Document:

Exhibit 10.2

 

SETTLEMENT AGREEMENT

This Settlement Agreement is entered into as of October 23, 2013 (the “Execution Date”), by and among (i) Patriot Coal Corporation a nd its affiliates that are debtors and debtors-in-possession (collectively, “Patriot” or the “Debt ors”) in the jointly administered chapter 11 cases captioned In re Patriot Coal Corporation, et al., Case No. 12-51502-659 (Bankr. E.D. Mo.) (the “Chapter 11 Cases”) pending in the United States Bankruptcy Court for the Eastern District of Missouri (the “Bankruptcy Court”) and ( ii) Arch Coal, Inc. and its subsidiaries and affiliates (collectively, “Arch”). Together, Patri ot and Arch are referred to in this Term Sheet as the “Parties”.

WHEREAS, Patriot filed for protection under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) on July 9, 2012 (the “ Petition Date”), in the United States Bankruptcy Court for the Southern District of New York; and

WHEREAS, the Debtors’ Chapter 11 Cases are being jointly administered; and

WHEREAS, on December 31, 2005, Arch and Magnum Coal Company (“Magnum”) entered into the Purchase and Sale Agreement between Arch and Magnum (the “Magnum PSA”), whereby Arch sold 100% of the stock of certa in mining operations in exchange for $15 million, the assumption of certain liabilities, and a contribution of $7.5 million to two newly-established voluntary employee benefit associations; and

WHEREAS, on April 2, 2008, Patriot, Magnum, ArcLight Energy Partners Fund I, L.P., and ArcLight Energy Partners Fund II, L.P. entered into the Agreement and Plan of Merger (the “Merger Agreement”) whereby Patriot acquired the en tirety of the outstanding stock of Magnum, in exchange for stock of Patriot and Patriot’s assumption of certain liabilities (the “Merger”); and

WHEREAS, the Debtors and the Official Committee of Unsecured Creditors of Patriot Coal Corporation (the “Creditors’ Committee”) have been investigating potential causes of action arising out of or relating to the Merger; and

WHEREAS, on September 3, 2013, the Debtors and the Creditors’ Committee moved for leave to take discovery of Arch pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure; and

WHEREAS, on September 20, 2013, the Bankruptcy Court entered a stipulated order authorizing the Debtors and the Creditors’ Committee to take Rule 2004 discovery of Arch; and

WHEREAS, on September 23, 2013, Patriot served a subpoena containing 30 individual requests on Arch (the “Rule 2004 Subpoena”); and

WHEREAS, the Debtors and the Creditors’ Committee have been engaged in analysis of Patriot’s own documents, and interviews with current Patriot employees, as part of the investigation of the Merger; and

WHEREAS, the Overriding Royalty Agreement dated October 31, 1994 (the “Override Agreement”) among Robin Land Company, LLC (“RLC”) a nd STB Ventures, Inc. (“STB”)

 

  

 

  

 

requires RLC to pay royalties to STB based on sales of coal mined from certain coal reserves located in West Virginia; and

WHEREAS, on August 10, 2012, RLC commenced an adversary proceeding in the Bankruptcy Court, Robin Land Company, LLC v. STB Ventures, Inc., Adv. Pro. No. 12-04355 (Bankr. E.D. Mo.) (the “STB Adversary Proceeding”), seeking a declaration that the Override Agreement is a standalone, non-executory contract for purposes of section 365 of the Bankruptcy Code; and

WHEREAS, on February 4, 2013, Arch, Ark Land Company (“Ark Land”) and Ark Land KH, Inc. (“ALKH”, together with Arch and Ark Land, the “Arch Entities”) intervened as defendants in the STB Adversary Proceeding, as a result of a Guaranty (the “Guaranty”) that Arch Mineral Corporation (a predecessor-in-interest to Arch) and STB, among others, had executed on October 31, 1994; and

WHEREAS, STB contends that the Guaranty requires Arch to indemnify STB if RLC fails to pay the Override Agreement; and

WHEREAS, on February 19, 2013, STB and the Arch Entities answered RLC’s complaint and filed counterclaims against RLC (i) seeking a declaration that the Override Agreement is an executory contract subject to section 365(d)(3) of the Bankruptcy Code and that RLC’s obligation to pay royalties under the Override Agreement is integrated with and not severable from the Debtors’ rights and obligations under certain other leases and executory contracts, (ii) claiming a post-petition breach of contract and (iii) claiming unjust enrichment and seeking to impose a constructive trust on RLC’s assets; and

WHEREAS, on March 4, 2013, RLC filed a motion for judgment on the pleadings and a motion to dismiss the counterclaims, and, on April 2, 2013, filed an answer to STB’s and Arch’s counterclaims; and

WHEREAS, on March 5, 2013, STB and the Arch Entities moved to compel RLC to make payments under the Override Agreement to STB, arguing that the Override Agreement is integrated with and not severable from (1) the Combined, Amended and Restated Coal Lease dated October 31, 1994 between Ark Land and Kelly-Hatfield Land Company (as amended, the “Kelly-Hatfield Lease”); (2) the Combined, Amended and Restated Coal Lease dated October 31, 1994 between Ark Land and Lawson Heirs, Inc. (the “ Lawson Heirs Lease”); (3) the Asset Purchase Agreement dated October 31, 1994 among Ark Land, Apogee Coal Company, STB, and others; and (4) the Assignment and Assumption of Leases dated October 31, 1994 by and among STB, Eagle Minerals Company and Ark Land; and (5) the Liabilities Undertaking Agreement dated October 31, 1994 by and among STB, Eagle Minerals Company, Ark Land and others; and

WHEREAS, on April 23, 2013, oral argument was held before the Bankruptcy Court on both RLC’s motion for judgment on the pleadings and to dismiss counterclaims, and on STB’s motion to compel, on April 23, 2013; and

 

  

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WHEREAS, the Bankruptcy Court has not ruled on the motions pending in the STB Adversary Proceeding; and

WHEREAS, the Parties have engaged in extensive, arms’-length negotiations in an attempt to reach a global resolution of the matters settled in this Settlement Agreement; and

WHEREAS, on October 4, 2013, the Debtors and Arch entered into a term sheet (the “Term Sheet”), that set forth the principle terms o f a settlement that resolves all disputes between the Debtors and Arch; and

WHEREAS, as of October 4, 2013, the Parties agreed to stay the STB Adversary Proceeding and related matters and suspend any obligations of Arch to respond to the Rule 2004 Subpoena; and

WHEREAS, on October 16, 2013, the Debtors filed the Motion of the Debtors for Entry of an Order Pursuant to 11 U.S.C. §§ 363(b) and 105(a) and Fed. R. Bankr. P. 9019(a) Approving the Settlement with Arch Coal, Inc., (the “Approval Motion”) seeking approval of the settlement embodied in this Settlement Agreement; and

WHEREAS, the Debtors have concluded that the Settlement embodied in this Settlement Agreement is in the best interests of the Estates and their creditors, as it provides for fair, reasonable, and adequate consideration in exchange for the releases and consideration the Estates will provide; and

WHEREAS, the consideration provided pursuant to this Settlement Agreement and resolution of the matters settled herein is an essential and integral aspect of the Debtors’ strategy for emergence from bankruptcy protection; and

WHEREAS, all Parties are willing to enter into this Settlement Agreement to resolve finally the matters settled herein, among other reasons, to avoid the attendant expense, risk, difficulties, delays, and uncertainties of litigation; and

NOW, THEREFORE, for and in sufficient consideration of the promises and the mutual covenants contained herein, and subject to Bankruptcy Court approval, the Parties hereby agree as follows:

	
1.  

	
Definitions. As used in this Settlement Agreement, the following terms have the respective meanings indicated in this Section 1. 

	
1.1.  

	
“Allowed Administrative Expense Claim” has the mean ing set forth in Section 7.1 hereof. 

	
1.2.  

	
“Allowed Unsecured Claims” has the meaning set fort h in Section 7.2 hereof. 

	
1.3.  

	
“Approval Motion” has the meaning set forth in the recitals to this Settlement Agreement. 

 

  

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1.4.  

	
“Approval Order” means an order of the Bankruptcy C ourt in form and substance reasonably acceptable to the Parties that, among other things, approves the Settlement Agreement and contains the releases set forth herein, it being understood and agreed that the form of order attached hereto as Exhibit A is acceptable to the Parties. 

	
        1.5.

	
“Arch” has the meaning set forth in the recitals to  this Settlement Agreement.

	
1.6.  

	
“Arch Discovery Obligations” has the meaning set fo rth in Section 12 hereof. 

	
1.7.  

	
“Arch Entities” has the meaning set forth in the re citals to this Settlement Agreement. 

	
1.8.  

	
“Arch Released Parties” means Arch, its current and former professionals, employees, advisors, officers, directors, agents, predecessors, and successors, but shall not include ArcLight. 

	
1.9.  

	
“ArcLight” means ArcLight Capital Partners LLC and its affiliates, subsidiaries, and managed entities. 

	
1.10.  

	
“AKLH” has the meaning set forth in the recitals to  this Settlement Agreement. 

	
1.11.  

	
“Ark Land” has the meaning set forth in the recital s to this Settlement Agreement. 

	
1.12.  

	
“Bankruptcy Code” has the meaning set forth in the recitals to this Settlement Agreement. 

	
1.13.  

	
“Bankruptcy Court” has the meaning set forth in the recitals to this Settlement Agreement. 

	
1.14.  

	
“Business Day” means a day which is not a Saturday, a Sunday, or a “legal holiday” as defined in Rule 9006 of the Federal Rul es of Bankruptcy Procedure. 

	
1.15.  

	
“Cash Payment” has the meaning set forth in Section  2 hereof. 

	
1.16.  

	
“Causes of Action” means, without limitation, any a nd all actions, proceedings, causes of action, controversies, liabilities, obligations, rights, rights of set-off, recoupment rights, suits, damages, judgments, accounts, defenses, offsets, powers, privileges, licenses, franchises, claims (as defined in section 101(5) of the Bankruptcy Code and including alter-ego claims and claims under chapter 5 of the Bankruptcy Code as well as any claims or rights created pursuant to sections 301 and 541 of the Bankruptcy Code upon the commencement of the Chapter 11 Cases), counterclaims, cross-claims, affirmative defenses and demands of any kind or character whatsoever, whether known or unknown, asserted or unasserted, reduced to judgment or otherwise, liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, secured or unsecured, assertable directly or derivatively, existing or hereafter arising, in contract or in tort, in law, in equity or otherwise in any court, tribunal, forum or proceeding, under any 

 

  

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local, state, federal, foreign, statutory, regulatory or other law or rule, based in whole or in part upon any act or omission or other event occurring prior to July 9, 2012 or during the course of the Chapter 11 Cases, including through the Effective Date, in all cases other than those arising under this Settlement Agreement or the Approval Order, or otherwise expressly preserved under this Settlement Agreement or the Approval Order, including, but not limited to, those that Arch may have against any of the Debtors arising under or related to any agreement entered into after the Petition Date or assumed prior to or as of the Effective Date, which are not released and are expressly preserved.

	
1.17.  

	
“Chapter 11 Cases” has the meaning set forth in the recitals to this Settlement Agreement. 

 

	
     1.18.

	
“Claim” means “claim” as defined in section 101(5) of the Bankruptcy Code.

 

	
     1.19.

	“Creditors” Committee” has the meaning set forth in the recitals to this Settlement 

Agreement; provided, reference to the “Creditors’ C ommittee” shall be deemed to include each member of the Creditors’ Committee solely in its capacity as such, and each advisor to the Creditors’ Committee.

 

	
1.20.  

	
“Confirmed Plan” means a Plan confirmed by the Bank ruptcy Court pursuant to section 1129 of the Bankruptcy Code. 

	
1.21.  

	
“Contract Assumptions” has the meaning set forth in  Section 5 hereof. 

	
1.22.  

	
“Contract Rejections” has the meaning set forth in  Section 6 hereof. 

	
1.23.  

	
“Debtors” has the meaning set forth in the recitals to this Settlement Agreement; providedthat wherever the context so requires, reference to the “Debtors” shall mean (or shall also mean, as the case may be) the reorganized Debtors. 

	
1.24.  

	
“Effective Date” has the meaning set forth in Sect ion 14 hereof. 

	
1.25.  

	
“Execution Date” has the meaning set forth in the r ecitals to this Settlement Agreement. 

	
1.26.  

	
“Guaranty” has the meaning set forth in the recital s to this Settlement Agreement. 

	
1.27.  

	
“Kelly-Hatfield Lease” has the meaning set forth in the recitals to this Settlement Agreement. 

	
1.28.  

	
“Lawson Heirs Lease” has the meaning set forth in t he recitals to this Settlement Agreement. 

	
1.29.  

	
“Lease Assumptions” has the meaning set forth in Se ction 4 hereof. 

	
1.30.  

	
“Litigation Trust” means the post-emergence litigat ion trust described in the Memorandum of Understanding. 

  

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      1.31.

	
“Magnum” has the meaning set forth in the recitals  to this Settlement Agreement.

	
1.32.  

	
“Magnum PSA” has the meaning set forth in the recit als to this Settlement Agreement. 

	
1.33.  

	
“Master Coal Sales and Services Agreement” means th e Master Coal Sales and Services Agreement effective as of December 31, 2005, by and between Arch Coal Sales Company, Inc., and Magnum. 

	
1.34.  

	
“Memorandum of Understanding” means the Memorandum of Understanding between the United Mine Workers of America, on behalf of itself and its members, and Patriot, dated August 26, 2013. 

	
1.35.  

	
“Merger” has the meaning set forth in the recitals  to this Settlement Agreement. 

	
1.36.  

	
“Merger Agreement” has the meaning set forth in the recitals to this Settlement Agreement. 

	
1.37.  

	
“New Lease” has the meaning set forth in Section 4  hereof. 

	
1.38.  

	
“Override Agreement” has the meaning set forth in t he recitals to this Settlement Agreement. 

	
1.39.  

	
“Parties” has the meaning set forth in the recitals  to this Settlement Agreement. 

	
1.40.  

	
“Person” means any natural person, entity, estate, trust, union or employee organization or governmental authority. 

	
1.41.  

	
“Petition Date” has the meaning set forth in the re citals to this Settlement Agreement. 

	
1.42.  

	
“Plan” means a plan of reorganization for the Debto rs that is proposed, filed, or confirmed in the Chapter 11 Cases. 

	
1.43.  

	
“Plan Documents” means, with respect to a Plan, di sclosure statement, solicitation procedures order, confirmation order and related notices. 

	
1.44.  

	
“Plan Effective Date” means the effective date of a Confirmed Plan that is (i) not inconsistent with the terms of this Settlement Agreement and (ii) does not include any provision that adversely affects Arch and such provision is not in form and substance reasonably acceptable to Arch. 

	
1.45.  

	
“RLC” has the meaning set forth in the recitals to  this Settlement Agreement. 

	
1.46.  

	
“Settlement” means the settlement embodied in this  Settlement Agreement. 

	
1.47.  

	
“Settlement Agreement” has the meaning set forth in  the preamble hereof. 

  

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1.48.  

	
“Settlement Documents” means the Settlement Agreeme nt, the Term Sheet, all other mutually acceptable definitive agreements referenced herein setting forth the terms of the Settlement described herein, and the Approval Order. 

	
1.49.  

	
“Surety Agreement” means that certain Surety Agreem ent, dated November 27, 2012, by and among Arch Coal, Inc., Magnum Coal Company LLC and Patriot Coal Corporation. 

	
                      1.50. 

	
“STB” has the meaning set forth in the recitals to  this Settlement Agreement.

	
1.51.  

	
“STB Adversary Proceeding” has the meaning set fort h in the recitals to this Settlement Agreement. 

	
1.52.  

	
“Term Sheet” has the meaning set forth in the recit als to this Settlement Agreement. 

	
2.  

	
Cash Payment. Arch shall pay or cause to be paid $5 million in cash to Patriot (the “Cash Payment”) on the Effective Date. 

	
3.  

	
STB Override.

	
3.1.  

	
As of and subsequent to the Effective Date, Arch shall (i) make all payments required to be paid under the Override Agreement, including all past due prepetition and post-petition amounts, pursuant to and in accordance with the Guaranty; (ii) not request or seek any reimbursement or indemnification from Patriot for any such payments; (iii) not object to the rejection of the Override Agreement or assert that the Override Agreement is integrated with any other contract, agreement or understanding, whether written or oral, by and between Arch, STB and/or any of the Debtors. 

	
3.2.  

	
The parties shall exercise commercially reasonable efforts to reach an agreement with STB, which shall include: 

	
i.  

	
A stay of the STB Adversary Proceeding; 

	
ii.  

	
Withdrawal of STB’s objection to the Lease Assumptions and withdrawal of STB’s motion to compel payments of amounts due under the Override Agreement; 

	
iii.  

	
Entering into a Stipulation and Order of Voluntary Dismissal by and between RLC, Arch and STB, pursuant to which (a) the Override Agreement is rejected, and no rejection damages result therefrom, (b) the STB Adversary Proceeding is dismissed, and (c) STB irrevocably withdraws any and all proofs of claim filed against the Debtors in the Chapter 11 Cases and releases the Debtors from any and all Causes of Action including, but not limited to, any counterclaims and defenses asserted by or that could be asserted by STB in the STB Adversary Proceeding. 

 

  

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4.  

	
Lease Assumptions.  As of the Effective Date, 

	
4.1.  

	
Patriot shall assume, pursuant to Section 365 of the Bankruptcy Code, the Kelly-Hatfield Lease, which shall hereby be deemed amended to waive any minimum royalty payments otherwise due thereunder from and after January 1, 2014. 

	
4.2.  

	
ALKH and RLC shall enter into a lease (the “New Lea se”) to become effective as of January 1, 2015 for the premises currently subject to the Kelly-Hatfield Lease, under terms and conditions customary for mineral leases in the industry that are not economically adverse to Patriot, to include, without limitation: (a) a base royalty rate of 6%, with total advance minimum annual royalty payments of $0 through December, 31, 2016 (through calendar year 2016), and thereafter, $500,000, with a five (5) year rolling recoupment period and (b) a term of ten (10) years with two five (5) year renewal or extension periods and then renewable or extendable annually thereafter for so long as mineable and merchantable coal remains on the premises. 

	
4.3.  

	
Arch shall withdraw its objection to any currently pending motion to assume the Kelly-Hatfield Lease or any other lease (the “Lease Assumptions”) and shall not object to the Lease Assumptions or assert that any of the leases is integrated with or not severable from any other agreement. 

	
5.  

	
Contract Assumptions. Patriot shall, as of the Effective Date, assume, pursuant to Section 365 of the Bankruptcy Code, the contracts listed on Schedule 1 hereto (collectively, the “Contract Assumptions”), and (ii ) Arch shall not object to the Contract Assumptions. 

	
6.  

	
Contract Rejections. Patriot shall, as of the Effective Date, reject, pursuant to Section 365 of the Bankruptcy Code, (x) the Magnum PSA and (y) the contracts listed on Schedule 2 hereto (collectively, and including rejection of the Magnum PSA, the “Contract Rejections”). Arch shall not object to t he Contract Rejections. 

	
7.  

	
Cure Claims and Rejection Claims. 

	
7.1.  

	
The Parties acknowledge and agree that the cure amount owed to Arch in connection with the Lease Assumptions and the Contract Assumptions is zero, except that the cure amount owed to Arch in connection with the assumption of the Kelly-Hatfield Lease is $1,131,398.45. Arch shall therefore be entitled to an allowed administrative expense claim against RLC in the amount of $1,131,398.45 (the “Allowed Administrative Expense Claim”) in connection with the assumption of the Kelly-Hatfield Lease. Arch shall not assert any additional claims for cure costs in connection with the Contract Assumptions or the Lease Assumptions. 

	
7.2.  

	
Arch shall be entitled to an allowed unsecured claim in the aggregate amount of $95 million as follows: $80.5 million against Magnum Coal Company LLC and $14.5 million against RLC, in respect of rejection damages owed to Arch in connection with the Contract Rejections, the previously rejected Master Coal 

 

  

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Sales and Service Agreement and guarantees related to previously rejected contracts (the “Allowed Unsecured Claims”). Arch s hall not assert any other claims in the Bankruptcy Cases except as preserved or otherwise permitted hereunder.

	
8.  

	
South Guffey Reserve. On the Effective Date, pursuant to a mutually agreeable purchase agreement, Patriot shall sell and convey to Arch, and Arch shall purchase and receive from Patriot, free and clear of all liens, claims, encumbrances and other interests, all of Patriot’s interests of whatever kind, nature and extent in and to the property and estates contained within the boundary identified and shown on Exhibit B hereto (commonly referred to as the South Guffey Reserve). In exchange, Arch shall (i) pay Patriot $16 million in cash on the Effective Date and (ii) pay Patriot a royalty of 6% on any coal recovered from such property in excess of 6.5 million tons. 

	
9.  

	
Letters of Credit. The Parties shall execute a mutually agreeable amendment to the Surety Agreement that shall be effective on the Effective Date to (i) eliminate Patriot’s obligation to maintain or arrange for the posting of any letters of credit thereunder until December 31, 2015, and (ii) require Patriot to post $8 million of letters of credit thereunder no later than December 31, 2015. Arch and Patriot shall cooperate to cancel the currently outstanding letters of credit. 

	
10.  

	
Releases 

	
10.1.  

	
Releases by the Debtors. Upon the occurrence of the Effective Date, the Debtors and each of their respective estates fully and forever release and shall be deemed to have fully and forever released the Arch Released Parties from any and all Causes of Action, including, without limitation, those Causes of Action based on avoidance liability under federal or state laws, veil piercing or alter ego theories of liability, contribution, indemnification and joint liability or otherwise, and such releases shall be binding on any trustees or successors to the Debtors. As a result, no Causes of Action against the Arch Released Parties will be included in any Litigation Trust established in the Chapter 11 Cases, and the Memorandum of Understanding has been modified accordingly. 

	
10.2.  

	
Releases by Third Parties. To the extent that any Plan provides for the release of claims by third parties against parties other than the Debtors, the Debtors will use reasonable good faith efforts to include the Arch Released Parties in such releases. 

	
10.3.  

	
Releases by Arch. Upon the occurrence of the Effective Date, Arch (i) fully and forever releases and shall be deemed to have fully and forever released the Debtors and their current and former professionals, employees, advisors, officers, directors, agents, predecessors and successors from any and all Causes of Action including, but not limited to, any counterclaims or defenses asserted by or that could be asserted by Arch in the STB Adversary Proceeding, and (ii) irrevocably withdraws and shall be deemed to have withdrawn irrevocably any and all proofs of claim filed against the Debtors in the Chapter 11 Cases other than the Allowed 

  

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Unsecured Claims and the Allowed Administrative Expense Claim, including, without limitation, (a) Claim No. 2143 asserting an administrative expense claim in the amount of $614,634.56 and (b) Claim No. 2144 an administrative claim that has been allowed in the amount of $13,500.00, and, upon the Effective Date, such proofs of claim are deemed to be disallowed with prejudice without further order of the Bankruptcy Court, and the Debtors’ claims agent and the clerk of the Bankruptcy Court are authorized and directed to amend the Debtors’ claims register accordingly.

	
11.  

	
Plan of Reorganization 

	
11.1.  

	
Arch shall not object to the confirmation of, and shall vote in favor of, any Plan proposed by the Debtors, provided that such Plan is not inconsistent with and does not breach or alter the terms of the Settlement Documents, it being understood and agreed by the Parties that the Plan as filed by the Debtors on October 9, 2013, is not inconsistent with and does not breach or alter the terms of the Settlement Documents. 

	
11.2.  

	
Patriot shall not propose or support any Plan that would (i) breach or alter the terms of the Settlement Documents, (ii) include any provision for a litigation trust or other similar arrangement that preserves the Debtors’ Causes of Action against the Arch Released Parties released hereunder, or (iii) includes any provision that adversely affects Arch unless such provision is in form and substance reasonably acceptable to Arch. 

	
12.  

	
Rule 2004 Discovery. Pursuant to the Term Sheet, any obligations of Arch to respond to any discovery request of the Debtors or Committee, including, without limitation, the Rule 2004 Subpoena propounded upon Arch (collectively, the “Arch Discovery Obligations”) have been suspended, and the statute of limitations with respect to any Causes of Action of the Debtors against Arch have been tolled until the earlier of March 31, 2014 or the Effective Date. Upon the Effective Date, Arch shall have no further Arch Discovery Obligations, and the Rule 2004 Subpoena shall be deemed withdrawn. 

	
13.  

	
Representations.

	
13.1.  

	
Each Party represents to all other Parties that: (i) it is authorized to execute and deliver this Settlement Agreement and all other agreements, documents and instruments to be executed and/or delivered in connection herewith or therewith and perform its obligations hereunder or thereunder (in the case of the Debtors, subject to entry of the Approval Order) and (ii) all claims waived or released pursuant to this Settlement Agreement by that Party have not been assigned or otherwise transferred. 

	
14.  

	
Effective Date. 

	
14.1.  

	
The Effective Date shall occur on the first Business Day on which each of the following conditions has been satisfied: 

 

 

  

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(a)  

	
The Approval Order has been entered by the Bankruptcy Court; and 

	
(b)  

	
The Plan Effective Date has occurred. 

	
15.  

	
Termination. This Settlement Agreement shall be void ab initio if the Effective Date has not occurred by March 31, 2014. 

	
16.  

	
No Disgorgement, or Subordination of Allowed Claims. the Allowed Unsecured Claims and the Allowed Administrative Expense Claim shall not be subject to (i) any actions, including without limitation, reconsideration under section 502(j) of the Bankruptcy Code, or otherwise; or (ii) any action under section 510 of the Bankruptcy Code or otherwise that would have the effect of subordinating Arch’s claims to the claims of general unsecured creditors or other creditors having the same or lower priority to general unsecured creditors. 

	
17.  

	
Notices.  All communications provided for herein shall be in writing and delivered by (i) electronic mail and (ii) overnight or international air courier to the addresses set forth below, or to such other address as each Party may designate to the other Party named below by notice given in accordance with this Section 17: 

 

	 	If to Arch:	Arch Coal, Inc.
	 	 	City Place One
	 	 	St. Louis, MO 63141
	 	 	Attention: General Counsel
	 	 	 
	 	 	With a copy to:
	 	 	Cleary Gottlieb Steen & Hamilton LLP
	 	 	One Liberty Plaza
	 	 	New York, NY 10006
	 	 	Attention: Sean A. O’Neal
	 	 	 
	 	 	Patriot Coal Corporation
	 	 	 
	 	If to the Debtors:	 12312 Olive Boulevard, Suite 400
	 	 	 St. Louis, Missouri, 63141
	 	 	 Attention: General Counsel
	 	 	 
	 	 	With a copy to:
	 	 	Davis Polk & Wardwell LLP
	 	 	450 Lexington Avenue
	 	 	New York, NY 10017
	 	 	Attention: Marshall S. Huebner and Elliot
	 	 	Moskowitz

 

  

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18.  

	
Miscellaneous.

	
18.1.  

	
This Settlement Agreement shall be construed in accordance with, and governed by, the laws of the State of New York, excluding and without regard to the conflict of laws rules thereof. 

	
18.2.  

	
The Bankruptcy Court shall retain jurisdiction to resolve any dispute arising out of or relating to this Settlement Agreement. The Parties hereby consent to the Bankruptcy Court’s entry of a final order with respect to any such dispute. 

	
18.3.  

	
Each party shall be responsible for its own fees and expenses in connection with the Settlement described in this Settlement Agreement. 

	
18.4.  

	
Upon entry of the Approval Order, this Settlement Agreement, together with the other Settlement Documents, constitutes the entire agreement among the Parties on the subjects addressed herein. Upon entry of the Approval Order, the Settlement Documents supersede in its entirety any term sheet and any subsequent written or oral descriptions of the settlement. No supplement, modification, amendment, waiver or termination of this Settlement Agreement shall be binding unless executed in writing by each of the Parties (or their successors and assigns) to be bound thereby, or by their authorized counsel. 

	
18.5.  

	
This Settlement Agreement is executed without reliance on any representations by any person or entity concerning the nature, cause or extent of injuries, or legal liability therefor, or any other representations of any type or nature except as set forth herein. No contrary or supplementary oral agreement shall be admissible in a court to contradict, alter, supplement, or otherwise change the meaning of this Settlement Agreement. This Settlement Agreement has been negotiated by the Parties adequately represented by counsel, none of whom shall be deemed the “drafter” of the agreement, and no provision of thi s Settlement Agreement shall be applied or interpreted by reference to any rule construing provisions against the drafter. 

	
18.6.  

	
This Settlement Agreement is being entered into in the context of a settlement. Nothing in this Settlement Agreement shall be construed as an admission of liability or fault by any Party, which liability and fault are expressly denied. Except as otherwise expressly provided in this Settlement Agreement, neither the existence of this Settlement Agreement nor anything in this Settlement Agreement shall be deemed to prejudice in any way the position of any Party or its claims or defenses. 

	
18.7.  

	
The provisions of this Settlement Agreement shall be breached and a cause of action accrued thereon immediately on any Party’s commencement of any action contrary to this Settlement Agreement, and in any such action this Settlement Agreement may be asserted both as a defense and as a counterclaim or crossclaim. 

 

  

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18.8.  

	
In the event of any conflict between this Settlement Agreement and the terms of any Confirmed Plan, the terms of this Settlement Agreement shall govern. 

	
18.9.  

	
Facsimile or other electronic copies of signatures on this Agreement are acceptable, and a facsimile or other electronic copy of a signature on this Agreement is deemed an original. 

	
18.10.  

	
This Agreement may be executed in counterparts, each of which is deemed an original, but when taken together constitute one and the same document. A facsimile or scan of a signed copy of the Agreement shall serve as an original executed copy for all purposes. 

	
18.11.  

	
This Settlement Agreement shall be binding on the Parties, their successors (including, without limitation, any chapter 11 or chapter 7 trustee), assigns, transferees, and any other Persons who have asserted or seek to assert claims on behalf of or against the Debtors’ estates. 

	
18.12.  

	
The Parties’ respective rights, obligations, remedies and protections provided for in this Settlement Agreement and the Approval Order shall survive the conversion, dismissal or closing of the Chapter 11 Cases, appointment of a chapter 7 or chapter 11 trustee therein, substantive consolidation thereof and confirmation of any plan of reorganization or liquidation, and the terms and provisions of this Settlement Agreement and Approval Order shall continue in full force and effect notwithstanding the entry of any order effecting any of the foregoing. 

	
18.13.  

	
The Parties acknowledge and agree that a breach of the provisions of this Settlement Agreement by any Party would cause irreparable damage to the other Parties and that such other Parties would not have an adequate remedy at law for such damage. Therefore, the obligations of the Parties set forth in this Settlement Agreement shall be enforceable by a decree of specific performance issued by any court of competent jurisdiction, and appropriate injunctive relief may be applied for and granted in connection therewith. Such remedies shall, however, be cumulative and not exclusive and shall be in addition to any other remedies that the Parties may have under this Settlement Agreement or otherwise. Notwithstanding the foregoing, nothing herein shall impair the Debtors’ ability to act in accordance with their fiduciary duties to maximize the value of their estates. 

	
18.14.  

	
No payment or other obligation of a Party set forth herein shall be delayed, reduced, offset, recouped or withheld based on any claim, allegation or contract between the Debtors and Arch, other than as expressly set forth in this Settlement Agreement. 

	
18.15.  

	
No failure or delay by any party in exercising any right or remedy provided by law under or pursuant to this Settlement Agreement shall impair such right or remedy or be construed as a waiver or variation of it or preclude its exercise at any subsequent time, and no single or partial exercise of any such right or remedy 

 

  

13

  

 

	
 

	

shall preclude any other or further exercise of it or the exercise of any other right or remedy.

 

	
18.16.  

	
If (i) the Bankruptcy Court declines to approve this Settlement Agreement, or (ii) the Approval Order is vacated or reversed prior to the Effective Date, then this Settlement Agreement shall be null and void and the Parties shall revert to their respective positions on the date immediately prior to entry into this Settlement Agreement, and in such event the Parties shall not refer to nor rely on the Settlement Agreement, nor to any of the negotiations that resulted in the Settlement Agreement, nor to any objections filed with respect to the Settlement Agreement, in any further proceedings in connection with the matters that are being settled in connection with the Settlement Agreement. 

	
18.17.  

	
As used in this Settlement Agreement, any reference to any federal, state, local, or foreign law, including any applicable law, will be deemed also to refer to such law as amended and all rules and regulations promulgated thereunder, unless the context requires otherwise. The words “include,” “ includes” and “including” will 

 

be deemed to be followed by “without limitation.” Pronouns in masculine, feminine, or neutral genders will be construed to include any other gender, and words in the singular form will be construed to include the plural and vice versa, unless the context otherwise requires. The words “ this Settlement Agreement,” “herein,” “hereof,” “hereby,” “hereunder” and words of similar import refer to this Settlement Agreement as a whole and not to any particular subdivision unless expressly so limited.

 

	
18.18.  

	
The provisions of this Settlement Agreement are integrated, essential and non-severable terms of this Settlement Agreement. Each of the provisions of this Settlement Agreement has been agreed upon in consideration of each other provision of this Settlement Agreement. No Party would have entered into this Settlement Agreement unless each of the provisions hereof was valid, binding and enforceable against each other Party. If any provision of this Settlement Agreement is determined not to be valid, binding and enforceable against each Party, this Settlement Agreement shall be terminated and the Parties restored to their respective positions existing immediately before entry into this Settlement Agreement. 

	
18.19.  

	
Each Party shall, at its own expense and upon the reasonable request of the other Party, duly execute and deliver, or cause to be duly executed and delivered, to such Party such further instruments and do and cause to be done such further acts as may be reasonably necessary or proper to carry out the provisions and purposes of this Settlement Agreement, including, without limitation, the use of reasonable best efforts to obtain the Approval Order. 

	
18.20.  

	
Except as specifically set forth herein or therein, this Settlement Agreement and all other agreements, documents, and instruments to be executed and/or delivered in connection herewith or therewith and all transactions contemplated hereby or thereby shall not benefit or create any right or cause of action in or on behalf of 

 

  

14

  

 

	
 

	
any person or entity other than the Parties, the parties released herein, and their respective successors and assigns.

 

	
18.21.  

	
Except as specifically set forth herein or therein, this Settlement Agreement and all other agreements, documents and instruments to be executed and/or delivered in connection herewith or therewith may not be transferred, assigned, pledged or hypothecated to an entity by a Party without the prior written consent of all Parties, which consent may not be unreasonably withheld, it being understood and agreed that this provision shall not apply to transfers from the Debtors to the Reorganized Debtors. 

	
18.22.  

	
No failure or delay by a Party in exercising any right, remedy, power or privilege under this Settlement Agreement or any other agreement, document or instrument to be executed and/or delivered in connection herewith or therewith shall operate as a waiver thereof; nor shall any waiver by a Party of any provision or breach hereof or thereof constitute a continuing waiver or waiver on any subsequent occasion or of any subsequent breach of the same or different provision of this Settlement Agreement or any other agreement, document or instrument to be executed and/or delivered in connection herewith or therewith. 

 

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

  

15

  

IN WITNESS WHEREOF, each of the Parties has caused this Settlement Agreement to be executed and delivered as of the last date set forth below.

 

 

Patriot Coal Corporation, on behalf of itself

And its affiliated debtors and debtors-in-possession

 

By: /s/ Joseph W. Bean

Name: Joseph W. Bean

Title: Senior Vice President-Law and Administration

Date: October 23, 2013

 

Arch Coal, Inc., on behalf of itself

And its subsidiaries and affiliates

 

 

By: ____________________

Name: 

Title:

Date:

 

 

 

  

16

  

 

IN WITNESS WHEREOF, each of the Parties has caused this Settlement Agreement to be executed and delivered as of the last date set forth below.

 

 

Patriot Coal Corporation, on behalf of itself

And its affiliated debtors and debtors-in-possession

 

By:

Name: 

Title: 

Date: 

 

Arch Coal, Inc., on behalf of itself

And its subsidiaries and affiliates

 

 

By: /s/ Robert G. Jones

Name: Robert G. Jones

Title: Senior Vice President-General Counsel

Date: 10-23-13

 

  

17

  

 

SCHEDULE 1

	
Contract ID

	
Date of Contract

	
Counterparty

	
Debtor Party

	  	  	
ALLEGHENY LAND

	
ROBIN LAND COMPANY,

	
LND7150

	
12/31/05

	
COMPANY

	
LLC

	  	  	
ARCH COAL SALES

	
ROBIN LAND COMPANY,

	
LND7146

	
12/31/05

	
COMPANY, INC.

	
LLC

	  	  	  	
APOGEE COAL

	  	  	  	
COMPANY, LLC; ROBIN

	
LND7148

	
12/31/05

	
Arch of West Virginia, Inc.

	
LAND COMPANY, LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7136

	
12/31/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7137

	
12/8/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7138

	
12/8/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7139

	
12/8/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7140

	
12/31/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7141

	
12/31/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	  	  	  	
LLC; MAGNUM COAL

	
LND7142

	
12/22/05

	
ARK LAND COMPANY

	
COMPANY LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7143

	
12/21/05

	
ARK LAND COMPANY

	
LLC

 

 

  

  

  

	
Contract ID

	
Date of Contract

	
Counterparty

	
Debtor Party

	  	  	  	
ROBIN LAND COMPANY,

	
LND7144

	
12/8/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7145

	
12/8/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7147

	
12/31/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	  	  	  	
LLC; MAGNUM COAL

	
LND7149

	
12/28/05

	
ARK LAND COMPANY

	
COMPANY LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7151

	
11/28/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7152

	
10/26/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7154

	
12/30/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7155

	
12/30/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7156

	
12/29/05

	
ARK LAND COMPANY

	
LLC

 

 

  

  

  

 

	
Contract ID

	
Date of Contract

	
Counterparty

	
Debtor Party

	  	  	  	
ROBIN LAND COMPANY,

	
LND7157

	
12/30/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7158

	
12/31/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7159

	
12/31/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7160

	
12/31/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7161

	
12/29/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7162

	
12/29/05

	
ARK LAND COMPANY

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND7153

	
12/31/05

	
JULIAN TIPPLE, INC.

	
LLC

 

 

  

  

  

 

SCHEDULE 2

	
Contract ID

	
Date of Contract

	
Counterparty

	
Debtor Party

	  	  	  	
MAGNUM COAL COMPANY

	
LND 7008

	
12/31/2005

	
ARCH COAL, INC.

	
LLC

	  	  	  	
PATRIOT COAL

	
CA 001

	
2/6/2012

	
ARCH COAL, INC.

	
CORPORATION

	  	  	
ALLEGHENY LAND

	
ROBIN LAND COMPANY,

	
LND 7051

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ALLEGHENY LAND

	
ROBIN LAND COMPANY,

	
LND 7054

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ALLEGHENY LAND

	
ROBIN LAND COMPANY,

	
LND 7057

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ALLEGHENY LAND

	
ROBIN LAND COMPANY,

	
LND 7072

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ALLEGHENY LAND

	
ROBIN LAND COMPANY,

	
LND 7083

	
12/31/2005

	
COMPANY

	
LLC

	  	  	
ARCH COAL SALES

	
ROBIN LAND COMPANY,

	
LND 7043

	
12/30/2005

	
COMPANY, INC.

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND 7073

	
12/30/2005

	
ARCH COAL, INC.

	
LLC

	  	  	
Arch of West Virginia,

	
ROBIN LAND COMPANY,

	
LND 7047

	
12/30/2005

	
Inc.

	
LLC

	
LMS0138-

	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
001

	
12/31/2005

	
COMPANY

	
LLC

	
LMS0138-

	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
002

	
5/22/2007

	
COMPANY

	
LLC

 

  

  

  

	
Contract ID

	
Date of Contract

	
Counterparty

	
Debtor Party

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7006

	
12/31/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7025

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7027

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7028

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7029

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7030

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7031

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7032

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7033

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7034

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7036

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7037

	
12/30/2005

	
COMPANY

	
LLC

 

  

  

  

 

	
Contract ID

	
Date of Contract

	
Counterparty

	
Debtor Party

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7038

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7039

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7040

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7041

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7042

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7044

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7048

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7049

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7050

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7052

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7059

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7060

	
12/30/2005

	
COMPANY

	
LLC

 

  

  

  

 

 

	
Contract ID

	
Date of Contract

	
Counterparty

	
Debtor Party

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7068

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7069

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7070

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7071

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7074

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7078

	
12/31/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7079

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7081

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7082

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7085

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7087

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7089

	
12/30/2005

	
COMPANY

	
LLC

	  	  	
ARK LAND

	
ROBIN LAND COMPANY,

	
LND 7091

	
12/30/2005

	
COMPANY

	
LLC

 

  

  

  

 

 

	
Contract ID

	
Date of Contract

	
Counterparty

	
Debtor Party

	  	  	  	
ROBIN LAND COMPANY,

	
LND 7065

	
12/31/05

	
JULIAN TIPPLE, INC.

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND 7066

	
12/31/05

	
JULIAN TIPPLE, INC.

	
LLC

	  	  	  	
ROBIN LAND COMPANY,

	
LND 7067

	
12/31/05

	
JULIAN TIPPLE, INC.

	
LLC

 

  

  

  

 

EXHIBIT A

Approval Order

  

  

  

 

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

	
In re:

	  
	  	
Chapter 11

	  	
Case No. 12-51502-659

	
PATRIOT COAL CORPORATION, et al.,

	
(Jointly Administered)

	 	 
	 	 
	
Debtors.1

	  
	  	  

ORDER AUTHORIZING AND APPROVING PURSUANT TO 

11 U.S.C. §§ 105(a) AND 363(b) AND FED. R. BANKR. P. 9019(a) 

THE SETTLEMENT WITH ARCH COAL, INC.

Upon the motion (the “ Motion”) 2 of Patriot Coal Corporation and its subsidiaries that are debtors and debtors in possession in these proceedings (collectively, the “ Debtors”) for entry of an order pursuant to sections 105(a) and 363(b) of the Bankruptcy Code and Bankruptcy Rule 9019(a), and the Court having jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. § 1334; and consideration of the Motion and the requested relief being a core proceeding that the Bankruptcy Court can determine pursuant to 28 U.S.C. § 157(b)3; and venue being proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409; and due and proper notice of the Motion having been provided in accordance with the Order Establishing Certain Notice, Case Management and Administrative Procedures entered on March 22, 2013 [ECF No. 3361]; and it appearing that

 

 

1 The Debtors are the entities listed on Schedule 1 attached to the Motion (as defined herein). The employer tax identification numbers and addresses for each of the Debtors are set forth in the Debtors’ chapter 11 petitions. 

2 Unless otherwise defined herein, each capitalized term shall have the meaning ascribed to such term in the Motion, or, if not defined in the Motion, the Settlement Agreement (as defined herein). 

3 Findings of fact shall be construed as conclusions of law and conclusions of law shall be construed as findings of fact when appropriate. See Fed. R. Bankr. P. 7052. 

 

  

1

  

no other or further notice need be provided; and the Court having reviewed the Motion; [and having held a hearing with appearances of parties in interest noted in the transcript thereof (the “ Hearing”)]; and the relief requested in the Motion being i n the best interests of the Debtors and their respective estates and creditors; and the Debtors having articulated good, sufficient and sound business justifications and compelling circumstances for the Arch Settlement; and the settlement and compromise reflected by the Arch Settlement being fair, reasonable and equitable to all of the parties in interest and the Court having determined that the legal and factual bases set forth in the Motion [and at the Hearing] establish just cause for the relief granted herein; and the terms and conditions of the Arch Settlement having been negotiated in good faith and at arm’s length by the Debtors and Arch; and upon all of the proceedings had before the Court and after due deliberation and sufficient cause appearing therefor, it is hereby

ORDERED that the relief requested in the Motion is hereby granted as set forth herein; and it is further

ORDERED that any objection to the Motion and the Arch Settlement is hereby overruled with prejudice; and it is further

ORDERED that pursuant to sections 105(a), and 363(b) of the Bankruptcy Code and Bankruptcy Rule 9019, the settlement agreement, substantially in the form attached hereto as Exhibit A (the “Settlement Agreement”), is approved in its entirety and all of its term s are incorporated herein by reference; and it is further

ORDERED that the failure to specifically include any particular provision of the Settlement Agreement in this Order shall not diminish or impair the effectiveness of such

 

  

2

  

provision, it being the intent of the Court that the Settlement Agreement be authorized and approved in its entirety; and it is further

ORDERED that the Settlement Agreement shall be binding upon Patriot and upon Arch, and each of their successors and assigns; and it is further

ORDERED that neither the Debtors nor Arch shall take any action that is inconsistent with the Settlement Agreement; and it is further

ORDERED that the Debtors are authorized to execute, deliver, implement, and fully perform any and all obligations, instruments, documents, and papers and to take any and all actions reasonably necessary or appropriate to consummate, complete, execute, and implement the Settlement Agreement and the relief granted in this Order, in accordance with the terms and conditions thereof; and it is further

ORDERED that upon the occurrence of the Effective Date (as defined in the Settlement Agreement), the Debtors and each of their respective estates fully and forever release and shall be deemed to have fully and forever released Arch and its current and former professionals, employees, advisors, officers, directors, agents, predecessors, and successors (not including ArcLight Capital Partners, LLC or its subsidiaries, affiliates, or managed entities) (the “ Arch Released Parties”) from any and all Causes of Action 4,

4 “Causes of Action” means, without limitation, any and all actions, proceedings, causes of action, controversies, liabilities, obligations, rights, rights of set-off, recoupment rights, suits, damages, judgments, accounts, defenses, offsets, powers, privileges, licenses, franchises, claims (as defined in section 101(5) of the Bankruptcy Code and including alter-ego claims and claims under chapter 5 of the Bankruptcy Code as well as any claims or rights created pursuant to sections 301 and 541 of the Bankruptcy Code upon the commencement of the above-captioned chapter 11 cases, counterclaims, cross-claims, affirmative defenses and demands of any kind or character whatsoever, whether known or unknown, asserted or unasserted, reduced to judgment or otherwise, liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, secured or unsecured, assertable directly or derivatively, existing or hereafter arising, in contract or in tort, in law, in equity or otherwise in any court, tribunal, forum or proceeding, under any local, state, federal, foreign, statutory, regulatory or other law or rule, based in whole or in part upon any act or omission or other event occurring prior to July 9, 2012 or during the course of the Chapter 11 Cases, including through the Effective Date, in all cases other than those arising under the Settlement Agreement or this Order, or otherwise expressly preserved under the Settlement Agreement or this Order, including, but not limited to, those that Arch

 

  

3

  

 

including, without limitation, those Causes of Action based on avoidance liability under federal or state laws, veil piercing or alter-ego theories of liability, contribution, indemnification and joint liability or otherwise, and such releases shall be binding on any trustees or successors to the Debtors; and it is further

ORDERED that Arch shall have (i) allowed unsecured claims in the aggregate amount of $95 million as follows: an allowed unsecured claim of $80.5 million against Magnum Coal Company LLC, and an allowed unsecured claim of $14.5 million against Robin Land Company, LLC (together, the “ Allowed Unsecured Claims”), and (ii) an allowed administrative expense claim of $1,131,398.45 (the “ Allowed Administrative Expense Claim”) and, upon the Effective Date, the Debtors’ claim s agent and the Clerk of the Court are authorized and directed to amend the Debtors’ claims register accordingly; and it is further

ORDERED that upon the occurrence of the Effective Date, Arch (i) fully and forever releases and shall be deemed to have fully and forever released the Debtors and their current and former professionals, employees, advisors, officers, directors, agents, predecessors, and successors from any and all Causes of Action including, but not limited to, any counterclaims or defenses asserted by or that could be asserted by Arch in the STB Adversary Proceeding, and (ii) irrevocably withdraws and shall be deemed to have withdrawn irrevocably any and all proofs of claim filed against the Debtors in the Chapter 11 Cases other than the Allowed Unsecured Claims and the Allowed Administrative Expense Claim, including, without limitation, (a) Claim No. 2143 asserting an administrative expense claim in the amount of $614,634.56 and (b) Claim No. 2144 an administrative claim that has been allowed in the

 

 

may have against any of the Debtors arising under or related to any agreement entered into after the Petition Date or assumed prior to or as of the Effective Date, which are not released and are expressly preserved.

 

  

4

  

amount of $13,500.00, and, upon the Effective Date, such proofs of claim are hereby deemed to be disallowed with prejudice without further order of this Court, and the Debtors’ claims agent and the Clerk of the Court are authorized and directed to amend the Debtors’ claims register accordingly; and it is further

ORDERED that no payment or other obligation of Arch set forth in the Settlement Agreement shall be delayed, reduced, offset, recouped or withheld based on any claim, allegation or contract between the Debtors and Arch, other than as expressly set forth in the Settlement Agreement; and it is further;

ORDERED that nothing in this Order or in the Settlement Agreement is to be construed as (i) releasing, discharging, precluding, waiving, or enjoining Arch’s or any third party’s liability to the UMWA 1974 Pension Plan, the UMWA 1992 Benefit Plan, the UMWA Combined Benefit Fund, the UMWA 2012 Retiree Bonus Account Trust or the UMWA 1993 Benefit Plan (collectively, the “ UMWA Plans”), if any, on account of any claim by or on behalf of the UMWA Plans; or (ii) affecting the rights and defenses of any party with respect to any such alleged right or claim. It being understood that this provision shall not apply with respect to any Causes of Action of the Debtors or the Reorganized Debtors against Arch that are released hereunder; and it is further

ORDERED that, pursuant to sections 105(a) and 363(f) of the Bankruptcy Code, upon the occurrence of the Effective Date and Arch’s payment of $16 million to Patriot, the South Guffey Reserve shall be deemed to be transferred to Arch, free and clear of any and all liens, claims and interests of all persons with any interest in, to and with respect to the South Guffey Reserve, whether arising prior to, during or subsequent to these Chapter 11 cases or imposed by agreement, understanding, law, equity or otherwise; provided, however, that

 

  

5

  

nothing in this Order shall affect the rights of the Debtors and Arch under the Settlement Agreement; and it is further

ORDERED that the transactions contemplated by the Settlement Agreement, including without limitation the transfer of South Guffey Reserve to Arch free and clear of all liens, claims and interests, are undertaken by Arch in good faith, as that term is used in section 363(m) of the Bankruptcy Code, and that neither the Debtors nor Arch has engaged in any conduct that would cause or permit any transactions contemplated by the Settlement Agreement, including the transfer of the South Guffey Reserve, to be avoidable under Section 363(n) of the Bankruptcy Code, and that the consideration being provided by Arch in exchange for the transfer of the South Guffey Reserve constitutes reasonably equivalent value and fair consideration under the Bankruptcy Code, the Uniform Fraudulent Transfer Act, the Uniform Fraudulent Conveyance Act, and under the laws of the United States, any state, territory or possession thereof, and the District of Columbia. Accordingly, the reversal or modification on appeal of the authorization to consummate the transfer of the South Guffey Reserve and the transactions contemplated by the Settlement Agreement shall not affect the validity of the transfer of the South Guffey Reserve to Arch, unless such authorization is duly stayed pending such appeal. Arch is a purchaser in good faith of the South Guffey Reserve and shall be entitled to all of the protections afforded by section 363(m) of the Bankruptcy Code; and it is further

ORDERED that entry into the Arch Settlement by the Debtors and the performance and fulfillment of their obligations thereunder, does not constitute the solicitation of a vote on a plan of reorganization, does not violate any law, including the Bankruptcy Code, and does not give rise to any claim or remedy against any of the Debtors; and its further

 

  

6

  

ORDERED that the Debtors are authorized and directed, upon the Effective Date, to assume the contracts listed on Schedule 1 of the Settlement Agreement as of the Effective Date, amend and assume the Kelly-Hatfield Lease, allow the Allowed Administrative Expense Claim as the cure amount owed in connection with the assumption of the Kelly-Hatfield Lease, and execute the New Lease, on the terms and subject to the conditions set forth in the Settlement Agreement; and it is further

ORDERED that the Debtors are authorized and directed to reject the PSA and the contracts listed on Schedule 2 to the Settlement Agreement, each as of the Effective Date; and it is further

ORDERED that, upon the Effective Date, the Rule 2004 Subpoena shall be deemed withdrawn, on the terms and subject to the conditions set forth in the Settlement Agreement; and it is further

ORDERED that the effect of this Order shall survive the conversion, dismissal and/or closing of these chapter 11 cases, appointment of a chapter 11 trustee, confirmation of a plan of reorganization and/or the substantive consolidation of these chapter 11 cases with any other case or cases and shall be binding on any successor (including a chapter 7 or chapter 11 trustee) of any of the Debtors; and it is further

ORDERED that the provisions of the Settlement Agreement are integrated, essential and non-severable terms of the Settlement Agreement; and it is further

ORDERED that to the extent of any conflict between the terms of this Order and any chapter 11 plan confirmed in the Chapter 11 Cases or any other order of this Court, the terms of this Order shall control; and it is further

 

  

7

  

 

ORDERED that proper, timely, adequate and sufficient notice of the Motion has been

provided, and no other or further notice of the Motion or the entry of this Order shall be

required; and it is further

ORDERED that, in the event the Effective Date does not occur, the releases granted

by this Order shall by void ab initio; and it is further

ORDERED that, notwithstanding the possible applicability of Bankruptcy Rules

4001(d), 6004(h), 7062, 9014, or otherwise, the terms and conditions of this Order shall be

immediately effective and enforceable upon its entry.

Dated:  _________________, 2013

St. Louis, Missouri

 

	 	 ________________________________________ 

THE HONORABLE KATHY SURRATT-STATES

CHIEF UNITED STATES BANKRUPTCY JUDGE

 

Order prepared by:

Marshall S. Huebner 

Elliot Moskowitz 

Brian M. Resnick 

Michelle M. McGreal

DAVIS POLK & WARDWELL LLP 

450 Lexington Avenue

New York, New York  10017

 

  

8

  

EXHIBIT B

South Guffey ReserveExhibit 10.3

 

 

Execution

 

BACKSTOP RIGHTS PURCHASE AGREEMENT

by and among

Patriot Coal Corporation

and the other entities set forth on Schedule 1 hereto

as Debtors,

and the Backstop Parties identified as such herein

Dated: November 4, 2013

 

 

 

 

 

 

  

  

  

 

 

TABLE OF CONTENTS

Page

 

	
Section 1.

	
Definitions

	
3

	  	  	  
	
Section 2.

	
Rights Offering; Backstop Commitment

	
9

	  	  	  
	
2.1

	
The Rights Offerings

	
9

	
2.2

	
Backstop

	
11

	
2.3

	
Backstop Fee

	
12

	  	  	  
	
2.4

	
Breakup Fee

	
12

	  	  	  
	
Section 3.

	
Representations and Warranties of the Debtors

	
13

	  	  	  
	
3.1

	
Organization

	
13

	
3.2

	
Due Authorization, Execution and Delivery; Enforceability

	
13

	
3.3

	
Consents

	
14

	
3.4

	
Due Issuance and Authorization of Securities; Reservation of Shares of New Common Stock

	
14

	
3.5

	
No Conflicts

	
14

	
3.6

	
No Registration

	
14

	
3.7

	
Arm’s Length

	
15

	
3.8

	
No Broker’s Fees

	
15

	  	  	  
	
Section 4.

	
Representations and Warranties of the Backstop Parties

	
15

	  	  	  
	
4.1

	
Organization

	
15

	
4.2

	
Due Authorization

	
15

	
4.3

	
Due Execution; Enforceability

	
15

	
4.4

	
Consents

	
15

	
4.5

	
No Conflicts

	
16

	
4.6

	
Legal Proceedings

	
16

	
4.7

	
No Registration Under the Securities Act

	
16

	
4.8

	
Acquisition for Investment

	
17

	
4.9

	
Accredited Backstop Party

	
17

	
4.10

	
Arm’s Length

	
17

	
4.11

	
No Broker’s Fees

	
17

	  	  	  
	
Section 5.

	
Additional Covenants

	
17

	  	  	  
	
5.1

	
Uncertificated Units

	
17

	
5.2

	
Further Assurances

	
17

	
5.3

	
Commercially Reasonable Efforts

	
17

	
5.4

	
No-Shop

	
17

	  	  	  
	
Section 6.

	
Conditions to Backstop Parties’ Obligations

	
19

	  	  	  
	
Section 7.

	
Conditions to the Debtors’ Obligations

	
21

	  	  	  
	
Section 8.

	
Plan Support.

	
22

	  	  	  
	
8.1

	
Plan

	
22

 

 

 

  

-i-

  

 

 

 

	
8.2

	
Agreements of the Supporting Parties

	
22

	
8.3

	
Additional Agreements of the Backstop Parties

	
23

	
8.4

	
Transfers

	
23

	
8.5

	
Additional Agreements of the Creditors’ Committee and the UMWA

	
24

	
8.6

	
Rights of Supporting Parties Unaffected

	
24

	
8.7

	
Additional Agreements of the Debtors

	
24

	
8.8

	
Acknowledgment

	
25

	  	  	  
	
Section 9.

	
Miscellaneous

	
25

	  	  	  
	
9.1

	
Notices

	
25

	
9.2

	
Indemnification

	
26

	
9.3

	
Survival of Representations and Warranties, etc.

	
27

	
9.4

	
Assignment

	
27

	
9.5

	
Entire Agreement

	
28

	
9.6

	
Waivers and Amendments

	
28

	
9.7

	
Governing Law; Jurisdiction; Venue; Process

	
28

	
9.8

	
Counterparts

	
29

	
9.9

	
Headings; Advice of Counsel; Interpretation

	
29

	
9.10

	
Severability

	
29

	
9.11

	
Termination

	
29

	
9.12

	
Conflict with Confirmation Order and Plan

	
32

	
9.13

	
Specific Performance

	
32

	
9.14

	
No Third Party Beneficiaries

	
32

	
9.15

	
Separate Investment Decisions

	
32

	
9.16

	
Date this Agreement is Effective

	
33

 

 

Exhibits

Exhibit A - Backstop Party Joinder to Agreement

Exhibit B - Supporting Party Joinder to Agreement

Schedules

Schedule 1 - Debtors

Schedule 2 - Backstop Party Commitments

 

  

-ii-

  

 

 

BACKSTOP RIGHTS PURCHASE AGREEMENT

THIS BACKSTOP RIGHTS PURCHASE AGREEMENT (together with the exhibits and schedules attached hereto, the “Agreement”) is made this 4th day of November, 2013, by and among Patriot Coal Corporation, a Delaware corporation (the “Company”), the other entities set forth in Schedule 1 hereto (together with the Company, the “Debtors” and each a “Debtor”), each of the undersigned entities and/or their investment advisors, managers, managed funds or accounts, intermediaries or nominees set forth on the signature pages hereto and any person executing a joinder (“Joinder”) to this Agreement in substantially the form attached hereto as Exhibit A as a Backstop Party (collectively, the “Backstop Parties” and each, a “Backstop Party”) and is consented to by the Official Committee of Unsecured Creditors (the “Creditors’ Committee”) and the United Mine Workers of America (the “UMWA” and, together with the Backstop Parties, the Creditors’ Committee and any person executing a joinder to this Agreement in substantially the form attached hereto as Exhibit B as a Supporting Party, the “Supporting Parties” and each, a “Supporting Party”). Capitalized terms used herein but not defined herein will have the meaning assigned to them in the Plan.

W I T N E S S E T H:

WHEREAS, on July 9, 2012 (the “Petition Date ”), each Debtor other than Brody Mining, LLC and Patriot Ventures LLC filed voluntary chapter 11 petitions under the Bankruptcy Code, and, on September 23, 2013, Brody Mining, LLC and Patriot Ventures LLC each filed voluntary chapter petitions under the Bankruptcy Code, and the Debtors’ chapter 11 cases are being jointly administered by the Bankruptcy Court under the caption In re Patriot Coal Corporation, et al, Case No. 12-51502-659 (Jointly Administered) (the “Chapter 11 Cases”);

WHEREAS, on October 9, 2013, the Debtors and Knighthead Capital Management, LLC, solely on behalf of certain funds and accounts it manages and/or advises, entered into a term sheet, consented to by the Creditors’ Committee and the UMWA, relating to the Rights Offerings and related transactions, under which Knighthead may designate certain Co-Investors (as defined therein) (the “Rights Offerings Term Sheet”);

WHEREAS, on October 26, 2013, the Company filed its Second Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (as amended, supplemented or otherwise modified from time to time, the “Plan”) and the Disclosure Statement for Debtors Second Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code;

WHEREAS, the transactions contemplated by the Plan include a rights offering (the “Notes Rights Offering”) for new Senior Secured Second Lien Notes of the Company (the “Notes”) and a rights offering (the “Warrant Rights Offering,” together with the Notes Rights Offering, the “Rights Offerings”) for new warrants of the Company (the “Warrants”) exercisable for New Common Stock, pursuant to which holders of an Allowed Senior Notes Claim, Allowed General Unsecured Claim or Allowed Convertible Notes Claim who are Certified Eligible Holders (as defined below), together with the Backstop Parties, will be offered subscription rights to purchase Notes (the “Notes Rights”) and subscription rights to purchase Warrants (the “Warrants Rights,” and together with the Notes Rights, the “Rights”);

 

 

 

  

  

  

 

 

WHEREAS, to ensure an orderly Plan confirmation process, (a) the Debtors are prepared to perform their obligations hereunder subject to the terms and conditions of this Agreement, including, among other things to use commercially reasonable efforts to have the Disclosure Statement approved and the Plan confirmed by the Bankruptcy Court; and (b) the Supporting Parties are prepared to perform their obligations hereunder subject to the terms and conditions of the Agreement, including without limitation, working with the Company to obtain Bankruptcy Court approval of this Agreement, the Disclosure Statement, and the Plan;

WHEREAS, in expressing such support and commitment, the Debtors and the Supporting Parties recognize that certain undertakings contemplated by this Agreement are subject to, among other things, the solicitation and disclosure requirements of applicable bankruptcy law and securities laws;

WHEREAS, the aggregate subscription price for the Notes offered for purchase pursuant to the Notes Rights (the “Rights Offering Notes”) shall be $250,000,000, the aggregate subscription price for the Warrants offered for purchase pursuant to the Warrants Rights (the “Rights Offering Warrants”) shall be $25,000 and the aggregate subscription price for the Rights Offering Notes and the Rights Offering Warrants shall be $250,025,000 (the “Rights Offerings Amount”);

WHEREAS, the Rights Offerings will be made only to the Backstop Parties and to holders of Allowed Senior Notes Claims, Allowed General Unsecured Claims and Allowed Convertible Notes Claims that certify they are “eligible holders” (i.e., holders that certify their status as (i) a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act, or an entity in which all of the equity owners are such “qualified institutional buyers,” or (ii) an “accredited investor” within the meaning of Rule 501(a)(1), (2), (3), (5), (6) or (7) under the Securities Act, or an entity in which all of the equity owners are such “accredited investors”) pursuant to Section 4(2) of the Securities Act (such holders, “Certified Eligible Holders”, and together with the Backstop Parties, the “Rights Offerings Participants”);

WHEREAS, the Backstop Parties shall be offered Notes Rights to purchase 40% of the Rights Offering Notes and Warrant Rights to purchase 40% of the Rights Offering Warrants, in each case in accordance with their respective Backstop Commitment Percentage, for an aggregate subscription price of $100,010,000, and the remaining Rights shall be allocated to holders of Allowed Claims as of a specified record date, in the proportion of (i) 92.3% to holders of Allowed Senior Notes Claims and (ii) 7.7% to holders of Allowed General Unsecured Claims and Allowed Convertible Notes Claims;

WHEREAS, Rights may not be offered to holders that are not Certified Eligible Holders, and, furthermore, pursuant to Section 3.2(c) of the Plan, the Company may decline to permit the subscription of Rights (the “Declined Rights”) so as to avoid, among other things, being required to become a reporting company under the Exchange Act;

WHEREAS, the Plan contemplates that the Rights not offered to holders of Allowed Senior Notes Claims and the Declined Rights related to Allowed Senior Notes Claims (together, the “Other Senior Notes Rights”) shall be offered to the Backstop Parties as part of their Initial Rights Allocation;

 

 

 

  

2

  

 

 

 

WHEREAS, in respect of such Other Senior Notes Rights and the New Common Stock that would have otherwise been distributed with such Other Senior Notes Rights pursuant to section 3.2(c)(i) of the Plan, the Backstop Parties will pay the Company the amount of cash distributable to holders of Allowed Senior Notes Claims pursuant to section 3.2(c) of the Plan;

WHEREAS, to the extent that not all the Rights are initially subscribed, 60% of the unsubscribed Rights (the “Unsubscribed Rights”) shall be allocated to Rights Offerings Participants that have subscribed for additional Rights, in the proportions set forth herein, and the remaining 40% of the Unsubscribed Rights shall be allocated to the Backstop Parties, with any remaining Rights offered to such parties in such proportions until all Rights have been exercised, or no more Rights are exercised;

WHEREAS, to facilitate the Rights Offerings and ensure that the Company receives the Rights Offerings Amount, and in consideration of the payment of the premiums and expense reimbursements described herein, each Backstop Party is willing to exercise on the Effective Date, to the extent that the Rights Offerings are not fully subscribed, its Backstop Commitment Percentage of the Unsubscribed Rights and to fund on or before the Effective Date its Backstop Purchase Price and its Senior Notes Cash Payment Amount; and

WHEREAS, the Parties agree that any valuations of the Debtors’ or the Reorganized Debtors’ assets or estates, whether implied or otherwise, arising from this Agreement will not be binding for any other purpose, including but not limited to, determining recoveries under the Plan, and this Agreement does not limit such rights regarding valuation in the Chapter 11 Cases.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained in this Agreement, the Parties hereto hereby agree as follows:

Section 1.    Definitions.

(a) For purposes of this Agreement, the following terms will have the meanings set forth below:

“Affiliate” has the meaning assigned to such term under Rule 144 of the Securities Act.

“Agreement” has the meaning assigned to it in the Preamble.

“Allowed Claim” means an Allowed Senior Notes Claim, Allowed General Unsecured Claim or Allowed Convertible Notes Claim.

“Allowed Convertible Notes Claim” has the meaning assigned to it in the Plan.

“Allowed General Unsecured Claim” has the meaning assigned to it in the Plan.

“Allowed Senior Notes Claim” has the meaning assigned to it in the Plan.

“Alternative Transaction” has the meaning assigned to it in Section 2.4 hereof.

  

3

  

 

“Approvals” means all approvals and other authorizations that are required under the Bankruptcy Code for the Debtors to take the actions set forth herein and in the Plan.

“Arch” has the meaning assigned to it in Section 6(d).

“Backstop Allocation” means Notes Rights and Warrant Rights offered to the Backstop Parties to purchase up to 40% of the Rights Offering Notes and up to 40% of the Rights Offering Warrants, respectively, for an aggregate subscription price of $100,010,000.

“Backstop Commitment Amounts” means the amounts set forth under the heading “Backstop Commitment Amounts” on Schedule 2 opposite each Backstop Party’s name.

“Backstop Commitment Percentages” means the percentages set forth under the heading “Backstop Commitment Percentages” on Schedule 2 opposite each Backstop Parties’ name.

“Backstop Fee” has the meaning assigned to it in Section 2.3 hereof.

“Backstop Party” and “Backstop Parties” have the meanings assigned to such terms in the Preamble.

“Backstop Party Material Adverse Change” means a material and adverse change or development (a) that would reasonably be expected to materially prohibit, delay or adversely impact a Backstop Party’s performance of its obligations under this Agreement or (b) concerning the validity or enforceability of this Agreement against a Backstop Party.

“Backstop Purchase Price” has the meaning assigned to it in Section 2.2(b)(i) hereof.

“ Bankruptcy Code ” means the Bankruptcy Reform Act of 1978, as amended and as codified in title 11 of the United States Code, 11 U.S.C. §§ 101 et seq., as applicable to the Chapter 11 Cases.

“Bankruptcy Court ” means the United States Bankruptcy Court for the Eastern District of Missouri Eastern Division having jurisdiction over the Chapter 11 Cases, whether acting through its bankruptcy court unit or otherwise.

“Bankruptcy Rules” means the Federal Rules of Bankruptcy Procedure, as amended, as applicable to the Chapter 11 Cases.

“Breakup Fee” has the meaning assigned to it in Section 2.4 hereof.

“Breakup Fee Triggering Event” has the meaning assigned to it in Section 2.4 hereof.

“ Business Day” means any day other than a Saturday, Sunday or a legal holiday on which banking institutions in the State of New York are not required to open.

“Chapter 11 Cases” has the meaning assigned to it in the Recitals.

  

4

  

 

“Claim” shall mean “claim” (as defined in section 101(5) of the Bankruptcy Code) against any Debtor, whether such claim arose, was incurred or accrued before or after the Petition Date.

“Creditors’ Committee” has the meaning assigned to it in the Preamble.

“Company” has the meaning assigned to it in the Preamble.

“Confirmation Order” has the meaning assigned to it in Section 6(a) hereof.

“Debtors” means the Company and entities set forth in Schedule 1 attached hereto.

“Declined Rights” has the meaning assigned to it in the Recitals.

“Disclosure Statement” means the disclosure statement in respect of the Plan that describes the Plan.

“Disclosure Statement Order” has the meaning assigned to it in Section 8.2(a).

“Effective Date” has the meaning set forth in the Plan.

“Expense Reimbursement” means all the reasonable and documented out-of-pocket fees and expenses of (i) Kirkland & Ellis LLP incurred on or after the date of the execution of the Rights Offerings Term Sheet relating to the preparation, negotiation and execution of the Backstop Agreement, the Plan, the Offerings Procedures, the Rights Offerings Term Sheet, the Plan documents or the Postconfirmation Organizational Documents (including, without limitation, in connection with the successful enforcement of any of rights and remedies under such documents) and, in each of the foregoing cases, the proposed documentation and the transactions contemplated thereunder and (ii) in the event the Debtors and the Backstop Parties agree that the Backstop Parties require a financial advisor in connection with litigation regarding the Plan and the Rights Offerings and the transactions contemplated thereby, one financial advisor in an amount to be agreed between the Debtors and the Backstop Parties, in each case excluding any fees and expenses previously paid by the Debtors in respect of the Initial Expense Reimbursement.

“Expiration Date” has the meaning assigned to it in Section 9.11(a)(A) hereof.

“File” or “Filed” means file, filed or filing with the Bankruptcy Court or its authorized designee in these Chapter 11 Cases.

“First -Lien Exit Facilities” means senior secured debt issued on the Effective Date by the Reorganized Company providing for: (1) no more than a $250.0 million first lien term loan facility, (2) a $200.0 million first lien letter of credit facility, none of which letters of credit shall be cash collateralized as of the Effective Date, or such other replacement letter of credit facility in such aggregate amount as may be necessary to fully satisfy the Debtors’ postpetition letter of credit financing obligations, and (3) a first lien revolving facility with commitments of $ 125.0 million that shall be fully available (subject to a borrowing base) on the Effective Date, the terms of which agreements are reasonably satisfactory to the Backstop Parties, provided that the

 

 

  

5

  

 

 

material financial terms thereof, including, without limitation, the coupon rate, the amount of any original issue discount and the maturity, shall be satisfactory to the Backstop Parties in their sole discretion.

“Governmental Entity” means any (i) federal, state, local, municipal, foreign or other government; (ii) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); or (iii) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or Tax Authority or power of any nature, including any arbitration tribunal.

“Hatfield Side Letter” means that certain letter agreement regarding the UMWA Pension Plan by and between Cecil E. Roberts and Bennett K. Hatfield, dated June 30, 2013.

“Indemnified Claims” has the meaning assigned to it in Section 9.2(b)

“Indemnitees” have the meaning assigned to it in Section 9.2 hereof

“Initial Expense Reimbursement” means all reasonable and documented fees and expenses incurred by Kirkland & Ellis LLP relating to negotiation of the terms and definitive documentation of a potential backstopped rights offering, and the performance of legal and other due diligence related to the negotiation, approval, and implementation thereof, whether or not the Debtors and Knighthead ultimately agree to the terms of any transaction, payable under the Order Authorizing and Approving the Payment of Fees and Reimbursement of Expenses of Potential Rights Offering Backstop Parties, approved by the Bankruptcy Court on July 26, 2013, Docket No. 4385.

“Initial Rights Allocation” means, with respect to each Certified Eligible Holder, those Rights initially offered to such Certified Eligible Holder in respect of its Allowed Claims or, with respect to Backstop Parties, their respective Backstop Commitment Percentage of the Backstop Allocation and the Other Senior Notes Rights.

“Joinder” has the meaning assigned to it in the Recitals.

“Knighthead” means Knighthead Capital Management, LLC, solely on behalf of certain funds and accounts it manages and/or advises.

“Material Adverse Change” means any change, conditions, development or event that, individually or in the aggregate, has had or could reasonably be expected to have a material adverse change in, or a material adverse effect on, the operations, business, assets, properties, liabilities (actual or contingent) or condition (financial or otherwise) of the Company and its subsidiaries or the industry in which it operates; provided that “Material Adverse Change” shall not include any such change, condition, development or event arising out of or resulting from (a) conditions or effects that generally affect persons operating in the industries and markets in which the Company and its subsidiaries operate, (b) general economic conditions in the U.S., or globally, (c) national or international political or social conditions, including the engagement by the U.S. in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the U.S. or any of its territories, possessions or personnel, or (d) financial, banking, securities, credit or commodities markets,

 

  

6

  

 

prevailing interest rates or general capital markets conditions in the U.S. or globally; except in each of clauses (a), (b), (c) and (d) above, if the Company and its subsidiaries, taken as a whole, are disproportionately affected thereby relative to other persons engaged in the industry in which they operate.

“New Common Stock” means the Class A common stock, par value $0.01 per share, of the Reorganized Company, entitled to one vote per share of common stock on all matters on which the common stock of the Reorganized Company is entitled to vote.

“Notes” has the meaning assigned to it in the Recitals.

“Notes Rights” has the meaning assigned to it in the Recitals.

“Notes Rights Offering” has the meaning assigned to it in the Recitals.

“Notes Subscription Purchase Price” means the purchase price for the Rights Offering Notes acquired by a Rights Offerings Participant, as calculated in accordance with such Rights Offerings Participant’s Subscription Form.

“Other Senior Notes Rights” has the meaning assigned to it in the Recitals.

“Party” means each of the Debtors or any Backstop Party, individually, and the “Parties” means the Debtors and the Backstop Parties, collectively, including, in each case, any person executing a Joinder as a Backstop Party.

“Peabody” has the meaning assigned to in Section 6(c).

“Person” means an individual, a partnership, a joint venture, a corporation, a business trust, a limited liability company, a trust, an unincorporated organization, a joint stock company, a labor union, an estate, a Governmental Entity or any other entity.

“Petition Date” means, with respect to the Debtors other than Brody Mining, LLC and Patriot Ventures LLC, July 9, 2012, and, with respect to Brody Mining, LLC and Patriot Ventures LLC, September 23, 2013.

“Plan” has the meaning assigned to it in the Recitals.

“Plan Documents” has the meaning assigned to it in Section 6(k) hereof.

“Postconfirmation Organizational Documents” has the meaning assigned to it in Section 6(i) hereof.

“Registration Rights Agreement” has the meaning assigned to it in the Plan.

“Remaining Rights Offering Notes” has the meaning assigned to it in Section 2.2(a)(i) hereof.

“Remaining Rights Offering Warrants” has the meaning assigned to it in Section 2.2(a)(i) hereof.

 

  

7

  

 

“Reorganized Company” means the Company as reorganized pursuant to and under the Plan on the Effective Date.

“Reorganized Debtors” means the Debtors as reorganized pursuant to and under the Plan on the Effective Date.

“Rights” has the meaning assigned to in the Recitals.

“Rights Offering Notes” has the meaning assigned to it in the Recitals.

“Rights Offering Warrants” has the meaning assigned to it in the Recitals.

“Rights Offerings” has the meaning assigned to it in the Recitals.

“Rights Offerings Amount” has the meaning assigned to it in the Recitals.

“Rights Offerings Participant” has the meaning assigned to it in the Recitals.

“Rights Offerings Procedures” means those rights offerings procedures attached as Appendix A to the Debtors’ Motion for Entry of an Order Pursuant to 11 U.S.C. §§ 363(b)(1) and 105(a) (i) Authorizing Entry Into a Backstop Purchase Agreement, (ii) Authorizing the Debtors to Conduct the Rights Offerings in Connection with the Debtors’ First Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code and (iii) Approving Rights Offerings Procedures, filed with the Bankruptcy Court on October 16, 2013, as thereafter amended or modified.

“Rights Offerings Term Sheet” has the meaning assigned to in the Recitals.

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

“Senior Notes Cash Payment” has the meaning assigned to it in Section 2.1(b).

“Senior Notes Cash Payment Amount” means, as to each Backstop Party, such Backstop Party’s Backstop Commitment Percentage multiplied by the Senior Notes Cash Payment.

“Subscription Agent” has the meaning assigned to it in the Plan.

“Subscription Deadline” means December 10, 2013 at 5:00 p.m. (prevailing Central Time) or such later time as determined by the Debtors in their sole discretion.

“Subscription Form” means the subscription form(s) and applicable instructions included on the ballot sent to each Rights Offerings Participant on which such Rights Offerings Participant may exercise his, her or its Initial Rights Allocation and, optionally, an Oversubscription, in substantially the form attached to the Rights Offerings Procedures.

“Subscription Purchase Price” means the purchase price for the Rights Offering Notes and the Rights Offering Warrants, as the case may be, acquired by each Rights Offerings Participant as calculated in accordance with such Rights Offerings Participant’s Subscription Form.

 

  

8

  

 

“Superior Transaction” has the meaning assigned to it in Section 9.11(b)(B).

“Supporting Parties” and “Supporting Party” have the meanings assigned to such terms in the Preamble.

“Taxation,” “Tax” or “Taxes” shall mean all forms of taxation, assessment, levy, duty or other governmental charge imposed by any Governmental Entity, including any income, alternative or add-on minimum, accumulated earnings, personal holding company, franchise, capital stock, environmental, profits, windfall profits, gross receipts, sales, use, value added, transfer, registration, stamp, premium, excise, customs duties, severance, real property, personal property, ad valorem, occupancy, license, occupation, unclaimed property liabilities, employment, payroll, social security, disability, unemployment, withholding, corporation, inheritance, value added, stamp duty reserve, estimated or other similar tax, assessment, levy, duty (including duties of customs and excise) or other governmental charge of any kind whatsoever, chargeable by any Tax Authority together with all penalties, interest and additions thereto, whether disputed or not.

“Tax Authority” shall mean any taxing or other authority (whether within or outside the U.S.) competent to impose Tax.

“UMWA” has the meaning assigned to it in the Preamble.

“Unsubscribed Rights” has the meaning assigned to it in the Recitals.

“Voting Trust” has the meaning assigned to it in the Plan.

“Voting Trust Agreement” has the meaning assigned to it in the Plan.

“Warrants” means the new warrants of the Reorganized Company with the terms set forth in the Plan.

“Warrant Rights” has the meaning set forth in the Recitals.

“Warrant Rights Offering” has the meaning set forth in the Recitals.

“Warrants Subscription Purchase Price” means the purchase price for the Rights Offering Warrants acquired by a Rights Offerings Participant, as calculated in accordance with such Rights Offerings Participant’s Subscription Form.

Section 2.    Rights Offering; Backstop Commitment.

2.1           The Rights Offerings.

(a) Commencing the Rights Offerings. The Subscription Agent will commence the Rights Offerings as part of the Plan solicitation process. Each Rights Offerings Participant will have the opportunity to participate in each of the Rights Offerings by electing to exercise its Initial Rights Allocation, in whole or in part, by (i) completing and returning a duly completed Subscription Form in the manner specified in the instructions accompanying the Subscription

 

  

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Form and (ii) paying or arranging for payment of such Rights Offerings Participant’s Subscription Purchase Price (as calculated pursuant to the Subscription Form) in the manner specified in the instructions accompanying the Subscription Form; provided that Knighthead shall exercise Senior Notes Rights with respect to at least $57,000,000 of Senior Notes.

(b) Other Senior Notes Rights. In furtherance of Section 2.1(a), the Backstop Parties (in accordance with their respective Backstop Commitment Percentage) shall be offered the Other Senior Notes Rights as part of the Backstop Parties’ Initial Rights Allocation. The Backstop Parties (in accordance with their respective Backstop Commitment Percentage) shall also receive the New Common Stock that would have otherwise been distributed with the Other Senior Notes Rights pursuant to section 3.2(c)(i) of the Plan. On or before the Effective Date, the Backstop Parties (in accordance with their respective Backstop Commitment Percentage) shall pay to the Company the amount of cash distributable to holders of Allowed Senior Notes Claims pursuant to section 3.2(c) of the Plan, which amount shall be equal to the lesser of (i) ten percent (10%) of the principal amount of the Senior Notes underlying such Allowed Senior Notes Claims and (ii) $5,000,000 (such amount, the “Senior Notes Cash Payment”).

(c) Oversubscription. To the extent that any Initial Rights Allocations are not exercised in full, 60% of the Unsubscribed Rights shall be allocated to the Rights Offerings Participants that have over subscribed for additional Rights in their duly completed Subscription Forms (such subscription, an “Oversubscription”), in the proportion of 92.3% as to Rights Offerings Participants who are holders of an Allowed Senior Notes Claim or who have subscribed for Other Senior Notes Rights, and 7.7% as to Rights Offerings Participants who are holders of an Allowed General Unsecured Claim or Allowed Convertible Notes Claim, and the remaining 40% of the Unsubscribed Rights shall be allocated to the Backstop Parties in accordance with their respective Backstop Commitment Percentage, with any remaining Unsubscribed Rights offered to such parties in such proportions until all Rights have been exercised, or no further Rights are exercised in any such offer. The purchase price for such Oversubscription shall be included in such Rights Offerings Participant’s Subscription Purchase Price, and must be paid on or prior to the Subscription Deadline in the manner specified above in Section 2.1(a) and in the instructions accompanying the Subscription Form; provided, however, that any amounts in respect of a Backstop Party’s Subscription Purchase Price must be received on or before the Effective Date.

(d) Failure to Deliver Subscription Form or Subscription Purchase Price. If, for any reason, the Subscription Agent does not receive on or prior to the Subscription Deadline from a Rights Offerings Participant both (i) a duly completed Subscription Form and the other documents included therewith and (ii) payment in immediately available funds in an amount equal to such Rights Offerings Participant’s Subscription Purchase Price (as calculated pursuant to the Subscription Form), then such Rights Offerings Participant will be deemed to have relinquished and waived its right to participate in the Rights Offerings; provided, however, that any Backstop Party’s Subscription Purchase Price must be received on or before the Effective Date.

  

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2.2           Backstop.

(a)           Effectuating the Backstop Commitment.

(i) If, after applying the procedures set forth in Section 2.1(c), there remain Unsubscribed Rights to acquire Rights Offering Notes or Rights Offering Warrants, as the case may be (respectively, the “Remaining Rights Offering Notes” and the “Remaining Rights Offering Warrants”), such Unsubscribed Rights shall be automatically and without further action by any party deemed transferred to the Backstop Parties in accordance with their Backstop Commitment Percentages, and each of the Backstop Parties hereby irrevocably elects to exercise such Unsubscribed Rights and purchase, at the applicable Subscription Purchase Price per $ 1,000 aggregate principal amount of Rights Offering Notes and per Rights Offering Warrant, such Remaining Rights Offering Notes and Remaining Rights Offering Warrants equal to its Backstop Commitment Percentage multiplied by the amount of such Remaining Rights Offering Notes and Remaining Rights Offering Warrants. In accordance with Section 2.2(b)(ii)(A), the purchase price for such Remaining Rights Offering Notes and Remaining Rights Offering Warrants shall be paid to the Company on or before the Effective Date.

(ii) The closing of the purchase and sale of the Remaining Rights Offering Notes and the Remaining Rights Offering Warrants, if any, will take place on the Effective Date.

(b)           Backstop Purchase.

(i) Notice. As soon as practicable but no later than ten (10) Business Days after the Subscription Deadline (including any extensions thereto as a result of reoffers of Unsubscribed Rights), the Subscription Agent will deliver notice to the Backstop Parties of (i) (A) each of the Backstop Parties’ irrevocable commitment to purchase the Remaining Rights Offering Notes and the Remaining Rights Offering Warrants up to such Backstop Party’s Backstop Party Commitment Amount; and (B) the purchase price therefor as described in Section 2.2(a) (the “Backstop Purchase Price”) and (ii) each of the Backstop Parties’ Senior Notes Cash Payment Amount.

(ii)  Delivery of Funds.

(A) On or prior to the Effective Date, each of the Backstop Parties will deliver its applicable Backstop Purchase Price, if any, and Senior Notes Cash Payment Amount by wire transfer in immediately available funds to an account (or accounts) designated by the Subscription Agent at least two (2) Business Days prior to the Effective Date.

(B) In the event that one or more of the Backstop Parties fails to fund any portion of its Backstop Purchase Price, the Subscription Agent will first make one or more reoffers of the Rights represented by such Backstop Purchase Price to the other Backstop Parties (pro rata based on their Backstop Commitment Percentages (calculated after excluding the non-funding Backstop Party) until such Rights are fully exercised or no additional Rights were exercised in the last such reoffer; provided that no Backstop Party other than Knighthead shall be obligated to fund more than its Backstop Commitment Amount hereunder without

 

  

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such Backstop Party’s express prior written consent. If after making such offers to the other Backstop Parties, the Rights Offering is not fully subscribed, then the Parties may enforce against the Backstop Party who failed to fund its Backstop Purchase Price in accordance with Section 2.2(a), its irrevocable commitment to do so and to purchase the related Rights Offering Notes and Rights Offering Warrants, including without limitation, seeking specific performance by such non-funding Backstop Party. Notwithstanding the foregoing, the Debtors may enforce against Knighthead a commitment to fully subscribe the Rights Offerings and to purchase the related Rights Offering Notes and Rights Offering Warrants.

2.3 Backstop Fee. In consideration for the Backstop Parties having irrevocably elected to purchase their applicable Remaining Rights Offering Notes and Remaining Rights Offering Warrants, and to fund their applicable Backstop Purchase Price, on or before the Effective Date, each Backstop Party will be entitled to receive an amount equal to 5% of its Backstop Commitment Amount payable in Backstop Fee Notes and Backstop Fee Warrants as set forth opposite its name in Schedule 2 hereto (the “Backstop Fee”). For the avoidance of doubt, each of the Backstop Parties will be entitled to its portion of the Backstop Fee without regard to whether the Rights Offerings are fully subscribed so long as such Backstop Party has purchased its applicable Remaining Rights Offering Notes and Remaining Rights Offering Warrants in accordance with Section 2.2(a) and funded its applicable Senior Notes Cash Payment Amount, and Backstop Purchase Price, including in the case of Knighthead, any unpaid amounts due to the failure of any Backstop Party to fund its Senior Notes Cash Payment Amount and Backstop Purchase Price. Notwithstanding the foregoing, in the event that any Backstop Party fails to purchase any portion of its applicable Remaining Rights Offering Notes and Remaining Rights Offering Warrants allocated to such Party or to fund its applicable Senior Notes Cash Payment Amount or Backstop Purchase Price, such Backstop Party shall not be entitled to its portion of the Backstop Fee; provided such portion of the Backstop Fee shall be payable to any other party, including Knighthead or any other Backstop Party, that assumes and satisfies the obligations of such Backstop Party. Following approval by the Bankruptcy Court of this Agreement, and upon consummation of the Rights Offerings, the Backstop Fee shall be payable without further Bankruptcy Court review or further Bankruptcy Court order. The Debtors’ obligations to pay the Backstop Fee shall constitute superpriority administrative expense claims against the Debtors junior only to the superpriority administrative expense claims granted to holders of the DIP Facility Claims.

2.4  Breakup Fee.

(a) In the event the Debtors enter into or seek court authority to enter into, or the Creditors’ Committee causes the Debtors to enter into or seek court authority to enter into (in each case, a “ Breakup Fee Triggering Event”) a transaction, or series of transactions, whether pursuant to a plan of reorganization, liquidation or otherwise, or merger, consolidation or combination or any other disposition of any material portion of the assets of or equity, capital stock or ownership interests in the Company and its subsidiaries outside the ordinary course of business, with or sponsored by any entity other than the Backstop Parties (an “Alternative Transaction”) the Company shall pay to the Backstop Parties (including any party that assumes any Backstop Party’s Backstop Commitment Amount and funds such Backstop Party’s Backstop Purchase Price) an aggregate fee of $10.0 million in cash (the “Breakup Fee”) with each

 

  

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Backstop Party receiving its allocable portion of such Breakup Fee based on its Backstop Commitment Percentage; provided , however, that the Breakup Fee shall not be payable in the event that the Rights Offerings are not consummated due to (i) the termination of the Backstop Agreement by the Backstop Parties as a result of the failure of one or more conditions precedent to the Backstop Parties’ obligations thereunder to be satisfied or waived by the Backstop Parties or (ii) the termination of the Backstop Agreement following any uncured breach of the Backstop Agreement by one or more Backstop Parties, in each case, other than due to a breach of the provisions of Section 5.4. Notwithstanding the foregoing, and for the avoidance of doubt, the Breakup Fee will be payable to the Backstop Parties in the event (i) the Debtors terminate this Agreement on or prior to the Effective Date in accordance with Section 9.11(b)(B) or (ii) the Creditors Committee withdraws its support of this Agreement in accordance with Section 9.11(c) and the Debtors enter into or seek court authority to enter into an Alternative Transaction, including a Superior Transaction, following such withdrawal of support. The Breakup Fee shall be paid on the earlier of the closing date of the Alternative Transaction and the thirtieth (30th) day after the Breakup Fee Triggering Event by wire transfer of immediately available funds to the accounts identified on Schedule 2 hereto.

(b) The terms set forth in this Section 2.4 shall survive termination of this Agreement to the extent set forth above and shall remain in full force and effect regardless of whether the transactions contemplated by this Agreement or any of the other transactions contemplated by the Plan are consummated. The Parties acknowledge that the agreements contained in this Section 2.4 are an integral part of the transactions contemplated by this Agreement, and constitute liquidated damages and not a penalty, and that, without these agreements, the Backstop Parties would not have entered into this Agreement. Following approval by the Bankruptcy Court of this Agreement, the Breakup Fee shall be payable in accordance with Section 2.4(a) without further Bankruptcy Court review or further Bankruptcy Court order. The Debtors’ obligations to pay the Breakup Fee shall constitute superpriority administrative expense claims against the Debtors junior only to the superpriority administrative expense claims granted to holders of the DIP Facility Claims. The obligations set forth in this Section 2.4 are in addition to, and do not limit, the Debtors’ obligations under any other provisions of this Agreement.

(c) Regardless of whether the Breakup Fee is payable, the Backstop Parties shall be entitled to payment of the Initial Expense Reimbursement and all other Expense Reimbursements.

Section 3. Representations and Warranties of the Debtors. The Debtors jointly and severally represent and warrant to the Backstop Parties as follows:

3.1 Organization. Each Debtor is duly formed and validly existing under the laws of its state of formation.

3.2 Due Authorization, Execution and Delivery; Enforceability. Subject to the Approvals, each of the Debtors has the requisite corporate or limited liability company power and authority to enter into, execute and deliver this Agreement and to perform its obligations hereunder, including the issuance of the Rights Offering Notes, the Rights Offering Warrants, the Backstop Fee Notes and the Backstop Fee Warrants by the Reorganized Company, and will take all necessary corporate action required for the due authorization, execution, delivery and 

 

 

 

  

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performance by it of this Agreement, including the issuance of the Rights Offering Notes, the Rights Offering Warrants, the Backstop Fee Notes, the Backstop Fee Warrants and the New Common Stock underlying such Rights Offering Warrants and Backstop Fee Warrants by the Reorganized Company. Subject to the Approvals, this Agreement will constitute, assuming the execution by the other Parties hereto, the legally valid and binding obligation of the Debtors, enforceable against them in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

3.3 Consents. Subject to the Approvals, none of the execution, delivery or performance of this Agreement by the Debtors will require any consent of, authorization by, exemption from, filing with, or notice to any Governmental Entity having jurisdiction over any Debtor.

3.4 Due Issuance and Authorization of Securities; Reservation of Shares of New Common Stock. The Rights Offering Notes, the Rights Offering Warrants, the Backstop Fee Notes and the Backstop Fee Warrants, and the New Common Stock underlying such Rights Offering Warrants and Backstop Fee Warrants, issued and delivered to the Backstop Parties pursuant to the terms of this Agreement will be, upon issuance, duly authorized and validly issued and will be free from all taxes, liens, preemptive rights and charges with respect to the issue thereof and the shares of New Common Stock underlying the Rights Offering Warrants and the Backstop Fee Warrants will, when issued, be fully paid and non-assessable. The number of shares of New Common Stock issuable in respect of the Rights Offering Warrants and the Backstop Fee Warrants shall have been reserved by the board of directors of the Reorganized Company.

3.5 No Conflicts. Except for the Approvals, the execution, delivery and performance of this Agreement by the Debtors will not (a) conflict with or result in any breach of any provision of any Debtor’s organizational documents as in effect on the Effective Date, (b) conflict with or result in the breach of the terms, conditions or provisions of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give rise to any right of termination, acceleration or cancellation under, any material agreement, lease, mortgage, license, indenture, instrument or other contract to which any of them is a party or (c) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, federal and state securities laws and regulations) applicable to any of them or their Subsidiaries or by which any of them or their Subsidiaries’ properties or assets are bound or affected as in effect on the Effective Date, except in the case of clauses (b) or (c) as would not, individually or in the aggregate, result in or reasonably be expected to result in a Material Adverse Change.

3.6 No Registration. Assuming the accuracy of the representations and warranties and compliance with the covenants of the Backstop Parties set forth in this Agreement, no registration of the Rights Offering Notes, the Rights Offering Warrants, the Backstop Fee Notes, the Backstop Fee Warrants and the New Common Stock underlying such Rights Offering Warrants and Backstop Fee Warrants, under the Securities Act is required for the purchase of the

 

  

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Rights Offering Notes and the Rights Offering Warrants by the Backstop Parties and the issuance of the Backstop Fee Notes and the Backstop Fee Warrants to the Backstop Parties, in the manner contemplated by this Agreement.

3.7 Arm’s Length. The Debtors are acting solely in the capacity of an arm’s length contractual counterparty to such Backstop Party with respect to the transactions contemplated hereby. The Debtors understand that no Backstop Party is relying on the Debtors, or any of their legal, financial, accounting or other advisors for any legal, tax, investment, accounting or regulatory advice.

3.8 No Broker’s Fees. To the best of their knowledge, no Debtor is a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a claim against the Debtors or the Backstop Parties for a brokerage commission, finder’s fee or like payment in connection with the transactions contemplated hereby.

Section 4. Representations and Warranties of the Backstop Parties. Each Backstop Party severally and not jointly represents and warrants as to itself, and not as to any other Backstop Party, to the Debtors as follows:

4.1 Organization. Such Backstop Party is duly formed, validly existing and in good standing under the laws of the jurisdiction of its formation.

4.2 Due Authorization. Such Backstop Party has the requisite power and authority to enter into, execute and deliver this Agreement and the Subscription Forms and to perform its obligations hereunder and thereunder and has taken all necessary action required for the due authorization, execution, delivery and performance by it of this Agreement and the Subscription Forms.

4.3 Due Execution; Enforceability. This Agreement has been duly and validly executed and delivered by such Backstop Party and, assuming the due execution of the other parties hereto, will constitute its valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). When the Subscription Form is duly and validly executed and delivered by such Backstop Party and, assuming the execution of the other parties thereto, such Subscription Form will constitute its valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

4.4 Consents. None of the execution, delivery or performance of this Agreement or the Subscription Forms by such Backstop Party will require any consent of, authorization by,

 

  

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exemption from, filing with, or notice to any Governmental Entity having jurisdiction over such Backstop Party.

4.5 No Conflicts. The execution, delivery and performance of this Agreement and the Subscription Forms by such Backstop Party will not (a) conflict with or result in any breach of any provision of its organizational documents, (b) conflict with or result in the breach of the terms, conditions or provisions of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give rise to any right of termination, acceleration or cancellation under, any material agreement, lease, mortgage, license, indenture, instrument or other contract to which it is a party or by which its properties or assets are bound, or (c) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, federal and state securities laws and regulations) applicable to it or by which its properties or assets are bound or affected as in effect on the Effective Date, except in the case of clauses (b) and (c), as would not, individually or in the aggregate, result in or reasonably be expected to result in a Backstop Party Material Adverse Change with respect to such Backstop Party.

4.6 Legal Proceedings. There are no actions, suits or proceedings to which such Backstop Party is a party or to which any property of such Backstop Party is subject that, individually or in the aggregate, has materially prohibited, delayed or adversely impacted, or if determined adversely to such Backstop Party, would reasonably be expected to materially prohibit, delay or adversely impact such Backstop Party’s performance, of its obligations under this Agreement and no such actions, suits or proceedings are, to the knowledge of such Backstop Party, threatened or contemplated and, to the knowledge of such Backstop Party, no investigations are threatened by any governmental or regulatory authority or threatened by others that has or would reasonably be expected, individually or in the aggregate, to materially prohibit, delay or adversely impact such Backstop Party’s performance of its obligations under this Agreement.

4.7 No Registration Under the Securities Act. Such Backstop Party understands that the Rights Offering Notes and the Rights Offering Warrants to be purchased by it and the Backstop Fee Notes and the Backstop Fee Warrants issuable to it pursuant to the terms of this Agreement have not been registered, and that, other than as provided for under the Registration Rights Agreement, none of the Debtors will be required to effect any registration or qualification, under the Securities Act or any state securities law, and the Rights Offering Notes, the Rights Offering Warrants, the Backstop Fee Notes and the Backstop Fee Warrants will be issued in reliance upon exemptions contained in the Securities Act or interpretations thereof, in the applicable state securities laws and under the Bankruptcy Code. Such Backstop Party understands that the Rights Offering Notes, the Rights Offering Warrants, the Backstop Fee Notes and the Backstop Fee Warrants cannot be offered for sale, sold or otherwise transferred except pursuant to a registration statement or in a transaction exempt from or not subject to registration under the Securities Act.

 

  

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4.8 Acquisition for Investment. The Rights Offering Notes, the Rights Offering Warrants, the Backstop Fee Notes and the Backstop Fee Warrants are being acquired under this Agreement by such Backstop Party in good faith solely for its own account, for investment and not with a view toward resale or other distribution within the meaning of the Securities Act.

4.9 Accredited Backstop Party. Such Backstop Party is (i) an “accredited investor” within the meaning of Rule 501(a)(1), (2), (3), (5), (6) or (7), or an entity in which all of the equity owners are such “accredited investors” or (ii) a “qualified institutional investor” within the meaning of Rule 144A under the Securities Act, or an entity in which all of the equity owners are such “qualified institutional buyers.”

4.10 Arm’s Length. Such Backstop Party understands that the Debtors are acting solely in the capacity of an arm’s length contractual counterparty to such Backstop Party with respect to the transactions contemplated hereby. Additionally, such Backstop Party is not relying on the Debtors, or any of their legal, financial, accounting or other advisors for any legal, tax, investment, accounting or regulatory advice.

4.11 No Broker’s Fees. To the best of its knowledge, such Backstop Party is not a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a claim against the Debtors for a brokerage commission, finder’s fee or like payment in connection with the transactions contemplated hereby.

Section 5.    Additional Covenants.

5.1 Uncertificated Units. The Parties agree that the Rights Offering Warrants, the Backstop Fee Warrants and the New Common Stock will not be certificated.

5.2 Further Assurances. From time to time after the date of this Agreement, the Parties will execute, acknowledge and deliver to the other Party such other instruments, documents, and certificates and will take such other actions as the other Party may reasonably request in order to consummate the transactions contemplated by this Agreement.

5.3  Commercially Reasonable Efforts

(a) The Debtors will use commercially reasonable efforts to cause the conditions set forth in Section 6 to be satisfied and to consummate the transactions contemplated herein.

(b) The Backstop Parties will use commercially reasonable efforts to cause the conditions set forth in Section 7 to be satisfied and to consummate the transactions contemplated herein.

5.4  No-Shop

(a) Except with the prior written consent of the Backstop Parties, or as expressly permitted by Sections 5.4(b) or 5.4(c) below, as applicable, the Debtors and the Creditors’ Committee and their respective advisors and representatives will not, directly or indirectly, take any action to solicit, initiate, encourage or assist the submission of, or enter into any discussions (other than accepting an initial inbound communication), negotiations or agreements regarding,

 

  

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any proposal, negotiation or offer relating to an Alternative Transaction (including any proposal submitted to the Debtors or their advisors or the Creditors’ Committee or their advisors on an unsolicited basis).

(b) Notwithstanding the preceding paragraph (a), if following the date hereof, the Company receives from any person (other than any of the Backstop Parties) a bona fide unsolicited proposal or expression of interest in undertaking an Alternative Transaction that the board of directors of the Company reasonably determines in its good faith judgment could be expected to lead to a proposal for a Superior Transaction and that the failure to take the actions set forth in clauses (i) and (ii) in this Section 5.4(b) would be inconsistent with its fiduciary duties, then the Company and its advisors shall be permitted to (i) furnish or cause to be furnished information concerning the Debtors to such Person (provided that (A) any information so furnished has already been provided or is provided contemporaneously to the Backstop Parties or their advisors and (B) such person has executed and delivered to the Company a customary confidentiality agreement reasonably acceptable to the Debtors), and (ii) engage in negotiations or discussions regarding such Alternative Transaction proposal with such Person or its advisors; provided, however, that, prior to commencing any such discussions (other than accepting an initial inbound communication), the Company shall advise the Backstop Parties or their advisors in writing that such discussions will be commenced; provided further that the Company gives the Backstop Parties at least five (5) business days’ written notice (accompanied by the proposal and any materials supporting such Alternative Transaction) and negotiates in good faith with and provides the Backstop Parties an opportunity to propose a revised transaction, before the earliest to occur of: (x) the Company exercising any permitted termination right in accordance with Section 9.11, (y) the Company entering into such Alternative Transaction, and (z) the Company filing a motion with the Bankruptcy Court seeking approval of such Alternative Transaction.

(c) Notwithstanding the preceding paragraph (a), if following the date hereof, the Creditors’ Committee receives from any person (other than any of the Backstop Parties) a bona fide unsolicited proposal or expression of interest in undertaking an Alternative Transaction that the Creditors’ Committee reasonably determines in its good faith judgment could be expected to lead to a proposal for a Superior Transaction and that the failure to take the actions permitted by this sentence would be inconsistent with its fiduciary duties, then the Creditors’ Committee shall be permitted to withdraw its support of this Agreement in accordance with Section 9.11; provided, however, that, prior to withdrawing its support of this Agreement in accordance with Section 9.11, the Creditors’ Committee gives the Company and the Backstop Parties at least five (5) business days’ written notice (accompanied by the proposal and any materials supporting such Alternative Transaction) and negotiates in good faith with and provides the Backstop Parties an opportunity to propose a revised transaction, before the earliest to occur of: (x) the Creditors’ Committee exercising any permitted right to withdraw its support of this Agreement in accordance with Section 9.11, (y) the Company entering into such Alternative Transaction, and (z) the Company filing a motion with the Bankruptcy Court seeking approval of such Alternative Transaction.

 

  

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Section 6. Conditions to Backstop Parties’ Obligations. The obligation of each Backstop Party, Knighthead on a joint and several basis, and any other Backstop Party on a several but not joint and several basis, to fund its Senior Notes Cash Payment Amount and Backstop Commitment Amount will be subject to the satisfaction (or waiver by each Backstop Party in its sole discretion) of each of the following conditions on or prior to the Effective Date:

(a) Confirmation Order. The Final Order or Orders of the Bankruptcy Court, among other things, confirming the Plan (including, for the avoidance of doubt the provisions of the Plan relating to the Voting Trust and the Voting Trust Agreement) pursuant to section 1129 of the Bankruptcy Code (the “Confirmation Order”) that is reasonably acceptable to the Backstop Parties will have been entered by the Bankruptcy Court, and no order staying the Confirmation Order will be in effect;

(b) Unrestricted Cash Balance. Upon the Effective Date (following satisfaction of all administrative claims and bankruptcy costs and expenses) immediately following the consummation of the Rights Offerings, the Company’s unrestricted cash balance shall not be less than $175.0 million (which shall include the $15.0 million dollar cash collateral posted by the Company in respect of federal black lung benefits even if not yet released by the Department of Labor), net of any amount in respect of the any Expense Reimbursement, including the Initial Expense Reimbursement, assuming, on a pro forma basis, no borrowings under the First Lien Exit Facilities’ revolving facility, and its working capital accounts shall have been managed in a manner generally consistent with past practice;

(c) Peabody Settlement. The Debtors shall have entered into a settlement agreement with Peabody Holding Company, LLC and certain of its affiliates (collectively, “Peabody”) under the terms and conditions substantially as set forth in the term sheet executed by the Debtors and Peabody on October 4, 2013, and which settlement agreement shall have become effective substantially in accordance with its terms;

(d) Arch Settlement. The Debtors shall have negotiated and entered into a settlement agreement with Arch Coal, Inc. and its subsidiaries and affiliates (collectively, “Arch”), under the terms and conditions substantially as set forth in the term sheet executed by the Debtors and Arch on October 4, 2013, and which settlement agreement shall have become effective substantially in accordance with its terms;

(e) VEBA Funding Agreement. The Company and the UMWA shall have executed a final and binding amended version of the VEBA Funding Agreement to reflect the terms set forth in the Rights Offerings Term Sheet with respect to funding the VEBA and which is otherwise reasonably acceptable to the Backstop Parties, and, provided that the funding payable to the VEBA on the Effective Date is made as set forth therein, the UMWA shall have waived any rights or ability to terminate the VEBA Funding Agreement, the Collective Bargaining Agreements, and all related agreements, including, but not limited to, the Memorandum of Understanding and the Hatfield Side Letter, that were ratified by the UMWA on August 16, 2013, and approved by the Bankruptcy Court on August 22, 2013, Docket No. 4511, on the basis set forth in section 3(x) of the VEBA Funding Agreement;

 

  

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(f) VEBA Funding. The VEBA shall have been funded with the amount contemplated by the VEBA Funding Agreement to be funded on the Effective Date;

(g) First-Lien Exit Facilities. The Company shall have entered into definitive documentation for the First Lien Exit Facilities (including, without limitation, intercreditor agreements) on or before the Effective Date in form and substance reasonably satisfactory to the Backstop Parties, provided that the material financial terms thereof, including, without limitation, the coupon rate, the amount of any original issue discount and the maturity, shall be satisfactory to the Backstop Parties in their sole discretion;

(h) Organizational Documents. The certificate of incorporation, bylaws, stockholders’ agreement and other corporate governance documents of Company that will be in effect after the Effective Date (the “Postconfirmation Organizational Documents”) shall provide to the Backstop Parties pre-emptive rights in the event the Company issues or proposes to issue any equity securities and certain information rights, including certain financial reporting and access covenants, and shall otherwise be in form and substance acceptable to the Backstop Parties;

(i) Registration Rights Agreement. The Company shall have executed and delivered the Registration Rights Agreement, which shall be in form and substance reasonably acceptable to the Backstop Parties;

(j) Plan and Disclosure Statement. The Plan, the Disclosure Statement, the Confirmation Order and any material documents, including, without limitation, the amended VEBA Funding Agreement (collectively, the “Plan Documents”), shall be in form and substance needed to effectuate the Plan and the Rights Offerings and the transactions contemplated thereby and herein and shall otherwise be in form and substance reasonably acceptable to the Backstop Parties;

(k) Issuance of Certain Voting Securities. The Plan shall provide that voting securities to be received by the Backstop Parties on account of their claims and/or upon exercise of their Rights shall be distributed by the Company on the Effective Date to entities designated by the Backstop Parties;

(l) Motions and Documents to be Filed. All motions and other documents to be filed with the United States Bankruptcy Court for the Eastern District of Missouri (the “Bankruptcy Court”) in connection with the Rights Offerings, and payment of the fees contemplated under the Plan, the Backstop Agreement, including, without limitation, the Backstop Fee and the Breakup Fee, and the Rights Offering Procedures shall be in form and substance needed to effectuate the Plan and the Rights Offerings and the transactions contemplated thereby and shall otherwise be in form and substance reasonably acceptable to the Backstop Parties;

(m) Backstop Agreement. This Agreement shall have been approved by the Bankruptcy Court by November 8, 2013 and shall have not been terminated;

(n)  Notes.  The definitive documents relating to the Notes (including, without limitation, intercreditor arrangements related thereto) shall be consistent with the Rights 

 

 

 

  

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Offerings Term Sheet and shall otherwise be in form and substance reasonably satisfactory to the Backstop Parties.

(o) Expense Reimbursements. The Company shall have paid all the Initial Expense Reimbursement and other Expense Reimbursements on the Effective Date.

(p) No Material Adverse Change. Since the date of the Rights Offerings Term Sheet, there has been no Material Adverse Change;

(q) Rights Offerings. The Rights Offerings will have been consummated pursuant to and in accordance with the Plan;

(r)  Effective Date. The Effective Date shall have occurred;

(s) Payment of Backstop Fee. The Backstop Fee Notes and the Backstop Fee Warrants will be issued simultaneously with the Rights Offering Notes and the Rights Offering Warrants;

(t) Other Conditions. (i) Each of the Debtors will have performed, in all material respects, their respective obligations hereunder required to be performed by it at or prior to the Effective Date, (ii) the representations and warranties of the Debtors in this Agreement (disregarding all qualifications as to materiality and Material Adverse Change contained therein) will be true and correct in all respects, with only such exceptions as would not individually or in the aggregate constitute a Material Adverse Change, in each case, at and as of the Effective Date as if made at and as of Effective Date (other than those representations and warranties that address matters only as of a particular earlier date, which need only be true and correct to the same extent as of such earlier date) and (iii) all conditions precedent to the Effective Date set forth in the Plan shall have been satisfied or waived (except for the obligations set forth herein); and

(u) Officer’s Certificate. The Company shall have delivered to the Backstop Parties an officer’s certificate of the chief financial officer dated as of the Effective Date certifying that the conditions set forth in Section 6(p) and Section 6(t) have been satisfied.

Section 7. Conditions to the Debtors’ Obligations. The obligations of the Debtors hereunder are subject to the satisfaction (or the waiver by the Debtors in their sole discretion) of the following conditions as of the Effective Date:

(a)  Rights Offerings. The Rights Offerings will have been consummated pursuant to the Plan;

(b) Plan Confirmation. The Confirmation Order that is reasonably acceptable to the Debtors will have been entered by the Bankruptcy Court, and no order staying the Confirmation Order will be in effect;

(c) Backstop Party Execution. Each of the Backstop Parties will have executed and delivered this Agreement; and

 

  

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(d) Other Conditions. (i) Each Backstop Party will have performed, in all material respects, their respective obligations hereunder required to be performed by it at or prior to the Effective Date, (ii) the representations and warranties of each Backstop Party in this Agreement (disregarding all qualifications as to materiality and Material Adverse Change contained therein) will be true and correct in all respects, with only such exceptions as would not individually or in the aggregate constitute a Material Adverse Change, in each case, at and as of the Effective Date as if made at and as of Effective Date (other than those representations and warranties that address matters only as of a particular earlier date, which need only be true and correct to the same extent as of such earlier date) and (iii) all conditions precedent to the Effective Date set forth in the Plan shall have been satisfied or waived (except for the obligations set forth herein).

Section 8.    Plan Support.

8.1 Plan. Each of the Debtors and each Supporting Party acknowledges and agrees that the terms and conditions set forth in the Rights Offerings Term Sheet and the Plan are acceptable in all respects. In expressing their support for the Agreement and the Plan (pursuant to the terms and conditions of this Agreement), the Debtors and the Supporting Parties do not desire and do not intend in any way to derogate or diminish the solicitation requirements of applicable securities and bankruptcy law, or the fiduciary duties of the Debtors. This Agreement is not an offer with respect to any securities or a solicitation of votes with respect to a chapter 11 plan of reorganization. Any such offer or solicitation will comply all applicable securities laws and/or provisions of the Bankruptcy Code. Acceptances or rejections with respect to a chapter 11 plan of reorganization may not be solicited until a disclosure statement has been approved by the Bankruptcy Court.

8.2 Agreements of the Supporting Parties. Each Supporting Party agrees that, so long as this Agreement has not been terminated as provided herein:

(a) such Supporting Party shall support entry by the Bankruptcy Court of an order approving the Disclosure Statement, in form and substance reasonably acceptable to the Backstop Parties, and finding that the Disclosure Statement satisfies the requirements of section 1125 of the Bankruptcy Code (such order, the “Disclosure Statement Order”) and shall use commercially reasonable efforts to obtain Bankruptcy Court approval of this Agreement;

(b) subject to entry of the Disclosure Statement Order and receipt of the accompanying materials in respect of the Disclosure Statement and the Plan, such Supporting Party shall support, and take all commercially reasonable actions necessary or reasonably requested by the Company or the Backstop Parties to facilitate the solicitation, confirmation, and consummation of the Plan and the transactions contemplated thereunder;

(c) in each case, other than the Plan, such Supporting Party shall not consent to, or otherwise directly or indirectly seek, support, solicit, assist, encourage, or participate in the formulation, pursuit or support of, any restructuring or reorganization of the Debtors (or any plan or proposal in respect of the same) or any sale or disposition of the Debtors (or all or substantially all of its assets or equity) or any dissolution, winding up or liquidation of the Debtors; and

 

  

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(d) such Supporting Party shall not take any other action, including initiating any legal proceedings or enforcing rights as a holder of Claim, if applicable, that could prevent, interfere with, delay, or impede the approval of the Disclosure Statement, the solicitation of votes in connection with the Plan, or consummation of the Plan, including objecting to confirmation of the Plan.

8.3 Additional Agreements of the Backstop Parties. In addition to the agreements in Section 8.2, each Backstop Party agrees that, so long as this Agreement has not been terminated as provided herein:

(a) subject to entry of the Disclosure Statement Order and receipt of the accompanying Disclosure Statement and other solicitation materials in respect of the Plan, it shall (A) timely vote or cause to be voted all Claims it has against the Debtors to accept the Plan by delivering its duly executed and completed ballot or ballots, as applicable, accepting the Plan on a timely basis following commencement of the solicitation of votes on a Plan in accordance with sections 1125 and 1126 of the Bankruptcy Code and (B) not change or withdraw such vote (or cause or direct such vote to be changed or withdrawn); provided that such vote shall be immediately deemed revoked and deemed void ab initio upon termination of this Agreement;

(b)  it shall not vote or cause to be voted any Claim against the Plan; and

(c) to the extent the Backstop Parties acquire additional Claims, the Backstop Parties agree that such additional Claims shall be subject to this Agreement and that, so long as this Agreement has not been terminated, subject to the terms of this Agreement, they shall vote (or cause to be voted) any such additional Claims entitled to vote on the Plan, in each case to the extent still held by it or on its behalf at the time of such vote, in a manner consistent with this Agreement. For the avoidance of doubt, this Agreement shall in no way be construed to preclude the Backstop Parties from acquiring additional Claims

8.4           Transfers.

(a) The Backstop Parties agree that they shall not sell, transfer, loan, issue, pledge, hypothecate, assign or otherwise dispose of (including by participation) (each, a “Transfer”), directly or indirectly, in whole or in part, any Claim (including entry into a voting agreement with respect to any such Claims), unless with respect to the proposed Transfer of any Claim, the transferee thereof is (i) already a Backstop Party or (ii) prior to such Transfer, agrees in writing for the benefit of the Debtors and the Supporting Parties to become a Supporting Party and to be bound by all of the terms of this Agreement applicable to the Supporting Parties by executing a Joinder as a Supporting Party (including with respect to any and all Claims it already may hold against or in the Company prior to such Transfer) and delivers such Joinder to the Debtors, in which event (A) the transferee shall be deemed to be a Supporting Party hereunder and (B) the transferor shall be deemed to relinquish its rights (and be released from its obligations) under this Agreement to the extent of such transferred Claim, and, with respect to Knighthead, in each case of (i) or (ii), such transferee assumes Knighthead’s obligation set forth in Section 2.1(a) to exercise Senior Notes Rights with respect to at least $57,000,000 of Senior Notes. The Debtors and the Supporting Parties agree that any Transfer of any Claim that does not comply with the

 

  

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terms and procedures set forth herein shall be deemed void ab initio, and the Debtors and any other Supporting Party shall have the right to enforce the voiding of such Transfer.

8.5 Additional Agreements of the Creditors’ Committee and the UMWA. So long as (i) neither the Debtors nor the Backstop Parties are in material breach of this Agreement and (ii) the Creditors’ Committee has not withdrawn its support pursuant to Section 9.11(c), the Creditors’ Committee and the UMWA shall file in the Bankruptcy Court a statement in support of approval of the Disclosure Statement by November 4, 2013 and a statement in support of the confirmation of the Plan by December 15, 2013.

8.6 Rights of Supporting Parties Unaffected. Nothing contained in this Agreement shall: (i) limit (A) the ability of a Supporting Party to consult with another Supporting Party or the Debtors, (B) the Creditors’ Committee’s rights under Section 9.11(c) or (C) the rights of a Supporting Party to be heard as a party in interest in the Chapter 11 Cases, in each case so long as such consultation or appearance is consistent with the Supporting Party’s obligations under the terms of this Agreement, the Plan, the Rights Offerings Term Sheet, and is not for the purpose of hindering, delaying, or preventing the confirmation or consummation of the Plan; or (ii) limit the ability of the Backstop Parties to sell or enter into any transactions in connection with the Claims or any other claims against or interests in the Company.

8.7  Additional Agreements of the Debtors.

(a) The Debtors agree that, so long as this Agreement has not been terminated as provided herein, unless otherwise permitted or required by this Agreement, the Debtors shall do the following:

(i) (A) support and take all actions reasonably necessary or requested by the Supporting Parties to seek approval of the Disclosure Statement and to facilitate the solicitation, confirmation, and consummation of the Plan and the transactions contemplated thereby; and (B) not take any action that is inconsistent with, or that would delay or impede the solicitation, confirmation, or consummation of the Plan;

(ii) timely file a formal objection to any motion filed with the Bankruptcy Court seeking the entry of an order (A) directing the appointment of an examiner with expanded powers or a trustee, (B) converting the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code, or (C) dismissing the Chapter 11 Cases;

(iii) timely file a formal objection to any motion filed with the Bankruptcy Court by a third party seeking the entry of an order modifying or terminating the Company’s exclusive right to file or solicit acceptances of a plan of reorganization; and

(iv) provide draft copies of all motions, applications and other documents the Company intends to file with the Bankruptcy Court related to the Plan to counsel for the Supporting Parties as soon as reasonably practicable before such documents are filed with the Bankruptcy Court and to consult in good faith with such counsel regarding the form and substance of any such proposed filings.

 

  

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(b) The Debtors agree that, so long as this Agreement has not been terminated as provided herein, unless otherwise permitted or required by this Agreement or the Rights Offerings Term Sheet or agreed in writing by the Supporting Parties, the Company shall not directly or indirectly, do or permit to occur any of the following:

(i) modify the Plan, in whole or in part, in a manner that is materially inconsistent with this Agreement or the Rights Offerings Term Sheet; and

(ii) withdraw or revoke the Plan or publicly announce its intention not to pursue the Plan.

8.8 Acknowledgment. Each Debtor and Supporting Party agrees that this Agreement and the transactions contemplated hereby are the product of negotiations among the Debtors and the Supporting Parties, together with their respective representatives. This Agreement is not, and shall not be deemed to be, a solicitation of votes for the acceptance of the Plan or any plan of reorganization for purposes of sections 1125 and 1126 of the Bankruptcy Code or otherwise. The votes of the holders of Claims and Interests against the Debtors will not be solicited until such holders who are entitled to vote on the Plan have received the disclosure statement approved by the Bankruptcy Court and any other required materials related to the solicitation. In addition, this Agreement does not constitute an offer to issue or sell securities to any person, or the solicitation of an offer to acquire or buy securities, in any jurisdiction where such offer or solicitation would be unlawful.

Section 9.    Miscellaneous

9.1 Notices. Any notice or other communication required or which may be given pursuant to this Agreement will be in writing and either delivered personally to the addressee, emailed or faxed to the addressee or mailed, certified or registered mail, postage prepaid, and will be deemed given when so delivered personally, if emailed or faxed, upon notice of successful transmission thereof, or, if mailed, five (5) days after the date of mailing, as follows:

	
(a)  

	
if to a Backstop Party, to the address specified on Schedule 2 hereto. 

With a copy to:

 

Kirkland & Ellis LLP

601 Lexington Avenue

New York, New York 10022 

Attention:  Stephen E. Hessler 

Email: shessler@kirkland.com

	
(b)  

	
if to the Debtors, to:

Patriot Coal Corporation

12312 Olive Boulevard, Suite 400 

St. Louis, Missouri 63141 

Attention:  Joseph W. Bean 

Email: jbean@patriotcoal.com

 

 

  

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with a copy to:

Davis Polk & Wardwell LLP 

450 Lexington Avenue

New York, New York 10017

Attention:   Mischa Travers

Email:           mtravers@davispolk.com

Attention:   Brian Resnick

Email:           bresnick@davispolk.com

9.2 Indemnification Indemnification. The Debtors will indemnify, save and hold harmless each Backstop Party, all of its respective directors, officers, stockholders, employees, partners, investors, members, managers, representatives, attorneys, other professional advisors and agents and all of their respective heirs, successors, legal administrators, permitted assigns, and each Person who (within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended) controls such Backstop Party and the officers, directors, agents and employees of any such controlling Person (collectively, the “Indemnitees”) from and against all losses, claims, damages, liabilities, costs (including, without limitation, the costs of investigation and reasonable attorneys’ fees) and expenses, as incurred by any or all of the Indemnitees in connection with any claim against them by a third party in connection with or arising from the execution, delivery and performance by the Debtors of this Agreement or the Rights Offerings (collectively, the “Losses”); provided, however, that the foregoing indemnity will not apply to Losses to the extent that they are found by a final, non -appealable judgment of a court of competent jurisdiction to have resulted from: (A) any material breach by any Indemnitee of this Agreement; (B) any act or failure to act by an Indemnitee of bad faith, willful or intentional misconduct or gross negligence; or (C) any violation of applicable law. This indemnification provision will be in addition to the rights of each and all of the Indemnitees to bring an action against the Debtors for material breach of any term of this Agreement. The Debtors acknowledge and agree that each and all of the Indemnitees shall be treated as third-party beneficiaries with rights to bring an action against the Debtors under this Section 9.2.

(b) Indemnification Procedure. Promptly after receipt by an Indemnitee of notice of the commencement of any claim, litigation, investigation or proceeding (an “Indemnified Claim”) by any Person other than a Debtor, such Indemnitee will, if a claim is to be made hereunder against the Debtors in respect thereof, notify the Debtors in writing of the commencement thereof; provided, that the omission to so notify the Debtors will not relieve the Debtors from any liability that it may have hereunder except to the extent it has been materially prejudiced by such failure. In case any such Indemnified Claims are brought against any Indemnitee and it notifies the Debtors of the commencement thereof, the Debtors will be entitled to participate therein, and, to the extent that it may elect by written notice delivered to the Debtors, to assume the defense thereof, with counsel reasonably acceptable to such Indemnitee; provided, that if the parties (including any impleaded parties) to any such Indemnified Claims include both such Indemnitee and the Debtors and based on advice of such Indemnitee's counsel there are legal defenses available to such Indemnitee that are different from or additional to those available to the Debtors, such Indemnitee shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such Indemnified Claims on

 

  

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behalf of such Indemnitee. Upon receipt of notice from the Debtors to such Indemnitee of its election so to assume the defense of such Indemnified Claims with counsel reasonably acceptable to the Indemnitee, the Debtors shall not be liable to such Indemnitee for expenses incurred by such Indemnitee in connection with the defense thereof (other than reasonable costs of investigation) unless (w) such Indemnitee shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the immediately preceding sentence (it being understood, however, that the Debtors shall not be liable for the expenses of more than one separate counsel representing the Indemnified Persons who are parties to such Indemnified Claims and that all such expenses shall be reimbursed as they occur), (x) the Debtors shall not have employed counsel reasonably acceptable to such Indemnitee to represent such Indemnitee within a reasonable time after notice of commencement of the Indemnified Claims, (y) the Debtors shall have failed or is failing to defend such claim, and is provided written notice of such failure by the Indemnitee and such failure is not reasonably cured within fifteen (15) Business Days of receipt of such notice, or (z) the Debtors shall have authorized in writing the employment of counsel for such Indemnitee.

(c) Settlement of Indemnified Claims. The Debtors shall not be liable for any settlement of any Indemnified Claims effected without its written consent. If any settlement of any Indemnified Claims is consummated with the written consent of the Debtors or if there is a final judgment for the plaintiff in any such Indemnified Claims, the Debtors agree to indemnify and hold harmless each Indemnitee from and against any and all Losses by reason of such settlement or judgment to the extent such Losses are otherwise subject to indemnification by the Debtors hereunder in accordance with, and subject to the limitations of, the provisions of this Section 9.2. Notwithstanding anything in this Section 9.2 to the contrary, if at any time an Indemnitee shall have requested the Debtors to reimburse such Indemnitee for legal or other expenses in connection with investigating, responding to or defending any Indemnified Claims as contemplated by this Section 9.2 , the Debtors shall be liable for any settlement of any Indemnified Claims effected without its written consent if (a) such settlement is entered into more than (i) sixty (60) days after receipt by the Debtors of such request for reimbursement and (ii) thirty (30) days after receipt by the Indemnitee of the material terms of such settlement and (b) the Debtors shall not have reimbursed such Indemnified Person in accordance with such request prior to the date of such settlement. The Debtors shall not, without the prior written consent of an Indemnitee, effect any settlement of any pending or threatened Indemnified Claims in respect of which indemnity or contribution has been sought hereunder by such Indemnitee unless such settlement (x) includes an unconditional release of such Indemnitee in form and substance satisfactory to such Indemnitee from all liability on the claims that are the subject matter of such Indemnified Claims and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnitee.

9.3 Survival of Representations and Warranties, etc. All representations and warranties made in this Agreement and the Schedules attached hereto will survive the execution and delivery of this Agreement.

9.4 Assignment. This Agreement will be binding upon and inure to the benefit of each and all of the Parties, and, except as set forth below, neither this Agreement nor any of the rights, interests or obligations hereunder will be assigned by any of the Parties without the prior written consent of the other parties; provided that without the consent of any other party hereto,

 

  

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any Backstop Party’s rights and obligations hereunder may be assigned, delegated or transferred, in whole or in part, by such Backstop Party to (i) any Affiliate of the Backstop Party over which the Backstop Party or any of its Affiliates exercises investment authority, including, without limitation, with respect to voting and dispositive rights or (ii) to one or more financial institutions or entities that certify their status as (A) a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act, or an entity in which all of the equity owners are such “qualified institutional buyers” or (B) an “accredited investor” within the meaning of Rule 501(a)(1), (2), (3), (5), (6) or (7) under the Securities Act, or an entity in which all of the equity owners are such “accredited investors”; provided further, that any such assignee, whether or not already a Backstop Party, executes a Joinder as a Backstop Party and thereby assumes the rights and obligations of such Backstop Party hereunder and agrees to be bound by the terms of this Agreement in the same manner as the Backstop Party. In the event of any such assignment, delegation or transfer, Schedule 2 to this Agreement shall be promptly amended to reflect such assignment, delegation or transfer without the need for the consent or action of any party hereto (other than Knighthead in the event of an assignment, delegation or transfer by a Backstop Party to a non-Affiliate of such Backstop Party and other than the assigning, delegating or transferring Party and the execution by the assignee of a Joinder as a Backstop Party whether or not such assignee is already a Backstop Party) and such amended Schedule 2 shall be deemed to form part of this Agreement for all purposes. Notwithstanding any assignment, delegation or transfer pursuant to this Section 9.4, if the Rights Offerings are not fully subscribed, then the Debtors may enforce against Knighthead a commitment to fully subscribe the Rights Offerings and to purchase the related Rights Offering Notes and Rights Offering Warrants.

9.5 Entire Agreement. This Agreement and the Plan contain the entire agreement by and among the Debtors and the Supporting Parties with respect to the transactions contemplated by this Agreement and supersede all prior agreements and representations, written or oral, with respect thereto.

9.6 Waivers and Amendments. This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms and conditions of this Agreement may be waived, only by a written instrument signed by the Debtors and the Backstop Parties; provided, however, that, if this Agreement is so amended or modified, and such amendment or modification is materially adverse to a Supporting Party (other than a Backstop Party), the applicable Supporting Party may withdraw its support of this Agreement, and such Supporting Party shall have no further obligations under this Agreement. No delay on the part of any party in exercising any right, power or privilege pursuant to this Agreement will operate as a waiver thereof, nor will any waiver on the part of any party of any right, power or privilege pursuant to this Agreement, nor will any single or partial exercise of any right, power or privilege pursuant to this Agreement, preclude any other or further exercise thereof or the exercise of any other right, power or privilege pursuant to this Agreement. The rights and remedies provided pursuant to this Agreement are cumulative and are not exclusive of any rights or remedies which any party otherwise may have at law or in equity.

9.7 Governing Law; Jurisdiction; Venue; Process. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE

 

  

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LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK. EACH PARTY HEREBY IRREVOCABLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES BANKRUPTCY COURT, FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

If a court finds that subject matter jurisdiction is not available in the Bankruptcy Court, the Parties hereby agree to submit any and all disputes arising out of this Agreement to the jurisdiction and venue of the U.S. District Court for the Southern District of New York or if such court will not have jurisdiction, then to the appropriate courts of the State of New York sitting in New York County.

9.8 Counterparts. This Agreement may be executed and delivered (including by facsimile or portable document format (PDF) transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed will be deemed to be an original, but all of which taken together will constitute one and the same.

9.9 Headings; Advice of Counsel; Interpretation. The headings in this Agreement are for reference purposes only, do not constitute a part of this Agreement and will not in any way affect the meaning or interpretation of this Agreement. Each of the Debtors and the Supporting Parties represents to the other parties to this Agreement that such Debtor or Supporting Party has been represented by counsel in connection with this Agreement, that such Debtor or Supporting Party has discussed this Agreement with its counsel and that any and all issues with respect to this Agreement have been resolved as set forth herein. No provision of this Agreement shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial agency.

9.10 Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein will not be in any way impaired thereby, it being intended that all of the rights and privileges of the Parties will be enforceable to the fullest extent permitted by law.

 

9.11  Termination

(a) Termination by the Backstop Parties. The Backstop Parties shall have the right, but not the obligation, to terminate this Agreement by notice to the Debtors if:

(A) the conditions set forth in Section 6 have not been satisfied (or waived) by December 31, 2013 (the “Expiration Date”);

 

 

  

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(B) a Material Adverse Change has occurred since the date of the Rights Offerings Term Sheet;

(C) the Bankruptcy Court shall not have entered an order approving the Backstop Agreement, including the Breakup Fee, the Backstop Fee and the Expense Reimbursement on or prior to November 8, 2013;

(D) the Bankruptcy Court enters an order confirming a plan of reorganization other than the Plan;

(E) the Company shall have failed to comply with all or any of its obligations or covenants set forth herein in any material respect or it shall be reasonably apparent that it shall be unable to satisfy each of the conditions to closing on or before the Effective Date and such failure or inability remains uncured or continues for a period of ten (10) Business Days following delivery of written notice thereof to the Company by the Backstop Parties;

(F) the Company shall have breached any of the representations and warranties made or deemed made in any material respect;

(G)  the Effective Date shall not have occurred by December 31, 2013; or

 

(H)  a Breakup Fee Triggering Event has occurred.

(b) Termination by the Debtors. The Debtors will have the right, but not the obligation, to terminate this Agreement by notice to the Backstop Parties if:

(A) the conditions set forth in Section 7 have not been satisfied (or waived) by the Expiration Date. In the event that any, but not all Backstop Parties materially breach this Agreement, and such breach is not cured after a notice period of ten (10) Business Days (which may be extended by the Company), the Debtors may terminate this Agreement with respect to such Backstop Party only and this Agreement will continue to remain in effect with respect to all other Parties; provided, however, that any such Backstop Party may cure such breach in accordance with this Section 9.11(b)(A) by assigning, delegating or transferring its obligations in accordance with Section 9.4 hereof, or

(B) the Company receives, after the date hereof, a bona fide unsolicited Alternative Transaction proposal, and the Company’s board of directors reasonably determines in its good faith judgment that: (i) such Alternative Transaction provides a higher and better economic recovery to the Debtors’ estates than that proposed in the Rights Offerings Term Sheet; (ii) the board of directors’ fiduciary obligations require it to direct the Company to accept such Alternative Transaction proposal (but subject to compliance with paragraphs (A) and (B) below); and (iii) such Alternative Transaction is from a proponent that the board of directors has reasonably determined is capable to consummate such Alternative Transaction (such an Alternative Transaction, a “Superior

 

  

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Transaction”), then the Company may terminate this Agreement, provided that the Company has been in compliance with its obligations in Section 5.4 of this Agreement through the time of such proposed termination, including (A) notifying the Backstop Parties in writing of such Alternative Transaction prior to any discussions (other than accepting an initial inbound communication) regarding such Alternative Transaction taking place) and (B) giving the Backstop Parties at least five (5) business days’ written notice (accompanied by the proposal and any materials supporting such Alternative Transaction) and negotiating in good faith with and providing the Backstop Parties an opportunity to propose a revised transaction, before the earliest to occur of: (x) the Company exercising any permitted termination right in accordance with this Section 9.11(b)(B), (y) the Company entering into such Alternative Transaction, and (z) the Company filing a motion with the Bankruptcy Court seeking approval of such Alternative Transaction, provided, further, that notwithstanding any of the foregoing in this Section 9.11(b)(B), the Company shall pay the Breakup Fee to the Backstop Parties to the extent otherwise payable under Section 2.4(a) of this Agreement.

(c) Withdrawal of Support by the Creditors’ Committee. The Creditors’ Committee will have the right, but not the obligation, to withdraw its support of this Agreement by notice to the Company and the Backstop Parties if the Creditors’ Committee receives, after the date hereof, a bona fide unsolicited Alternative Transaction proposal, and the Creditors’ Committee reasonably determines in its good faith judgment that such Alternative Transaction is a Superior Transaction, then the Creditors’ Committee may withdraw its support of this Agreement, provided, the Creditors’ Committee may not engage in discussions or negotiations regarding such Alternative Transaction with such third party (other than accepting an initial inbound communication and asking basic clarifying questions regarding such Alternative Transaction in that communication) and the Creditors’ Committee has been in compliance with its obligations in Section 5.4(c) of this Agreement through the time of such proposed termination, including (A) promptly notifying the Backstop Parties in writing of such Alternative Transaction and (B) giving the Company and the Backstop Parties at least five (5) business days’ written notice (accompanied by the proposal and any materials supporting such Alternative Transaction) and negotiating in good faith with and providing the Backstop Parties an opportunity to propose a revised transaction, before the earliest to occur of: (x) the Creditors’ Committee exercising any permitted right to withdraw its support of this Agreement in accordance with this Section 9 .11(c), (y) the Company entering into such Alternative Transaction, and (z) the Company filing a motion with the Bankruptcy Court seeking approval of such Alternative Transaction, provided, further, that, notwithstanding any of the foregoing in this Section 9.11(c), the Company shall pay the Breakup Fee to the Backstop Parties if the Company enters into or seeks court authority to enter into an Alternative Transaction, including a Superior Transaction to the extent otherwise payable under Section 2.4(a) of this Agreement.

(d) Effect of Termination. In the event of termination of this Agreement as provided above, the provisions of this Agreement will immediately become void and of no further force and effect (other than this Section 9 (except Section 9 .3) and Section 2.4); provided that no Party will be released from any liability for any breach of this Agreement prior to such termination, which shall in each case expressly survive any such termination; provided further

 

  

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that the Company shall remain obligated to pay all the Initial Expense Reimbursement and Expense Reimbursements.

(e) Automatic Stay. The Debtors acknowledge and agree and shall not dispute that the giving of notice of termination of this Agreement or withdrawal of support of this Agreement, as applicable, by any of the Supporting Parties shall not be a violation of the automatic stay of section 362 of the Bankruptcy Code (and the Debtors hereby waive, to the greatest extent possible, the applicability of the automatic stay to the giving of such notice); provided, however, nothing herein shall prejudice any of the Debtors or the Supporting Parties’ rights to argue that the termination or withdrawal of support, as applicable, was not proper under the terms of this Agreement.

9.12    Conflict with Confirmation Order and Plan.

(a) Conflict with the Confirmation Order. In the event there is a conflict between the terms of this Agreement and the terms of the Confirmation Order, the terms of the Confirmation Order will control and such Confirmation Order will control over the Plan.

(b) Conflict with the Plan. In the event there is a conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan will control.

9.13 Specific Performance. The Debtors and the Supporting Parties acknowledge and agree that any breach of terms of this Agreement would give rise to irreparable harm for which money damages would not be an adequate remedy, and, accordingly, the Debtors and the Supporting Parties agree that, in addition to any other remedies, each will be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy. Without limiting the foregoing, each Backstop Party agrees that each other Backstop Party shall have the right, in addition to any other rights and remedies existing in its favor, to enforce its rights and the obligations of any other Backstop Party hereunder not only by an action or actions for damages but also by an action or actions for specific performance, injunctive or other equitable relief without the necessity of proving the inadequacy of money damages as a remedy.

9.14 No Third Party Beneficiaries. This Agreement will not confer any rights or remedies upon any other person or entity other than the Parties and their respective successors and permitted assigns.

9.15 Separate Investment Decisions. Each Backstop Party acknowledges and agrees for the benefit of each other Backstop Party that: (1) no Backstop Party shall be deemed or otherwise considered to be acting as an agent or in any other fiduciary capacity on behalf of another Backstop Party by virtue of this Agreement, (2) it has without reliance upon any other Backstop Party made its own credit and investment analysis and decision to enter into this Agreement and the transactions contemplated hereby to which it is a party, and (3) it will without reliance upon any other Backstop Party continue to make its own credit and investment decisions in taking or not taking any action in connection with this Agreement and the transactions contemplated hereby and in any other agreement to which it is a party.

 

  

32

  

 

9.16 Date this Agreement is Effective. This Agreement shall become immediately effective with respect to the Supporting Parties on the date on which all of the Supporting Parties and the Debtors execute this Agreement, and shall become effective with respect to the Debtors upon the date on which the Bankruptcy Court shall have entered a final order approving this Agreement and authorizing the Debtors to perform hereunder, which order shall be in form and substance consistent with the Rights Offerings Term Sheet and otherwise reasonably acceptable to the Supporting Parties.

[Signature Pages Follow]

  

33

  

 

IN WITNESS WHEREOF, the Debtors and the Supporting Parties have duly executed this Agreement as of the date first above written.

 

	 	
PATRIOT COAL CORPORATION

AND ITS AFFILIATED DEBTORS

	 
	 	 	 	 
	 	
By: 

	/s/ Joseph W. Bean	 
	 	 	Name: Joseph W. Bean	 
	 	 	Title: Senior Vice President	 
	 	 	 	 

  

 

  

 

	 	
BACKSTOP PARTIES:

	 
	 	 	 
	 	
KNIGHTHEAD CAPITAL MANAGEMENT, LLC.,

solely on behalf of certain funds and accounts it

manages and/or advises

	 
	 	 	 	 
	 	
By: 

	/s/ Thomas A. Wagner	 
	 	 	Name: Thomas A. Wagner	 
	 	 	Title: Managing Member	 
	 	 	 	 

  

 

  

 

	 	
CONSENTED TO BY:

	 
	 	 	 
	 	
THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS

	 
	 	 	 	 
	 	
By: 

	/s/ Adam C. Rogoff	 
	 	 	Name: Adam C. Rogoff	 
	 	 	Title: Kramer Levin Naftalis & Frankel LLP

          Counsel to Creditors Committee	 
	 	 	 	 

 

	 	THE UNITED MINE WORKERS OF AMERICA	 
	 	 	 
	 	
By: 

	/s/ Grant Crandall	 
	 	 	Name: Grant Crandall	 
	 	 	Title: General Counsel	 
	 	 	 	 

  

 

  

Exhibit A

BACKSTOP PARTY JOINDER

TO BACKSTOP RIGHTS PURCHASE AGREEMENT

This Joinder to Backstop Rights Purchase Agreement (this “Joinder”), dated as of _______________, is entered into as of ______________ by [INSERT NAME] (“Joinder Party”) and [INSERT NAME] (“Assignor”).

Joinder Party was not a party to the original Backstop Rights Purchase Agreement dated as of _____________, 2013 (the “Backstop Agreement”) by and among Patriot Coal Corporation, a Delaware corporation (the “Company”), the other entities set forth in Schedule 1 thereto (together with the Company, the “Debtors” and each a “Debtor”), and each of the undersigned entities and/or their investment advisors, managers, managed funds or accounts, intermediaries or nominees set forth on the signature pages thereto (collectively, the “Backstop Parties” and each, a “Backstop Party”), and consented to by the Official Committee of the Unsecured Creditors and the United Mine Workers of America. Capitalized terms used herein without definition shall have the meanings given in the Backstop Agreement.

Assignor hereby assigns irrevocably to Joinder Party its rights, title, interests and obligations as a Backstop Party with respect to the amounts set forth on Schedule 1 hereto pursuant to Section 9.4 of the Backstop Agreement. Pursuant to Section 9.4 of the Backstop Agreement, Schedule 2 to the Backstop Agreement is hereby replaced in its entirety with the form of Schedule 2 attached hereto, which shall be deemed to form part of the Backstop Agreement for all purposes. Joinder Party agrees with the amounts set forth opposite its name on Schedule 2 attached hereto.

Joinder Party has agreed to become party to the Backstop Agreement as a Backstop Party. Joinder Party hereby agrees to be subject to the applicable terms and conditions of the Backstop Agreement as a Backstop Party, as referred to therein, and to make the representations and warranties set forth in Section 4 therein.

Any notice required or permitted by the Backstop Agreement shall be given to Joinder Party at the address listed under Joinder Party’s signature below.

 

 

	 	
JOINDER PARTY

	 
	 	 	 
	 	
By: 

	 	 
	 	 	Name: 	 
	 	 	Title: 	 
	 	 	 	 

 

	 	ASSIGNOR	 
	 	 	 
	 	
By: 

	 	 
	 	 	Name: 	 
	 	 	Title: 	 
	 	 	 	 

 

 

 

  

 

  

 

 

Exhibit B

SUPPORTING PARTY JOINDER

TO BACKSTOP RIGHTS PURCHASE AGREEMENT

This Joinder to Backstop Rights Purchase Agreement (this “Joinder”), dated as of _______________, is entered into as of ______________ by [INSERT NAME] (“Joinder Party”) and [INSERT NAME] (“Assignor”).

Joinder Party was not a party to the original Backstop Rights Purchase Agreement dated as of _____________, 2013 (the “Backstop Agreement”) by and among Patriot Coal Corporation, a Delaware corporation (the “Company”), the other entities set forth in Schedule 1 thereto (together with the Company, the “Debtors” and each a “Debtor”), and each of the undersigned entities and/or their investment advisors, managers, managed funds or accounts, intermediaries or nominees set forth on the signature pages thereto (collectively, the “Backstop Parties” and each, a “Backstop Party”), and consented to by the Official Committee of the Unsecured Creditors and the United Mine Workers of America. Capitalized terms used herein without definition shall have the meanings given in the Backstop Agreement.

Assignor hereby assigns irrevocably to Joinder Party its [ ] Claims and any and all rights associated therewith.

Joinder Party has consented to the Backstop Agreement as a Supporting Party. Joinder Party hereby agrees to be subject to the applicable terms and conditions of the Backstop Agreement as a Supporting Party.

Any notice required or permitted by the Backstop Agreement shall be given to Joinder Party at the address listed under Joinder Party’s signature below.

 

	 	
JOINDER PARTY

	 
	 	 	 
	 	
By: 

	 	 
	 	 	Name: 	 
	 	 	Title: 	 
	 	 	 	 

 

	 	ASSIGNOR	 
	 	 	 
	 	
By: 

	 	 
	 	 	Name: 	 
	 	 	Title: 	 
	 	 	 	 

 

 

 

A-1

 

 

SCHEDULE 1

(Debtor Entities)

	
1.

	
Affinity Mining Company

	
52.

	
KE Ventures LLC

	
2.

	
Apogee Coal Company, LLC

	
53.

	
Little Creek LLC

	
3.

	
Appalachia Mine Services, LLC

	
54.

	
Logan Fork Coal Company

	
4.

	
Beaver Dam Coal Company, LLC

	
55.

	
Magnum Coal Company LLC

	
5.

	
Big Eagle, LLC

	
56.

	
Magnum Coal Sales LLC

	
6.

	
Big Eagle Rail, LLC

	
57.

	
Martinka Coal Company, LLC

	
7.

	
Black Stallion Coal Company, LLC

	
58.

	
Midland Trail Energy LLC

	
8.

	
Black Walnut Coal Company

	
59.

	
Midwest Coal Resources II, LLC

	
9.

	
Bluegrass Mine Services, LLC

	
60.

	
Mountain View Coal Company, LLC

	
10.

	
Brody Mining, LLC

	
61.

	
New Trout Coal Holdings II, LLC

	
11.

	
Brook Trout Coal, LLC

	
62.

	
Newtown Energy, Inc.

	
12.

	
Catenary Coal Company, LLC

	
63.

	
North Page Coal Corp.

	
13.

	
Central States Coal Reserves of Kentucky, LLC

	
64.

	
Ohio County Coal Company, LLC

	
14.

	
Charles Coal Company, LLC

	
65.

	
Panther LLC

	
15.

	
Cleaton Coal Company

	
66.

	
Patriot Beaver Dam Holdings, LLC

	
16.

	
Coal Clean LLC

	
67.

	
Patriot Coal Company, L.P.

	
17.

	
Coal Properties, LLC

	
68.

	
Patriot Coal Corporation

	
18.

	
Coal Reserve Holding Limited Liability Company No. 2

	
69.

	
Patriot Coal Sales LLC

	
19.

	
Colony Bay Coal Company

	
70.

	
Patriot Coal Services LLC

	
20.

	
Cook Mountain Coal Company, LLC

	
71.

	
Patriot Leasing Company LLC

	
21.

	
Corydon Resources LLC

	
72.

	
Patriot Midwest Holdings, LLC

	
22.

	
Coventry Mining Services, LLC

	
73.

	
Patriot Reserve Holdings, LLC

	
23.

	
Coyote Coal Company LLC

	
74.

	
Patriot Trading LLC

	
24.

	
Cub Branch Coal Company LLC

	
75.

	
Patriot Ventures LLC

	
25.

	
Dakota LLC

	
76.

	
PCX Enterprises, Inc.

	
26.

	
Day LLC

	
77.

	
Pine Ridge Coal Company, LLC

	
27.

	
Dixon Mining Company, LLC

	
78.

	
Pond Creek Land Resources, LLC

	
28.

	
Dodge Hill Holding JV, LLC

	
79.

	
Pond Fork Processing LLC

	
29.

	
Dodge Hill Mining Company, LLC

	
80.

	
Remington Holdings LLC

	
30.

	
Dodge Hill of Kentucky, LLC

	
81.

	
Remington II LLC

	
31.

	
EACC Camps, Inc.

	
82.

	
Remington LLC

	
32.

	
Eastern Associated Coal, LLC

	
83.

	
Rivers Edge Mining, Inc.

	
33.

	
Eastern Coal Company, LLC

	
84.

	
Robin Land Company, LLC

	
34.

	
Eastern Royalty, LLC

	
85.

	
Sentry Mining, LLC

	
35.

	
Emerald Processing, L.L.C.

	
86.

	
Snowberry Land Company

	
36.

	
Gateway Eagle Coal Company, LLC

	
87.

	
Speed Mining LLC

	
37.

	
Grand Eagle Mining, LLC

	
88.

	
Sterling Smokeless Coal Company, LLC

	
38.

	
Heritage Coal Company LLC

	
89.

	
TC Sales Company, LLC

	
39.

	
Highland Mining Company, LLC

	
90.

	
The Presidents Energy Company LLC

	
40.

	
Hillside Mining Company

	
91.

	
Thunderhill Coal LLC

	
41.

	
Hobet Mining, LLC

	
92.

	
Trout Coal Holdings, LLC

	
42.

	
Indian Hill Company LLC

	
93.

	
Union County Coal Co., LLC

	
43.

	
Infinity Coal Sales, LLC

	
94.

	
Viper LLC

	
44.

	
Interior Holdings, LLC

	
95.

	
Weatherby Processing LLC

	
45.

	
IO Coal LLC

	
96.

	
Wildcat Energy LLC

	
46.

	
Jarrell’s Branch Coal Company

	
97.

	
Wildcat, LLC

	
47.

	
Jupiter Holdings LLC

	
98.

	
Will Scarlet Properties LLC

	
48.

	
Kanawha Eagle Coal, LLC

	
99.

	
Winchester LLC

	
49.

	
Kanawha River Ventures I, LLC

	
100.

	
Winifrede Dock Limited Liability Company

	
50.

	
Kanawha River Ventures II, LLC

	
101.

	
Yankeetown Dock, LLC

	
51.

	
Kanawha River Ventures III, LLC

	  	  

 

  

I-1

  

 

Schedule 2

Backstop Party Commitments1

	  	  	  	
Backstop Commitment

	
Backstop Commitment

	  	  
	
Backstop Party

	
Address

	
Percentage

	
Amount

	
Backstop Fee

	  	  	  	  	
Notes

	
Warrants

	
Notes

	
Warrants

	
[Investor 1]

	c/o [    ]	
50%

	
$125,000,000

	
$12,500

	
$6.25 million

	
250,000

	  	
[Address]

	  	  	  	  	  
	  	
Attn:

	  	  	  	  	  	  
	  	
Fax:

	  	  	  	  	  	  
	  	
Wire Instruction:

	  	  	  	  	  
	  	  	  	  	  	  	  	  
	
[Investor 2]

	c/o [    ]	
50%

	
$125,000,000

	
$12,500

	
$6.25 million

	
250,000

	  	
[Address]

	  	  	  	  	  
	  	
Attn:

	  	  	  	  	  	  
	  	
Fax:

	  	  	  	  	  	  
	  	
Wire Instruction:

	  	  	  	  	  
	  	  	  	  	  	  	  	  
	
Total

	  	  	
100.0%

	
$250,000,000

	
$25,000

	
$12.5 million

	
500,000

 

 

 

 

 

 

1 Illustrative only.

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