Section 4.2.2, the board of directors of the Company
shall have approved the terms of the transactions contemplated by this Agreement and
the Ancillary Documents.




     (h) The Company shall have assumed all obligations of Arch or its Affiliates,
as applicable, under the Retention Agreements.




     (i) Arch shall have received the Transition Services Agreement and the Arch
Coal Sales and Purchase Agreement, each duly executed by the Company.



50









 






     (j) Arch shall have received the Coal Sales Agreements, each duly executed by
Infinity Coal Sales, LLC as agent for the Company.



ARTICLE VI

Covenants




     6.1 Covenants of All Parties.




     (a) Subject to the terms and conditions of this Agreement, the Company and Arch
will use their commercially reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things reasonably necessary or desirable
(including, executing and delivering such other documents, certificates, agreements
and other writings) under applicable Laws to consummate the transactions
contemplated by this Agreement and the Ancillary Documents.




     (b) The Company and Arch shall cooperate with one another (i) in determining
whether any action by or in respect of, or filing with, any Governmental or
Regulatory Authority, agency, official or authority is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement and (ii) in taking such actions or making any such
filings and furnishing information required in connection therewith and seeking
timely to obtain any such actions, consents, approvals or waivers, and shall,
subject to applicable legal requirements, permit the other parties to review in
advance any written communication to any Government or Regulatory Authority, and
furnish to the other parties copies of all material correspondence, filings, and
communications between them and their respective representatives on the one hand,
and any Governmental or Regulatory Authority or their respective staffs on the other
hand, in connection with the transactions contemplated by this Agreement (including,
without limitation, taking all commercially reasonable actions necessary or
appropriate to cause the prompt expiration or termination of any applicable waiting
period under the HSR Act in respect of the transactions contemplated hereby,
including, without limitation, complying as promptly as practicable with any
requests for additional information).




     (c) At the Closing or as soon as reasonably possible thereafter, (i) Arch shall
assign or cause the assignment of all rights in and to, and the Company shall assume
all obligations under, all Permits listed on Schedule 4.2.19(1) that are not listed
as owned by one of the Arch Companies, in each case, pursuant to a Permit Assignment
and Assumption Agreement, and (ii) the Company shall cause the Arch Companies, as
applicable, to assign, all rights in and to, and Arch shall assume all obligations
under, all Permits owned by the Arch Companies which are not listed on Schedule
4.2.19(1) which are permits utilized in connection with Dal-Tex, Hobet 07 and Arch
of Illinois operations, in each case, pursuant to a Permit Assignment and Assumption
Agreement.



51









 





     6.2 Covenants of Arch.




     (a) From the Execution Date until the Closing, subject to applicable Law, Arch
will (i) give the Company, and its counsel, financial advisors, auditors and other
authorized representatives full access to the offices, properties, books and records
(as applicable) of Arch relating to the Arch Equity Interests and Underlying Assets,
(ii) furnish to the Company and its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other information
relating to the Arch Equity Interests and the Underlying Assets as such Persons may
reasonably request and (iii) instruct the employees, counsel and financial advisors
of Arch to cooperate with the Company in its investigation of the Arch Equity
Interests and the Underlying Assets. The Parties agree to comply with the
information sharing restrictions of the Confidentiality Agreement, including the
restriction that all information sharing relate solely to the transactions
contemplated by this Agreement and the Ancillary Documents. Any investigation
pursuant to this Section shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of Arch and its Subsidiaries.
Notwithstanding the foregoing and subject to applicable Law, the Company shall not
have access to personnel records of Arch relating to individual performance or
evaluation records, medical histories or other information which in Arch’s good
faith opinion is sensitive or the disclosure of which could subject Arch to risk of
liability until after the Effective Time.




     (b) From the Execution Date until the Closing, Arch shall promptly notify the
Company of:




(i) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;




(ii) any notice or other communication from any Governmental or Regulatory
Authority in connection with the transactions contemplated by this
Agreement;




(iii) any Actions that are commenced or, to its Knowledge are threatened
against, relating to or involving or otherwise affecting Arch or the Arch
Equity Interests or the Underlying Assets conveyed (directly or indirectly)
by it that, if pending on the date of the execution of this Agreement, would
have been required to have been disclosed pursuant to Section 4.2.12 or that
relate to the consummation of the transactions contemplated by this
Agreement; and




(iv) the damage or destruction by fire or other casualty of any part of the
Underlying Assets held by the Arch Companies or in the event that any such
or part thereof becomes the subject of any proceeding or, to the Knowledge
of Arch, threatened proceeding for the taking thereof or any



52









 







part thereof or of any right relating thereto by condemnation, eminent
domain or other similar governmental action.




     (c) From the Execution Date until the Closing, except for the Arch
Reorganization Transactions, Arch shall conduct the business of the Arch Equity
Interests and the Underlying Assets in the ordinary course consistent with past
practice and shall use commercially reasonable efforts to preserve intact the
business organizations and relationships with third parties and to keep available
the services of the present employees of the business of the applicable Arch Equity
Interests and Underlying Assets. Without limiting the generality of the foregoing,
from the Execution Date until the Closing Date, except for the Arch Reorganization
Transactions, Arch will not:




(i) with respect to the business of the Arch Equity Interests or the
Underlying Assets acquire a material amount of assets from any other Person,
other than the purchase of inventory and equipment in the ordinary course of
business;




(ii) sell, lease, license, otherwise dispose of, or create any Liens on, any
(A) Arch Equity Interests or (B) Underlying Assets other than, with respect
to the Underlying Assets (1) the sale of inventory in the ordinary course of
business, (2) the sale, transfer or discarding of obsolete or worn-out
equipment no longer required in connection with the business of such Person
or (3) Assets and Properties that are replaced by other Assets and
Properties of like utility in such Person’s business;




(iii) agree or commit to do any of the foregoing; or




(iv) take or agree or commit to take any action that would make any
representation or warranty of Arch hereunder inaccurate in any respect at,
or as of any time prior to, the Closing Date or (ii) omit or agree or commit
to omit to take any action necessary to prevent any such representation or
warranty from being inaccurate in any respect at any such time.




     (d) From the Execution Date until the Closing, Arch shall ensure that none of
the Arch Companies do or suffer to exist (and, in the case of paragraph (iv) below,
Arch shall not do or suffer to exist), any of the following without the prior
consent of the Company, except to the extent contemplated in the Arch Reorganization
Transaction:




(i) amend or otherwise modify in any respect its charter, by-laws or other
equivalent organizational documents;




(ii) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
outstanding equity or debt securities (other than cash dividends or
distributions made prior to the Closing);



53









 






(iii) reclassify, combine, split, subdivide or otherwise amend the terms of,
or redeem, repurchase or otherwise acquire, directly or indirectly, any of
its outstanding equity or debt securities (or securities convertible into,
or exercisable or exchangeable for equity or debt securities);




(iv) either (I) issue, sell, pledge, grant, transfer or otherwise dispose of
(or authorize the issuance, sale, pledge, grant, transfer or other
disposition), or (II) create, permit, allow or suffer to exist any Lien in
respect of (A) any ownership interests of any Arch Company or any other
securities convertible into or exchangeable or exercisable for any such
ownership interests (or derivative securities thereof), or (B) any options,
warrants or other rights of any kind to acquire any ownership interests
(including, without limitation, any phantom interest), of any Arch Company;




(v) grant any increase in compensation or benefits, or otherwise increase
the compensation or benefits payable, or to become payable, to any director,
officer or employee of, or any consultant to, any Arch Company or grant any
rights to retention, severance or termination pay to, or enter into any new
(or amend any existing) employment, retention, severance or other Contract
with, any such Person other than any such increase in compensation or
benefits made in the ordinary course of business and consistent with past
practices;




(vi) adopt any new or amend any existing Arch Companies Plan (or any plan,
arrangement or other Contract that would be an Arch Companies Plan of any
Arch Company if so adopted or amended), including, without limitation, (A)
amending or modifying the period (from that currently provided for) of
exercisability of options granted under any Arch Companies or (B)
authorizing cash payments in exchange for any options to acquire equity
interests granted thereunder;




(vii) enter into, adopt, extend, renew or amend any collective bargaining
agreement or other contract with any labor organization, union or
association, except in each case as required by applicable Law (and
following written notice to the Company);




(viii) incur or assume any liabilities, obligations or indebtedness for
borrowed money or guarantee any such liabilities, obligations or
indebtedness (other than indebtedness with respect to working capital in the
ordinary course and in amounts consistent with past practice), or issue any
other debt securities, or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any Person, or
otherwise make any loans or advances material to the business of any Arch
Company;




54










 







(ix) sell, transfer, lease, license or otherwise dispose of any real or
personal property or other assets thereof that are material to the business
of any Arch Company, other than (i) the sale of inventory in the ordinary
course of business, (ii) the sale, transfer or discarding of obsolete or
worn-out equipment no longer required in connection with the business of
such Person or (iii) Assets and Properties that are replaced by other Assets
and Properties of like utility in such Person’s business;




(x) enter into, modify, amend, terminate, permit the lapse of or renew any
lease of real property, except any renewals of existing leases in the
ordinary course of the Business and consistent with past practice, with
respect to which the other Contributors and the Company shall be provided
prior written notice;




(xi) modify, amend, terminate or permit the lapse of any lease of, or
reciprocal easement agreement, operating agreement or other material
agreement relating to, real property, except any renewals of existing leases
or agreements pursuant to their terms or terminations or lapses of existing
leases or agreements pursuant to the expiration of the then current term, in
each case in the ordinary course of business and consistent with past
practice;




(xii) create, permit, allow or suffer to exist any Lien that would have been
required to be disclosed on Schedule 4.2.4(a)(iii) or 4.2.16(a)(2), if
existing as of the Execution Date;




(xiii) cancel, pay, discharge or satisfy any claims, indebtedness,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) or waive any rights of material value, other than
the payment, discharge or satisfaction of claims, indebtedness, liabilities
or obligations in the ordinary course of business;




(xiv) make any payment other than in the ordinary course of business
consistent with past practice or transfer any assets to, or enter into any
Contract with, Arch or any Affiliate of Arch in each case on terms that are
less favorable to the Arch Company than could be obtained on an arm’s-length
basis from unrelated third parties;




(xv) make any change with respect to the Arch Companies’ accounting
practices, policies, principles, methods or procedures, including, without
limitation, revenue recognition policies, other than as required by GAAP
(which GAAP-required changes will be provided to the other parties in
writing);




(xvi) make any Tax election or settle or compromise any material Tax
liability except as noted in Section 11.2(b);



55









 






(xvii) acquire (including, without limitation, by merger, consolidation, or
acquisition of stock or assets) any interest in any corporation,
partnership, other business organization or Person or any division thereof,
other than the purchase of inventory in the ordinary course of business
consistent with past practice;




(xviii) make or authorize any capital expenditure, other than capital
expenditures in the ordinary course of the business consistent with past
practice;




(xix) (A) amend, modify, terminate, cancel or request any modification or
amendment to, or agree to any of the foregoing in respect of this Agreement
or any Ancillary Document or contract to which an Arch Company is a party,
or (B) enter into any additional contract or agreement other than in the
ordinary course of business; or




(xx) authorize or enter into any formal or informal agreement (whether or
not in writing) or otherwise make any commitment to do any of the foregoing,
or to take any action which would make any of the representations or
warranties contained in this Agreement untrue or incorrect or prevent Arch
and the Company from performing or cause Arch and the Company not to perform
its obligations hereunder, or result in any of the conditions to the
transactions contemplated hereby not being satisfied.



     (e) Following the Closing, Arch shall deliver to the Company, promptly upon the
reasonable request of the Company from time to time (i) all Books and Records solely
related to the business and operations of the Arch Companies (other than the
Material Books and Records, which shall have been delivered to the Company pursuant
to Section 4.2) and (ii) in the case of Books and Records that relate to the
business and operations of the Arch Companies but do not relate solely thereto, the
information contained in such Books and Records that relates to the business and
operations of the Arch Companies.



     (f) If any Arch Company is required to make any payments, refunds or credits to
the UMWA funds in connection with any claims that the UMWA funds have against any
Arch Company as of the Closing arising under the A.T. Massey Coal Company Case, Arch
shall pay the amount of such payment, refund or credit to the Company within 10
business days of receipt of notice from the Company thereof.



     (g) The Company shall deliver to Arch promptly after receipt by it from the
UMWA funds the assessment of monthly payments for the then upcoming calendar year
due by the Company in respect of Coal Act Benefits. Within ten calendar days before
each monthly payment is due, Arch shall pay the relevant monthly payment amount to
the Company. Arch shall cooperate in good



56









 




faith with the Company to arrange for direct payment by Arch of all Coal Act
Benefits to the UMWA funds.




     (h) Arch will cooperate in good faith with the Company to obtain any
governmental approvals necessary as a result of a change in ownership of the Arch
Companies.



     (i) Prior to the Closing, Arch, and following the Closing, Arch and the
Company, shall take appropriate actions to seek recognition by the Internal Revenue
Service of the exempt status of the Hobet VEBA and the Apogee VEBA under Section
501(c)(9) of the Code.



     (j) As of the Closing, Hobet and Apogee, together, shall have an aggregate cash
balance (the “Cash Balance”) of $4,576,000 for the purpose of providing benefits to
the Benefits Covered Employees under the Black Lung Benefits Reform Act of 1977, as
amended in 1981 (“Black Lung Benefits”); provided, however, the Cash Balance shall
not be considered in the calculation of working capital pursuant to Section 3.2.



     (k) Arch (I) shall pay all claims made by any Covered Employee prior to the
Effective Time under any Arch Benefit Plan and (II) shall remain responsible for and
shall make any payments required by and fulfill its obligations associated with the
Arch Plans. For purposes of this Section 6.2(k), a claim shall be deemed made on
the date the service is provided.



     (l) On or prior to the Closing, Arch shall adopt amendments to the Arch Plans
necessary to ensure that the Covered Employees cease to accrue benefits under the
Arch Plans after the Effective Date.



     (m) Within 60 days following the Closing, Arch shall prepare, or cause to be
prepared, and deliver to the Company audited financial statements titled, “Arch
Coal, Inc. Contributed Properties Combined Financial Statements” for the fiscal year
ended December 31, 2005 (the “2005 Audited Financial Statements”). Such 2005
Audited Financial Statements shall be prepared in accordance with the standards set
forth in Section 4.2.8(c) above.



     (n) Except as otherwise provided for herein, following the Closing, in the
event Arch or one of its Subsidiaries, collects any receivables which are related to
the Arch Companies or the business conducted thereby, Arch shall pay or cause its
Subsidiaries to pay, as applicable, any such amounts to the Company promptly upon
receipt thereof.



     (o) For each of the five (5) years following the Closing, Arch shall pay to the
Company $1.25 per ton of coal sold by the Company for a particular calendar month,
up to a maximum of $8,500,000 per year, to be paid monthly within 20 days of the end
of each month.



57









 





     (p) Arch shall sell to the Company, at the applicable contract price, any coal
required to be supplied under any of the coal sales agreements set forth on Schedule
4.2.18(a)(x)(A) which was scheduled to be shipped in 2005 and is set forth on
Schedule 6.2(p). The actual scheduling of the shipments shall be mutually agreed
upon in a reasonable manner by Arch and the Company.



     (q) Prior to the Closing, Arch or one of its Affiliates shall take all actions
necessary, if any, to transfer sponsorship of the Arch Companies Plans to the Arch
Companies as of the Closing. After the Closing, neither Arch nor any of its
Affiliates shall have any responsibility for the administration (unless pursuant to
the Transition Services Agreement) or liability for benefits under such plans except
as otherwise expressly provided in this Agreement. After the Closing, the Company,
the Arch Companies or one of their Affiliates shall have the sole liability to
provide the benefits thereunder (except as otherwise expressly provided in this
Agreement) and to otherwise administer such plans (unless provided otherwise
pursuant to the Transition Services Agreement).



     (r) Provided the Closing Date occurs before January 6, 2006, prior to the
Closing Date, neither Arch nor an Arch Company will terminate the retiree medical
coverage of a Benefits Covered Employee due to such individual’s failure to enroll
in prescription drug coverage available to Medicare beneficiaries under Part D of
Medicare.



     (s) Arch shall cooperate with, and provide such assistance to the Company that
is reasonably necessary to accomplish the provisions contained in Section
6.3(a)(iv), including, but not limited to, the deposit of funds, pursuant to the
Company’s direction, into the Arch 401(k) Plan representing the Covered Employees’
repayment of any outstanding plan loans from the Closing Date until such time that
the transfer of assets from the Arch 401(k) Plan to the Company’s 401(k) Plan is
completed.



     (t) Because the Arch Companies have not been fully released at or before
Closing from any and all Liabilities of any kind under or in respect of the Arch
Credit Agreement, or any of the Assets and Properties of the Arch Companies are
subject to any Liens securing the Liabilities under the Arch Credit Agreement,
pursuant to Section 5.2(m), the parties have agreed on an arrangement pursuant to
which the parties shall cooperate and use their best efforts to take such actions,
make such filings and obtain such executed documents as is necessary to cause (i)
the Arch Companies to be fully released from any and all Liabilities of any kind
under or in respect of the Arch Credit Agreement and (ii) none of the Assets or
Properties of the Arch Companies to be subject to any Liens securing the
Liabilities under the Arch Credit Agreement, in each case, as soon as reasonably
possible, and in any event within 30 days following the Closing Date (collectively,
the Releases”). If all of the Releases are not completed within 30 days of the
Closing Date, then Arch shall pay to the Company (without limiting the Company’s
right to indemnity under Section 10.3(l)), $25,000 per day



58









 






(increasing by $10,000 per day each 10 days thereafter) until the Releases are
completed.



     6.3 Covenants of the Company.



     (a) The Company covenants as follows with respect to the employees of each Arch Company
(together, the “Covered Employees”):




     (i) Equivalent Compensation. From the Closing Date until six months following
the Closing Date, the Company will maintain or will cause to be maintained base salary,
wages, and compensation levels for the benefit of the Covered Employees, and such Covered
Employees will be eligible to participate in the Company’s benefit plans and programs,
which, in the aggregate, are reasonably equivalent in value to, the wages, compensation
levels, and core benefit plans provided to the Covered Employees on the Execution Date. In
addition, and notwithstanding the previous sentence, for the 12 months following the Closing
Date, the Company will maintain as to each Covered Employee a severance plan that is
substantially equivalent to the severance plan to which such Covered Employee was entitled
prior to the Closing Date.




     (ii) Service Credit. The Company shall provide each Covered Employee with
credit for all service with the Arch Companies and their respective Affiliates, including
any service with predecessors of such entities, for vesting and eligibility purposes only
under each employee benefit plan, program, or arrangement of the Company or its Affiliates
in which such employee is eligible to participate, except to the extent that such service
credit would result in a duplication of benefits with respect to the same period of service
and in accordance with the eligibility and vesting requirements contained under such plans.
With respect to each group health plan or welfare plan provided by the Company or its
Affiliates as of the Closing Date in which the Covered Employees are eligible to participate
after the Closing Date, the Company shall waive all limitations as to preexisting
conditions, exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Covered Employees, provided that if such plan is provided
under an insured arrangement, such waiver will occur only to the extent otherwise permitted
under the applicable insurance contract or agreement, provided, further, that the Company
shall use its best efforts to procure such waivers.




     (iii) Notwithstanding any other provision of this Agreement, the Company (i) shall not
be required to maintain a “defined benefit” plan, provided it maintains a “defined
contribution” pension plan; (ii) shall not be required to maintain any form of nonqualified
deferred compensation plan (as defined in Section 409(A) of the Code) except a plan which
complies with the provisions of Section 409(A) of the Code; and (iii) may establish plans
(including pension plans and 401(k) plans) within a reasonable time after the Closing
(rather than having such plans in place at the Effective Time) with retroactive effect or
other reasonable accommodation to Covered Employees, to the extent permitted by Laws.




     (iv) As of the Closing Date, Arch shall cease all contributions in respect of each
Covered Employee in Arch’s 401(k) Plan. As soon as reasonably practicable after



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the Closing Date, the Company or one of its Affiliates shall have in effect one or more
defined contribution plans that includes a qualified cash or deferred arrangement within the
meaning of Code Section 401(k) (“Company’s 401(k) Plan”). Each Covered Employee who was a
participant in Arch’s 401(k) Plan on the Closing Date shall be immediately eligible to
participate in Company’s 401(k) Plan. As soon as practicable following the Closing Date,
Arch shall cause to be transferred to Company’s 401(k) Plan cash or other assets (meaning
notes evidencing loans to Covered Employees from their account balances) equal to the
aggregate value of the account balances in Arch’s 401(k) Plan as of the date of transfer for
Covered Employees, including any qualified domestic relations orders, as defined in Code
Section 414(p), applicable to the account balances of Covered Employees. Following such
transfer of assets, Company’s 401(k) Plan shall assume all obligations with respect to the
transferred account balances and Arch and its Affiliates shall have no further liability to
the Company or any Covered Employee under Arch’s 401(k) Plan with respect to such
transferred amounts. The Company’s 401(k) Plan shall comply with Code Section 411(d)(6)
with respect to the account balances transferred to Company’s 401(k) Plan from Arch’s 401(k)
Plan, and the Company and its Affiliates shall indemnify and hold Arch and its Affiliates
harmless from and against any losses arising from any failure to comply with such Code
provision. The Company’s 401(k) Plan shall comply with Code Section 411(d)(6).




     (v) The Company or one of its Affiliates shall make sufficient funds available to Arch
or its designee to allow Arch or its designee to administer the Company’s flexible benefits
plans in accordance with the terms of the Transition Services Agreement. Neither Arch nor
any of its Affiliates shall be liable to make funds available to pay benefits claims under
the Company’s flexible benefits plan. Failure of the Company or one of its Affiliates to
make sufficient funds available to process claims under the Company’s flexible benefits plan
shall be the sole liability of the Company.




     (vi) The Company or an Affiliate of the Company, shall as soon as reasonably possible
following the Closing, adopt a plan substantially similar to the Ashland Coal, Inc.
Long-Term Disability Plan to provide long-term disability benefits to the LTD Individuals
who are currently receiving benefits under the Ashland Coal, Inc. Long-Term Disability Plan
due to their former employment with Hobet Mining.



     (b) If any Arch Company is entitled to any payments, refunds or credits in connection with any
claims of any Arch Company relating to the A.T. Massey Coal Company Case, and any such amounts are
paid to the Company or any Arch Company, or the Company or any Arch Company receives any credit or
refund in connection therewith following the Closing, the Company shall pay the amount of such
payment, credit or refund to Arch within 10 business days of receipt thereof.



     (c) After the Closing, the Company shall pay or cause the Arch Companies to pay all
liabilities of Arch or the Arch Companies with respect to the Arch Companies Plans Employees under
the Federal Mine Safety and Health Act of 1977, as amended, and applicable Federal and state laws
for claims for disability or death due to “black lung” or pneumoconiosis, whenever created.



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     (d) Within 90 days following the Closing, the Company shall pay the Incentive Compensation
Accrual to certain employees of the Arch Companies who were eligible under the annual incentive
compensation plan of Arch prior to the Closing (a list of whom has been previously provided to the
Company), determined in the Company’s discretion. In the event the Company does not pay all or any
portion of the Incentive Compensation Accrual to such employees within such time, the Company shall
pay to Arch any amount of the Incentive Compensation Accrual not paid to such employees and such
amount shall be deemed to be an increase to the Purchase Price.



ARTICLE VII

Non-solicitation of Employees




          (a) The Company agrees that it will not, and none of its Affiliates will, either for its own
account or in connection with or on behalf of any Person at any time from the Execution Date until
the date that is six months after the Closing Date (the “Restricted Period”), directly or
indirectly, either for itself or any other Person, (i) induce, solicit or entice or attempt to
induce, solicit or entice any employee at such time of Arch or any of its Subsidiaries at such time
to leave the employ thereof, or (ii) in any way interfere with the relationship between Arch or any
of its Subsidiaries at such time and any of its employees at such time, it being understood that
upon consummation of the sale contemplated in Article II, such restrictions are not applicable to
the Arch Companies given that they will be Subsidiaries of the Company.




          (b) Arch agrees that it will not, and none of its Affiliates will, either for his or its own
account or in connection with or on behalf of any Person during the Restricted Period, directly or
indirectly, either for itself or any other Person, (i) induce, solicit or entice or attempt to
induce, solicit or entice any employee at such time of the Company or its Subsidiaries at such time
to leave the employ of thereof, or (ii) in any way interfere with the relationship between the
Company or any of its Subsidiaries at such time and any of its employees at such time.




          (c) In the event of a breach of any covenant set forth in this Article VII of this Agreement,
the term of such covenant will be extended by the period of the duration of such breach. If any
provision contained in this Article shall for any reason be held invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect any other
provisions of this Section, but this Section shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. It is the intention of the parties that
if any of the restrictions or covenants contained herein is in any way construed to be too broad or
to any extent invalid, such provision shall not be construed to be null, void and of no effect, but
to the extent such provision would be valid or enforceable under applicable Law, a court of
competent jurisdiction shall construe and interpret or reform this Section to provide for a
covenant having the maximum enforceable provisions (not greater than those contained herein) as
shall be valid and enforceable under such applicable Law. Each party acknowledges that the other
parties would be irreparably harmed by any breach of this Section and that there would be no
adequate remedy at law or in damages to compensate such other parties for any such breach. The
parties agree that other parties shall be entitled to injunctive relief requiring specific
performance by such party of this Section.




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ARTICLE VIII

Arch Guarantees




     8.1 Arch Guarantees.



          (a) The Company agrees with Arch to use commercially reasonable efforts after the Closing Date
to facilitate the release of Arch from its obligations under any guarantees (the “Arch Guarantees”)
provided by it with respect to payments under (i) any of the coal mining leases held by any of the
Arch Companies or any of the coal sales agreements set forth on Schedule 4.2.18(a)(x)(A), (ii) the
Reclamation Bonds, and (iii) any of the bonds, letters of credit or guarantees set forth on
Schedule 8.1(a) (the “Miscellaneous Bonds”). Arch agrees to cooperate fully with the Company in
connection with the Company’s efforts to seek the releases described in this Section 8.1.




          (b) Notwithstanding the foregoing, if the Company fails to obtain the release of Arch from the
guarantees related to the Reclamation Bonds by the date that is two years after the Closing Date,
the Company will arrange for a letter of credit to be posted in favor of Arch in the amount of the
portion of the Reclamation Bonds reflected as liabilities on Books and Records of the Company,
which may be drawn upon in the event that Arch is required to make any payments in respect of such
guarantees.




          (c) In the event the Company fails to obtain the release of Arch from any guarantees related
to the Miscellaneous Bonds within 360 days following the Closing Date, the Company shall post an
irrevocable letter of credit for the aggregate bond or guarantee amounts outstanding under the
Miscellaneous Bonds; provided, however, if at any time, ArcLight Energy Partners Fund L, L.P. owns
(beneficially or of record) less than five percent (5%) of the outstanding equity of the Company,
calculated on a fully diluted basis, the Company shall be required to obtain the release of Arch
from any such guarantees related to the Miscellaneous Bonds within 30 days of such date.




ARTICLE IX

Costs and Expenses




     9.1 Costs and Expenses.



               (a) The Company shall pay all sales, use and similar taxes arising out of the contributions,
conveyances and deliveries to be made hereunder, and shall pay all documentary, filing, recording,
transfer, deed, and conveyance taxes and fees required in connection therewith in connection with
the transactions contemplated by this Agreement and the Ancillary Documents. In addition, the
Company shall be responsible for all costs, liabilities and expenses (including court costs and
reasonable attorneys’ fees) incurred by the Company in connection with the satisfaction or waiver
of any restriction pursuant to Section 11.1.



               (b) Each of the Parties shall pay all costs and expenses incurred on its behalf in connection
with the negotiation, preparation and execution of this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, the fees and expenses of its
attorneys, accountants, advisors and other representatives.



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ARTICLE
X

Further Assurances; Termination; Indemnification




     10.1 Further Assurances.



               (a) From time to time, as and when requested by any party, each Party shall execute and
deliver, or cause to be executed and delivered, all such documents and instruments and shall take,
or cause to be taken, all such further or other actions, as such other Party may reasonably deem
necessary or desirable to consummate the transactions contemplated by this Agreement, including,
such assignments, deeds, bills of sale, consents and other instruments as any Party or its counsel
may reasonably request as necessary or desirable for such purpose.



               (b) Arch agrees to furnish to the Company, upon request, as promptly as practicable, such
information and assistance relating to the Arch Equity Interests and the Underlying Assets
(including, without limitation, access to Books and Records and employees thereof) as is reasonably
necessary for the preparation of financial statements, the performance of any financial audits, the
filing of all Tax Returns, the making of any election relating to Taxes, the preparation for any
audit by any taxing authority, the prosecution or defense of any claim, suit or proceeding relating
to any Tax and the defense of the Arch Companies Litigation or the prosecution or defense of any
other litigation by or against any Person (other than any litigation by Arch or the Company against
the other Party); provided, however, in any case, the Company agrees to furnish to Arch upon
reasonable request copies of those Books and Records that were delivered by Arch to the Company in
connection with the consummation of the transactions contemplated hereby. Each Party shall retain
all Books and Records with respect to Taxes and the matters in dispute in the Arch Companies
Litigation pertaining to the Arch Equity Interests and the Underlying Assets for a period of at
least six years following the Closing Date. At the end of such period, each Party shall provide
the other with at least ten days prior written notice before destroying any such Books and Records,
during which period the Party receiving such notice can elect to take possession, at its own
expense, of such Books and Records. The Parties shall cooperate with each other in the conduct of
any audit or other proceeding relating to Taxes or the Arch Companies Litigation involving the Arch
Equity Interests, the Underlying Assets or the business thereof.



               (c) If at any time prior to the second anniversary of the Closing Date, a Person challenges
(whether or not through a legal proceeding) the title of any of the Arch Companies to the real
property purported to be owned, leased or subleased by it, Arch shall, as and when reasonably
requested by the Company, execute and deliver, or cause to be executed and delivered, all such
documents and instruments and shall take, or cause to be taken, all such further or other actions,
as the Company and Arch may reasonably deem necessary or desirable to defend the title of the
relevant Arch Company thereto; provided that Arch shall not be required to expend any money in
connection with compliance with this paragraph (c) to the extent that such expenditure does not
exceed the threshold set forth in the proviso contained in Section 10.3(a).



     10.2 Termination



               (a) This Agreement may be terminated at any time prior to the Closing:



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(i) by mutual agreement of the Company and Arch;




(ii) by either Arch or the Company if the Closing shall not have been
consummated before January 1, 2006;




(iii) by the Company if an Arch Material Adverse Effect has occurred which
has not been cured (if such Arch Material Adverse Effect is capable of being
cured) by Arch on or before December 30, 2005;




(iv) by Arch if a Company Material Adverse Effect has occurred which has not
been cured (if such Company Material Adverse Effect is capable of being
cured) by the Company on or before December 30, 2005;




(v) by Arch, if Arch shall not have received an approval from its board of
directors approving the terms of the transactions contemplated by this
Agreement and the Ancillary Documents; or




(vi) by the Company if it shall not have received an approval from its board
of directors approving the terms of the transactions contemplated by this
Agreement and the Ancillary Documents.




The party desiring to terminate this Agreement pursuant to the clauses above
shall give notice of such termination to the other party or parties.



10.3 Indemnification.





     (a) Notwithstanding anything to the contrary in this Agreement, Arch hereby
indemnifies the Company and its Affiliates, directors, officers, employees and
agents against and agrees to hold each of them harmless from any and all damage,
loss, liability and expense (including, without limitation, reasonable expenses of
investigation and reasonable attorneys’ fees and expenses in connection with any
action, suit or proceeding whether involving a third party claim or a claim solely
between the parties hereto) (“Damages”) incurred or suffered by the recipient of
such indemnity or any of its Affiliates, directors, officers, employees and agents
arising out of any breach of a representation or warranty (each such breach of a
representation or warranty a “Warranty Breach”) by Arch or breach of covenant or
agreement made or to be performed by Arch pursuant to this Agreement, but in the
case of a breach of covenant except to the extent caused by the Company or any of
its Affiliates (other than Arch and its Affiliates); provided that with respect to
an indemnification by Arch for any Warranty Breach under any of Section 4.2 (A) Arch
shall not be liable unless the aggregate amount of Damages with respect to any
Warranty Breaches exceeds $7,500,000 (the “Basket”) and then for the full amount of
such Damages and (B) Arch’s maximum liability for all such Warranty Breaches shall
not exceed $75,000,000 (the “Cap”).




     (b) Notwithstanding anything to the contrary in this Agreement, Arch hereby
indemnifies the Company and its Affiliates, directors, officers, employees



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and agents from and against and agrees to hold each of them harmless from any
and all Damages incurred or suffered by any of them arising out of or in connection
with all currently pending litigation or arbitration proceedings (including any
existing orders or judgments related to completed proceedings) involving any Arch
Company or any of the Assets and Properties, business or operations of any Arch
Company (the “Arch Companies Litigation”), including without limitation, the
litigation or arbitral proceedings set forth on Schedule 10.3(b). Arch shall assume
the defense of the Arch Companies Litigation and the Parties shall make available to
each other all relevant information in their possession relating to any Arch
Companies Litigation, subject to protection of attorney client and attorney work
product privileges, and shall cooperate in the defense thereof. In furtherance of
Arch’s right to assume such defense, the Company shall cause each relevant Arch
Company to issue a power-of-attorney in favor of Arch, in form and substance
mutually acceptable to Arch and the Company.




     (c) Notwithstanding anything to the contrary in this Agreement, the Company
hereby indemnifies Arch and its Affiliates, directors, officers, employees and
agents, from and against, and agrees to reimburse Arch in respect of, (i) any and
all payments made by it under the Arch Guarantees and (ii) any and all reasonable
and customary costs and/or expenses paid or incurred by Arch in connection with the
Reclamation Bonds and/or the Miscellaneous Bonds, including without limitation, the
cost of maintenance of the Reclamation Bonds and/or the Miscellaneous Bonds.



     (d) Notwithstanding anything to the contrary in this Agreement, the Company
hereby indemnifies and holds harmless Arch and its Affiliates, directors, officers,
employees and agents from any and all Damages incurred or suffered by any of them
arising from liabilities or obligations of the Arch Companies, except to the extent
of any Damages arising out of any Warranty Breach by Arch or for which Arch would
otherwise be obligated to indemnify the Company pursuant to this Section 10.3 or
otherwise pay pursuant to any covenant contained in this Agreement.



     (e) Notwithstanding anything to the contrary in this Agreement, the Company
hereby indemnifies and holds harmless Arch and its Affiliates, directors, officers,
employees and agents from any and all Damages incurred or suffered by any of them
arising out of, relating to or in connection with (i) the Arch Companies Plans, or
(ii) any claims made by one or more of the LTD Individuals for benefits related to
long term disability, except to the extent of any Damages arising out of any
Warranty Breach by Arch or for which Arch would otherwise be obligated to indemnify
the Company pursuant to this Section 10.3 or otherwise pay pursuant to any covenant
contained in this Agreement.



     (f) Notwithstanding anything to the contrary in this Agreement, the Company
hereby indemnifies Arch and its Affiliates against and agrees to hold each of them
harmless from any and all Damages incurred or suffered by the



65









 




recipient of such indemnity or any of its Affiliates arising out of any
Warranty Breach by the Company or breach of covenant or agreement made or to be
performed by the Company pursuant to this Agreement; provided that with respect to
indemnification by the Company for any Warranty Breaches under any of Section 4.1
(A) the Company shall not be liable unless the aggregate amount of Damages with
respect to any Warranty Breach exceeds the Basket and then for the full amount of
such Damages and (B) the Company’s maximum liability for all such Warranty Breaches
shall not exceed the Cap.




     (g) Notwithstanding anything to the contrary in this Agreement, the Company
hereby indemnifies and holds harmless Arch and its Affiliates, directors, officers,
employees and agents (i) against any and all Losses under the Worker Adjustment and
Retraining Notification Act, the continuation coverage requirements contained in
Section 4980B(f) of the Internal Revenue Code of 1986 and Section 601 et seq. of
ERISA or any similar laws relating to any Covered Employee arising out of or
relating to this Agreement, and (ii) in respect of (A) any claims made against any
of them with respect to a Retention Agreement or (B) a liability under the Coal Act
Benefits with respect to which Arch has theretofore paid the Company in full
pursuant to Section 6.2(g), in each case, except to the extent of any Damages
arising out of any Warranty Breach by Arch or for which Arch would otherwise be
obligated to indemnify the Company pursuant to this Section 10.3 or otherwise pay
pursuant to any covenant contained in this Agreement.



     (h) Notwithstanding anything to the contrary in this Agreement, Arch hereby
indemnifies and holds harmless the Company, its Affiliates, directors, officers,
employees and agents from and against and agrees to hold each of them harmless from
any and all liabilities of incurred or suffered by any of them for workers’
compensation benefits paid to the Benefits Covered Employees (“Workers’ Compensation
Benefits”).



     (i) Notwithstanding anything to the contrary in this Agreement, Arch hereby
indemnifies and holds harmless the Company, its Affiliates, directors, officers,
employees and agents from and against any and all Damages incurred or suffered by
any of them arising out of, relating to or in connection with the Arch Plans, except
as expressly provided for herein.



     (j) Notwithstanding anything to the contrary in this Agreement, Arch hereby
indemnifies and holds harmless the Company, its Affiliates, directors, officers,
employees and agents from and against, any and all Damages incurred or suffered by
any of them arising out of, relating to or in connection with the Company or one of
the Arch Companies under any one or more of the Arch Companies Plans (i) as they
relate to any person who is not an Arch Companies Plans Employee, or (ii) relating
to long term disability obligations existing prior to the Effective Time other than
any long term disability obligations owed to the LTD Individuals and being provided
pursuant to Section 6.3(a)(vi).



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     (k) Notwithstanding anything to the contrary in this Agreement, Arch hereby
indemnifies and holds harmless the Company, its Affiliates, directors, officers,
employees and agents from and against, any and all Damages incurred or suffered by
any of them arising out of, relating to or in connection with (i) a judgment lien
filed by David Anthony Warren in Boone County, West Virginia on January 3, 2000 with
respect to a judgment amount equal to $854,722.59, and (ii) a state tax lien filed
on October 16, 2000 by the State of West Virginia in the amount of $8,635.12.



     (l) Notwithstanding anything to the contrary in this Agreement, Arch hereby
indemnifies and holds harmless the Company, its Affiliates, directors, officers,
employees and agents from and against, any and all Damages incurred or suffered by
any of them arising out of, relating to or in connection with Liabilities under the
Arch Credit Agreement or any Liens securing the Liabilities under the Arch Credit
Agreement.



     (m) The party seeking indemnification under this Section (the “Indemnified
Party”) agrees to give prompt notice to the party against whom indemnity is sought
(the “Indemnifying Party”) of the assertion of any claim, or the commencement of any
suit, action or proceeding in respect of which indemnity may be sought under such
Section; provided that the failure to so notify shall not affect the obligations of
the Indemnifying Party except to the extent such failure to notify actually
prejudices the Indemnifying Party. The Indemnifying Party may at the request of the
Indemnified Party participate in and control the defense of any such suit, action or
proceeding at its own expense. The Indemnifying Party shall not be liable under
this Section for any settlement effected without its consent of any claim,
litigation or proceeding in respect of which indemnity may be sought hereunder.



     (n) Except in the case of Fraud by a Party, the remedies provided in this
Section 10.3 shall be the exclusive remedies of the Parties after the Closing in
connection with the transactions contemplated by this Agreement, including without
limitation any breach or non-performance of any representation, warranty, covenant
or agreement contained herein. Except in the event of Fraud, no party may commence
any suit, action or proceeding against any other party with respect to the subject
matter of this Agreement or the transactions contemplated hereby, whether in
contract, tort or otherwise, except to enforce such Party’s rights under this
Section 10.3, or equitable and specific performance remedies with respect to Article
VII. As used herein, “Fraud” means knowing misrepresentation made with the
intention of causing material harm to the other party. Any Party alleging Fraud
shall bear the burden of proving the existence of Fraud.



     (o) Notwithstanding anything to the contrary in this Agreement, Arch shall not
be liable to the Company or any of its Affiliates in any way with respect to License
and/or the Land Management System.



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     (p) For clarification purposes, the Basket and the Cap shall only apply to
Sections 10.3(a) and 10.3(f), and to the extent that indemnity may be available
under either Section 10.3(a) or 10.3(f) in addition to other provisions of Section
10.3, indemnification shall be made under such other provision.



     10.4 Survival.



               The representations and warranties, covenants and other agreements of the parties hereto (and
the corresponding indemnities under Section 10.3) contained in this Agreement or in any certificate
or other writing delivered pursuant hereto or in connection herewith shall survive (a) in the case
of representations (and the corresponding indemnities under Section 10.3) until the date that is 12
months after the Closing Date and (b) in the case of covenants, indemnities and other agreements,
indefinitely unless otherwise specified; provided that (i) each representation and warranty (and
the corresponding indemnity) in Section 4.2.3, paragraphs (a), (b), (c) and (e) of Section 4.2.4,
Section 4.2.14, Section 4.2.23 shall survive until the earlier of (A) expiration of the statute of
limitations applicable to the matter covered thereby (giving effect to any waiver, mitigation or
extension thereof) and (B) three years from the Closing Date, and (ii) each representation,
warranty and covenant (and the corresponding indemnity) in Section 4.2.11 and Section 11.2 shall
survive until the earlier of (A) expiration of the statute of limitations applicable to tax matters
and (B) three years from the Closing Date. Notwithstanding the preceding sentence, any
representation or warranty or covenant in respect of which indemnity may be sought under this
Agreement shall survive the time at which it would otherwise terminate pursuant to the preceding
sentence, if written notice of the inaccuracy thereof giving rise to such right of indemnity shall
have been given to the party against whom such indemnity may be sought prior to such time.



ARTICLE XI

Miscellaneous




     11.1 Consents; Restriction on Assignment.



               Anything in this Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement to assign any Arch Equity Interest, any Underlying Asset or any claim or
right or any benefit arising thereunder or resulting therefrom if such assignment, without the
consent of a third party thereto, would constitute a breach or other contravention of such Arch
Equity Interest or Underlying Asset or in any way adversely affect the rights of Arch and the
Company thereunder. Arch will use its commercially reasonable efforts to obtain the consent of the
other parties to any such Arch Equity Interest or Underlying Asset or any claim or right or any
benefit arising thereunder for the assignment thereof to the Company, if required, as the Company
may request. If such consent is not obtained, or if an attempted assignment thereof would be
ineffective or would adversely affect the rights of Arch thereunder so that the Company would not
in fact receive all such rights, Arch and the Company will cooperate in a mutually agreeable
arrangement under which the Company would obtain the benefits and assume the obligations thereunder
in accordance with this Agreement, including sub-contracting, sub-licensing, or sub-leasing to the
Company which Arch would enforce for the benefit of the Company, with the Company assuming Arch’s
obligations, any and all rights of Arch against a third party thereto. Arch will promptly pay to
the Company when received all monies received



68









 




by Arch under any Arch Equity Interest, Underlying Asset or any claim or right or any benefit
arising thereunder. In such event, Arch and the Company shall, to the extent the benefits
therefrom and obligations thereunder have not been provided by alternate arrangements satisfactory
to the Company and Arch, negotiate in good faith an adjustment in the consideration paid by the
Company for the Arch Equity Interests.




     11.2 Tax Matters.




          (a) As between Arch and the Company, all real estate and personal property taxes
relating to the assets of the Arch Companies (herein collectively referred to as the “Arch
Taxes”) shall be borne by Arch for the period of time prior to the Closing Date and by the
Company for the period of time from and after the Closing Date. The Company shall pay the
Arch Taxes for the tax period that includes the Closing Date and shall submit to Arch proof
of payment of such Arch Taxes within a reasonable time of such payment for reimbursement by
Arch under the terms of such leases. Arch shall fully reimburse the Company for any unpaid
amounts of the Arch Taxes relating to the period of time prior to the Closing Date.




          (b) The Company agrees that in the event any amounts are collected or received by any
of the Arch Companies from and after the Closing with respect to any tax claims which
related to a period ending on or prior to the Closing, including but not limited to those
claims set forth in Schedule 11.2(b), filed by Arch relating to the Arch Companies, the
Company as soon as practically possible shall pay over all such amounts to Arch (net of
expenses). The Company agrees to permit Arch to control the prosecution of any such
outstanding tax claims to which Arch or its Affiliates is entitled under this Section 11.2,
and upon Arch’s reasonable request in writing, the Company will, or will cause its relevant
Affiliates to, authorize by appropriate powers of attorney such Persons as Arch designates
to represent such Affiliates with respect to such claims. Arch shall indemnify the Company
for any costs or expenses it incurs that are directly related to, or arise out of, Arch’s
prosecution of such outstanding tax claims




          (c) From and after the Closing Date, Arch shall be liable for, and shall indemnify the
Company and each of its officers, directors, employees, stockholders, agents and
representatives against and hold them harmless from:




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






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



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receives a Tax Benefit (as defined below) with respect to such Arch VEBA Contributions
then the Company shall pay the Tax Benefit attributable to such Arch VEBA Contribution to
Arch (net of any reasonable expenses directly attributable thereto). For purposes of this
Section the Tax Benefit shall equal the actual amount of any reduction in federal or state
income taxes when and to the extent received as a result of any deduction to the Company
under Sections 162 and 419 attributable to the Arch VEBA Contribution (a “Tax Benefit”).
The Company shall advise Arch on an annual basis of the amount of Tax Benefit, if any,
attributable to the Arch VEBA Contribution and provide a calculation of such Tax Benefit.
In the event Arch disagrees with the calculation of such Tax Benefit the parties shall
negotiate in good faith to determine such Tax Benefit and absent reaching agreement as to
the amount of such Tax Benefit the parties shall jointly retain a mutually acceptable
nationally recognized accounting firm to resolve the dispute. The costs, fees and expenses
of the accounting firm shall be borne by the non-prevailing party.




11.3 Grant of License.




     (a) Subject to and effective upon (i) the Closing and (ii) the payment of $100,000 in
immediately available funds by the Company to Arch, the Company and its Affiliates shall
have a non-exclusive, perpetual, non-transferable, non-sub-licensable right to use the Land
Management Software to process transactions for any properties owned or leased by the
Company or any of its Affiliates (the “License”); provided, however, such License shall
terminate immediately in the event of a Change in Control of the Company. For purposes of
this Section 11.3 only, a “Change in Control” shall mean any one of the following: (i) a
transaction or series of related transactions that results in the sale or other disposition
of all or substantially all of the Company’s assets; or (ii) a Person becoming a beneficial
owner of 30% or more of the outstanding voting securities of the Company by any one Person
who is either (a) operational in the coal industry, or (b) not reasonably acceptable to
Arch; provided, however, transfers to Affiliates of the Company which would otherwise result
in a Change in Control under subsection (ii) above shall not be deemed to be a Change in
Control.



     (b) ARCH IS GRANTING THE LICENSE ON AN “AS-IS, WHERE-IS” BASIS, AND MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WRITTEN OR ORAL, AND TO THE MAXIMUM
EXTENT PERMITTED BY LAW HEREBY DISCLAIMS ANY SUCH REPRESENTATIONS OR WARRANTIES (INCLUDING
WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A
PARTICULAR PURPOSE), WHETHER BY ARCH OR ANY OF ITS AFFILIATES, INCLUDING WITHOUT LIMITATION,
ANY OF THE ARCH COMPANIES, THEIR AFFILIATES, OR ANY OF THEIR OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, MEMBERS OR REPRESENTATIVES OR ANY OTHER PERSON, WITH RESPECT TO THE LICENSE OR THE
LAND MANAGEMENT SYSTEM, NOTWITHSTANDING THE DELIVERY OF OR DISCLOSURE TO THE COMPANY, ANY
AFFILIATE OF THE COMPANY OR ANY OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES



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OR ANY OTHER PERSON OF ANY DOCUMENTATION OR OTHER INFORMATION BY ARCH OR ANY OF ITS
AFFILIATES, OR ANY OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, MEMBERS OR REPRESENTATIVES OR ANY
OTHER PERSON WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.




               (c) Further, following the Closing, except as set forth in the Transition Services
Agreement, Arch shall have no obligation to maintain, support, fix, update or enhance the
data, source code and/or object code comprising the Land Management System or to provide any
assistance to the Company or its Affiliates, including without limitation, the Arch
Companies, relating to the use of the Land Management System. 



     11.4 Assignment; Successors and Assigns.



               This Agreement and the rights and obligations hereunder shall not be assignable or
transferable by either Party (including by operation of law in connection with a merger or
consolidation of such Party) without the prior consent of the other Party hereto. Any attempted
assignment in violation of this Section 11.4 shall be null and void and of no effect. The
Agreement shall be binding upon and inure to the benefit of the Parties signatory hereto and their
respective successors and assigns.



     11.5 No Third Party Rights.



               This Agreement is for the sole and exclusive benefit of the Parties hereto and their
successors and permitted assigns, and nothing herein expressed or implied shall give, or be
construe to give, to any Person, other than the Parties hereto and such successors and permitted
assigns, any legal or equitable right, remedies or claims under or with respect to this Agreement
or any provisions hereof.



     11.6 Counterparts.



               This Agreement may be executed in any number of counterparts, all of which shall be considered
one and the same agreement, and shall become effective when one or more such counterparts have been
signed by each of the Parties and delivered to the other Party. Any such counterpart may be
delivered to a Party by facsimile.



     11.7 Governing Law.



               This Agreement shall be construed in accordance with, and this Agreement and all matters
arising out of or relating in any way whatsoever (whether in contract, tort or otherwise) to this
Agreement shall be governed by, the law of the State of New York, except to the extent that it is
mandatory that the law of some other jurisdiction, wherein the Arch Equity Interests or Underlying
Assets are located, shall apply.



     11.8 Submission to Jurisdiction.



               Each Party irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the
State of New York, New York County, and (b) the United States District Court for



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the Southern District of New York, for the purposes of any suit, action or other proceeding
arising out of this Agreement, any Ancillary Agreement or any transaction contemplated hereby or
thereby. Each Party agrees to commence any such action, suit or proceeding either in the United
States District Court for the Southern District of New York or if such suit, action or other
proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the
State of New York, New York County. Each Party further agrees that service of any process,
summons, notice or document by U.S. registered mail to such Party’s respective address set forth
above shall be effective service of process for any action, suit or proceeding in New York with
respect to any matters to which it has submitted to jurisdiction in this Section 11.8. Each Party
irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or
proceeding arising out of this Agreement, any Ancillary Document or the transactions contemplated
hereby and thereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the
United States District Court for the Southern District of New York, and hereby and thereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in an inconvenient
forum.




     11.9 Waiver of Jury Trial.



               EACH PARTY HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT, ANY TRANSACTION OR ANY TRANSACTION CONTEMPLATED HEREBY OR
THEREBY. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTION DOCUMENTS, AS APPLICABLE, BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.9.



     11.10 Severability.



               If any of the provisions of this Agreement are held by any court of competent jurisdiction to
contravene, or to be invalid under, the Laws of any political body having jurisdiction over the
subject matter hereof, such contravention or invalidity shall not invalidate the entire Agreement.
Instead, this Agreement shall be construed as if it did not contain the particular provision or
provisions held to be invalid, and an equitable adjustment shall be made and necessary provision
added so as to give effect to the intention of the Parties as expressed in this Agreement at the
time of execution of this Agreement.



     11.11 Amendment or Modification.



               This Agreement may be amended or modified from time to time only by the written agreement of
the Parties hereto and affected thereby.



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     11.12 Integration.



               This Agreement and the Ancillary Documents (and any schedules, exhibits or annexes thereto),
contain the entire agreement and understanding among the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings relating to such subject matter.
Neither Party shall be liable or bound to the other Party in any manner by any representations,
warranties or covenants relating to such subject matter except as specifically set forth herein or
therein.



     11.13 Notices.



               All notices, requests and other communications hereunder must be in writing and will be deemed
to have been duly given only if delivered personally or by facsimile transmission or mailed (first
class postage prepaid) to the Parties at the following addresses or facsimile numbers:



	 	 	 	 	 
	 

	 	(a)
	 	in the case of Arch and the Arch Companies to:
	 
	 	 	 	 
	 

	 	 	 	Arch Coal, Inc.
	 

	 	 	 	One City Place Drive, Suite 300
	 

	 	 	 	St. Louis, MO 63141
	 

	 	 	 	Facsimile: (314) 994-2878
	 

	 	 	 	Attention: David Peugh
	 
	 	 	 	 
	 

	 	 	 	with copies to:
	 
	 	 	 	 
	 

	 	 	 	Arch Coal, Inc.
	 

	 	 	 	One CityPlace Drive, Suite 300
	 

	 	 	 	St. Louis, MO 63141
	 

	 	 	 	Facsimile: (314) 994-2878
	 

	 	 	 	Attention: Robert Jones
	 
	 	 	 	 
	 

	 	 	 	Bryan Cave LLP
	 

	 	 	 	One Metropolitan Square, Suite 3600
	 

	 	 	 	St. Louis, MO 63102
	 

	 	 	 	Facsimile: (314) 259-2020
	 

	 	 	 	Attention: Patricia Brandt
	 
	 	 	 	 
	 

	 	(b)
	 	in the case of the Company:
	 
	 	 	 	 
	 

	 	 	 	Magnum Coal Company
	 

	 	 	 	106 Lockheed Drive
	 

	 	 	 	Beaver, WV 25813
	 

	 	 	 	Facsimile: (304) 255-9455






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	 	Attention: Paul H. Vining
	 
	 	 
	 

	 	with a copy to:
	 
	 	 
	 

	 	ArcLight Energy Partners Fund I, L.P.
	 

	 	200 Clarendon Street, 55th Floor
	 

	 	Boston, MA 02117
	 

	 	Facsimile: (617) 531-6300
	 

	 	Attention: Christine Miller, Esq.






               All such notices, requests and other communications will (i) if delivered personally to the
address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile
transmission to the facsimile number as provided in this Section, be deemed given upon receipt, and
(iii) if delivered by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such notice, request or
other communication is received by any other Person to whom a copy of such notice, request or other
communication is to be delivered pursuant to this Section). Any party from time to time may change
its address, facsimile number or other information for the purpose of notices to that party by
giving notice specifying such change to the other parties hereto.



     11.14 No Consequential Damages.



               No Party hereunder shall be liable for any special, indirect, consequential or punitive
damages (whether or not the claim therefor is based on contract, tort or duty imposed by law), in
connection with, arising out of or in any way related to the transactions contemplated by this
Agreement or the Ancillary Documents or any act or omission or event occurring in connection
therewith; and each Party hereto hereby waives, releases and agrees not to sue upon any such claim
for any such damages, whether or not accrued and whether or not known or suspected to exist in its
favor.



     11.15 Payments.



               All payments under this Agreement shall be made in immediately available funds, without
deduction, setoff or counterclaim.



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




	 	 	 	 	 	 	 
	 	 	Arch Coal, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ David B. Peugh
 

	 	 
	 

	 	 	 	Name: David B. Peugh	 	 
	 

	 	 	 	Title: Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	Magnum Coal Company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Paul H. Vining	 	 
	 

	 	 	 	 

Name: Paul Vining
	 	 
	 

	 	 	 	Title: President and Chief Executive Officer	 	 







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