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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________TO_____________
COMMISSION FILE NO.: 0-26823
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ALLIANCE RESOURCE PARTNERS, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 73-1564280
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1717 SOUTH BOULDER AVENUE, SUITE 600, TULSA, OKLAHOMA 74119
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(918) 295-7600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Units
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate value of the Common Units held by non-affiliates of the
registrant (treating all executive officers and directors of the registrant, for
this purpose, as if they may be affiliates of the registrant) was approximately
$95,705,398 on March 23, 2000, based on $12.88 per unit, the closing price of
the Common Units as reported on the Nasdaq National Market on such date.
As of March 23, 2000, 8,982,780 Common Units and 6,422,531 Subordinated
Units are outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
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TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS ............................................................. 4
ITEM 2. PROPERTIES ........................................................... 15
ITEM 3. LEGAL PROCEEDINGS .................................................... 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS ................ 19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON UNITS AND RELATED
UNITHOLDER MATTERS ................................................... 19
ITEM 6. SELECTED FINANCIAL DATA .............................................. 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .................................. 22
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK ................................................................ 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA .......................... 29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE ................................................. 50
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE MANAGING GENERAL PARTNER ..... 50
ITEM 11. EXECUTIVE COMPENSATION ............................................... 52
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT ........................................................... 54
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ....................... 56
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K .......................................................... 58
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements. These
statements are based on Alliance Resource Partners, L.P.'s (the "Partnership")
beliefs as well as assumptions made by and information currently available to
the Partnership. When used in this document, the words "anticipate," "believe,"
"expect," "estimate," "forecast," "project," and similar expressions identify
forward-looking statements. These statements reflect the Partnership's current
views with respect to future events and are subject to various risks,
uncertainties and assumptions including, but not limited to (a) the
Partnership's dependence on significant customer contracts and the terms of
those contracts, (b) the Partnership's productivity levels and margins that it
earns from the sale of coal, (c) the effects of any unanticipated increases in
labor costs, adverse changes in work rules, or unexpected cash payments
associated with post-mine reclamation, workers' compensation claims, and
environmental litigation or cleanup, (d) the risk of major mine-related
accidents or interruptions, (e) the effects of any adverse change in the
domestic coal industry, electric utility industry, or general economic
conditions. If one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described in this Form 10-K. Except as required by
applicable securities laws, the Partnership does not intend to update these
forward-looking statements.
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PART I
ITEM 1. BUSINESS
GENERAL
We are a diversified producer and marketer of coal to major United States
utilities and industrial users. We began mining operations in 1971 and, since
then, have grown through acquisitions and internal development to become the
eighth largest coal producer in the eastern United States. At December 31, 1999,
we had approximately 440 million tons of reserves in Illinois, Indiana,
Kentucky, Maryland and West Virginia. In 1999, we produced 14.1 million tons of
coal and sold 15.0 million tons of coal. The coal we produced in 1999 was 19.9%
low-sulfur coal, 19.9% medium-sulfur coal and 60.2% high-sulfur coal. In 1999,
approximately 85% of our medium- and high-sulfur coal was sold to utility plants
with installed pollution control devices, also known as "scrubbers," to remove
sulfur dioxide.
We currently operate six mining complexes in Illinois, Kentucky and
Maryland and have one complex under development in Indiana. Five of our active
mines are underground and one has both surface and underground mines. Our mining
activities are organized into three operating regions: (a) the Illinois Basin
operations, (b) the East Kentucky operations and (c) the Maryland operations.
We and our subsidiary, Alliance Resource Operating Partners, L.P. (the
"Intermediate Partnership"), were formed to acquire, own and operate
substantially all of the coal production and marketing assets of Alliance
Resource Holdings, Inc. ("ARH"), a Delaware corporation formerly known as
Alliance Coal Corporation. We completed our initial public offering ("IPO") on
August 20, 1999, and concurrently therewith, ARH contributed substantially all
of its operating assets and liabilities to the Intermediate Partnership.
Our managing general partner, Alliance Resource Management GP, LLC (the
"Managing GP") and our special general partner, Alliance Resource GP, LLC (the
"Special GP") (collectively, the Special GP and the Managing GP are the "General
Partners") own an aggregate 2% general partner interest in the Partnership. Our
limited partners, including the General Partners as holders of Common Units and
Subordinated Units, own an aggregate 98% limited partner interest in the
Partnership.
The coal production and marketing assets of ARH acquired by the
Partnership are referred to as the "Predecessor." All 1999 operating data
contained herein includes the results of the Partnership and the Predecessor.
RECENT DEVELOPMENTS
We are constantly evaluating strategic acquisition of coal reserve
properties that are adjacent or otherwise complementary to our existing
operations. Over the last year, we have increased our reserves from
approximately 411 million tons of proven and probable reserves at December 31,
1998, to approximately 440 million tons of proven and probable reserves at
December 31, 1999. Recent significant acquisitions and option exercises include:
Acquisition of reserves in western Kentucky. In September 1999, we
acquired approximately 21 million saleable tons of reserves in western
Kentucky that are contiguous with our Dotiki mine. This acquisition
allows for the immediate advancement of the Dotiki mine's existing
operations into the newly acquired reserve area without the cost of
additional development capital.
Exercise of options to acquire two tracts of reserves in western
Kentucky. In March 2000, the Special GP exercised two separate options to
acquire substantial tracts of reserves in western Kentucky. One tract is
contiguous with our Dotiki mine, and the other borders our Hopkins County
Coal facilities. Upon closing of the acquisition, the Special GP, in its
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discretion, may choose to lease the tracts to us or assign the properties
to us in return for payment for all amounts it expended in connection
with the reserve acquisition, plus a market rate of interest. See "Item
13. Certain Relationships and Related Transactions." Although the Special
GP expects to close the acquisition by the end of September 2000, the
Special GP can make no assurances that it will be able to do so. The
reserves covered by these two options are not included in the 440 million
tons of proven and probable reserves noted above.
At Gibson County Coal, slope construction commenced in the fall of 1999
and construction of the preparation plant began in January 2000. We have entered
into an arrangement with the Special GP where the Special GP will construct the
preparation plant and ancillary facilities. See "Item 13. Certain Relationships
and Related Transactions." We expect the slope construction and the preparation
plant (including ancillary facilities) to be completed by this fall and the mine
to commence production by the end of this year.
MINING OPERATIONS
We produce a diverse range of steam coals with varying sulfur and heat
contents, which enables us to satisfy the broad range of specifications demanded
by our customers. The following chart illustrates our production by region for
the last five years.
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OPERATING REGION AND MINES 1999 1998 1997 1996 1995
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(TONS IN MILLIONS)
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Illinois Basin Operations:
Dotiki, Pattiki, Hopkins County Coal 8.5 7.9 5.2 4.3 4.4
East Kentucky Operations:
Pontiki/Excel, MC Mining 2.8 2.5 2.8 2.0 1.8
Maryland Operations:
Mettiki 2.8 3.0 2.9 2.7 2.6
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Total 14.1 13.4 10.9 9.0 8.8
========= ========= ========= ========= =========
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Illinois Basin Operations
Our Illinois Basin mining operations are currently located in western
Kentucky and southern Illinois. We have approximately 770 employees in the
Illinois Basin and currently operate three mining complexes. We also have a mine
under development in southern Indiana.
Webster County Coal, LLC. Webster County Coal operates the Dotiki mine
which is an underground mining operation located in Webster County, Kentucky.
The mine was opened in 1966, and we purchased the mine in 1971. Our Dotiki
operation utilizes continuous mining units employing room-and-pillar mining
techniques. The preparation plant has a throughput capacity of 1,000 tons of raw
coal an hour. Production from the mine is shipped via the CSX railroad, the
Paducah & Louisville railroad and by truck. Our primary customers for coal
produced at Dotiki are Seminole Electric Cooperative, Inc., Tennessee Valley
Authority and Western Kentucky Energy Corp., which purchase our coal pursuant to
long-term contracts for use in their scrubbed generating units.
White County Coal, LLC. White County Coal operates the Pattiki mine which
is an underground mining operation located in White County, Illinois. We began
construction of the mine in 1980 and have operated it since its inception. Our
Pattiki operation utilizes continuous mining units employing room-and-pillar
mining techniques. The preparation plant has a throughput capacity of 1,000 tons
of raw coal an hour. Production from the mine is shipped via the CSX railroad.
Our primary customers for coal produced at Pattiki are Seminole Electric
Cooperative, Inc. and Tennessee Valley Authority, which purchase our coal
pursuant to long-term contracts for use in their scrubbed generating units.
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Hopkins County Coal, LLC. Hopkins County Coal is a mining complex located
in Hopkins County, Kentucky. The operation has three surface mines, one of which
is currently idle, and one underground mine. We acquired Hopkins County Coal in
January 1998. In accordance with our acquisition plan, we incurred substantial
start-up costs in early 1998, when we completed extensive rebuilds of older
equipment and purchases of new or refurbished equipment. The surface operations
utilize dragline mining, and the underground operations utilize continuous
mining units employing room-and-pillar mining techniques. The preparation plant
has a throughput capacity of 1,000 tons of raw coal an hour. Production from the
complex is shipped via the CSX and the Paducah & Louisville railroads and by
truck. Our primary customers for coal produced at the Hopkins County Coal
complex include Louisville Gas & Electric, Tennessee Valley Authority and
Western Kentucky Energy Corp.
Gibson County Coal, LLC. We control 37.8 million tons of low-sulfur coal
reserves located in Gibson County, Indiana, situated in the southwestern part
of the state. We refer to these reserves as the Gibson County Coal "north"
reserves. In 1997, we acquired an additional 104.2 million tons of reserves in
Gibson County, Indiana. We refer to these reserves as the Gibson County Coal
"south" reserves. Approximately 10.9 million tons of our Gibson County Coal
south reserves are low-sulfur coal. We recently entered into a long-term
contract with PSI Energy, Inc., a subsidiary of Cinergy Corporation, for
production from our Gibson County Coal north reserves. We began construction of
a new mining complex to supply this contract with commencement of slope
construction in the fall of 1999 and construction of the preparation plant
and ancillary facilities in January of 2000. We plan to utilize continuous
mining units with commencement of production by the end of this year. We have
contractual commitments for an aggregate of 23 million tons of production from
this mine through 2012.
East Kentucky Operations
Our East Kentucky mining operations are located in the central Appalachia
coal fields. Our East Kentucky mines are currently our principal source for
low-sulfur coal. We have approximately 245 employees and operate two mining
complexes in East Kentucky.
Pontiki Coal, LLC/Excel Mining, LLC. Pontiki/Excel is an underground
mining complex located in Martin County, Kentucky. In 1977, we constructed the
mine and operated it continuously until September 1998, when we suspended
operations and terminated substantially all of our workforce due to adverse
market conditions. While we had intended originally to idle the mine for an
indefinite period, we were able to procure a new long-term supply agreement that
justified the re-opening of the mine beginning in late 1998. As a result, this
operation was restructured with a new mine plan, operating structure, and
workforce hired by Excel, an affiliate of Pontiki. Pontiki owns the mining
complex and reserves and Excel is responsible for conducting all mining
operations. While idled, the mine incurred a net loss of approximately $5.2
million in 1998, consisting of workers' compensation accruals and severance
payments consistent with the federal Worker Adjustment and Retraining
Notification Act (the "WARN Act"), as well as the costs associated with
maintaining an idled mine. During late 1998 and early 1999, we incurred
substantial start-up costs to bring Pontiki/Excel up to its current production
level. All of the coal produced at Pontiki/Excel meets or exceeds the compliance
requirements of Phase II of the Clean Air Act Amendments. Our Pontiki/Excel
operation utilizes continuous mining units employing room-and-pillar mining
techniques. The preparation plant has a throughput capacity of 800 tons of raw
coal an hour. Production from the mine is shipped via the Norfolk Southern
railroad and by truck. Our primary customers for coal produced at Pontiki are
James River Cogeneration Company, successor to Cogentrix of Virginia, Inc., and
A.E.I. Coal Sales, Inc.
MC Mining, LLC. MC Mining is an underground mining facility located in
Pike County, Kentucky, acquired in 1989. The underground mine operations are
operated by a contract mining company. The preparation plant is operated by
employees of MC Mining. The operation utilizes continuous mining units employing
room-and-pillar mining techniques. The preparation plant was upgraded during
1999 and has a throughput capacity of 800 tons of raw coal an hour. Production
from the mine is shipped via the CSX railroad and by truck. MC Mining sells its
production primarily to industrial customers.
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Maryland Operations
Our Maryland mining operations are located in the northern Appalachia
coal fields. We have approximately 245 employees and operate one mining complex
in Maryland.
Mettiki Coal, LLC. Mettiki is an underground longwall mining operation
located in Garrett County, Maryland. We constructed Mettiki in 1977 and have
operated it since its inception. The operation utilizes a longwall miner for the
majority of the coal extraction as well as continuous mining units used to
prepare the mine for future longwall mining operation areas. The preparation
plant has a throughput capacity of 1,350 tons of raw coal an hour. Production
from the mine is shipped via truck and the CSX railroad. Our primary customer
for coal produced at Mettiki is Virginia Electric and Power Company, which
purchases the coal pursuant to a long-term contract for use in the generating
units at its Mt. Storm, West Virginia power plant located less than 20 miles
away. We also process coal at Mettiki for Anker Energy Corporation and one of
its affiliates.
Mettiki Coal (WV), LLC. Mettiki (WV) has approximately 20.1 million tons
of undeveloped recoverable reserves in Grant and Tucker Counties, West Virginia.
We currently conduct no mining operations at Mettiki (WV).
OTHER OPERATIONS
Mt. Vernon Transfer Terminal, LLC
Mt. Vernon terminal is a rail-to-barge loading terminal on the Ohio River
in Mt. Vernon, Indiana. The terminal has a capacity of 5.5 million tons per year
with existing ground storage. Our primary customer at Mt. Vernon is Seminole
Electric Cooperative, Inc., with which we have a contract to load up to 2.7
million tons of coal annually. However, Seminole Electric Cooperative, Inc. has
filed suit in Indiana state court to terminate this contract and is seeking a
declaratory judgment as to the damages it owes us in connection with the
termination of the contract. We are currently not loading any volumes for
Seminole Electric Cooperative, Inc. We are currently exploring our options with
respect to this terminal. See "Item 3. Legal Proceedings."
Additional Services
We aggressively develop and market additional services in order to
establish ourselves as the supplier of choice for our customers. Examples of the
kind of services we have offered to date include ash and scrubber sludge
removal, coal yard maintenance and arranging alternate transportation services.
We will continue to think proactively in providing additional services for
customers and believe that this approach will give us a competitive advantage in
obtaining coal supply contracts in the future.
Coal Brokerage
We buy coal from outside producers throughout the eastern United States,
which we then resell, both directly and indirectly, to utility and industrial
customers. We purchased and sold 1.0 million tons of outside coal in 1999. We
have a policy of matching our outside coal purchases and sales to minimize
market risks associated with buying and reselling coal.
COAL MARKETING AND SALES
As is customary in the coal industry, we have entered into long-term
contracts with many of our customers. These arrangements are mutually
beneficial. Our utility customers secure a fuel supply for their power plants
for years into the future. Our long-term contracts contribute to our stability
and profitability by providing greater predictability of sales volumes and sales
prices. In 1999, approximately 75% of our sales tonnage was sold under long-term
contracts with maturities ranging from 2000 to 2010. Our total nominal
commitment under significant long-term contracts is approximately 88.4 million
tons at December 31, 1999. The total commitment of coal under contract is an
approximate number because, in some instances, our contracts contain provisions
which could cause the nominal total commitment to increase or decrease by as
much as 20%; in addition, the nominal total commitment can otherwise change
because of price reopener provisions contained in certain of these long-term
contracts. We believe our long-term contract position compares favorably to that
of our competitors.
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By providing a diverse range of coals with varying sulfur and heat
contents, we can satisfy the demanding specifications of a broad customer base.
Our diversity of coals enables us to serve a broader market and more readily
secure long-term contracts.
The terms of long-term contracts are the results of both bidding
procedures and extensive negotiations with the customer. As a result, the terms
of these contracts vary significantly in many respects, including, among others,
price adjustment features, price and contract reopener terms, permitted sources
of supply, force majeure provisions, coal qualities, and quantity. Virtually all
of our long-term contracts are subject to price adjustment provisions which
permit an increase or decrease periodically in the contract price to reflect
changes in specified price indices or items such as taxes, royalties or actual
production costs. These provisions, however, may not assure that the contract
price will reflect every change in production or other costs. Failure of the
parties to agree on a price pursuant to an adjustment or a reopener provision
can lead to early termination of a contract. Some of the long-term contracts
also permit the contract to be reopened to renegotiate terms and conditions
other than the pricing terms, and where a mutually acceptable agreement on terms
and conditions cannot be concluded, either party may have the option to
terminate the contract. The long-term contracts typically stipulate procedures
for quality control, sampling and weighing. Most contain provisions requiring us
to deliver coal within ranges for specific coal characteristic such as heat,
sulfur, ash, moisture, grindability, volatility and other qualities. Failure to
meet these specifications can result in economic penalties or termination of the
contracts. While most of the contracts specify the approved seams and/or
approved locations from which the coal is to be mined, some contracts allow the
coal to be sourced from more than one mine or location. Although the volume to
be delivered pursuant to a long-term contract is stipulated, the buyers often
have the option to vary the volume within specified limits.
RELIANCE ON MAJOR CUSTOMERS
Our three largest customers are Seminole Electric Cooperative, Inc.,
Tennessee Valley Authority and Virginia Electric and Power Company. Sales to
these customers in the aggregate accounted for approximately 49% of our 1999
total revenues, and sales to each customer accounted for more than 10% of our
1999 total revenues. Each of these customers has purchased coal regularly from
us for more than 15 years.
COMPETITION
The United States coal industry is highly competitive with numerous
producers in all coal producing regions. We compete with other large producers
and hundreds of small producers in the United States. The largest coal company
is estimated to have approximately 15% of the total 1999 tonnage sold in the
United States market. We compete with other coal producers primarily on the
basis of coal price at the mine, coal quality (including sulfur content),
transportation cost from the mine to the customer, and the reliability of
supply. Continued demand for our coal and the prices that we obtain are also
affected by demand for electricity, environmental and government regulations,
technological developments and the availability and price of alternative fuel
supplies, including nuclear, natural gas, oil, and hydroelectric power.
TRANSPORTATION
Our coal is transported to our customers by rail, barge and truck.
Depending on the proximity of the customer to the mine and the transportation
available for delivering coal to that customer, transportation costs can range
from 10% to 60% of the delivered cost of a customer's coal. As a consequence,
the availability and cost of transportation constitute important factors in the
marketability of coal. We believe our mines are located in favorable geographic
locations that minimize transportation costs for our customers.
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We generally pay transportation charges to deliver coal to a designated
point named in the sales contract. Customers typically pay the transportation
costs from the contractual F.O.B. point to the customer's plant. At the Mettiki
mine, a contractor operates a truck delivery system that transports the coal
from the mine to Virginia Electric and Power Company's Mt. Storm power plant.
In 1999, the largest volume transporter of our coal production was CSX
railroad, which moved approximately 50% of our tonnage over its rail system. The
practices of and rates set by the railroad serving a particular mine or customer
might affect, either adversely or favorably, our marketing efforts with respect
to coal produced from the relevant mine.
REGULATION AND LAWS
The coal mining industry is subject to regulation by federal, state and
local authorities on matters such as:
- employee health and safety;
- mine permits and other licensing requirements;
- air quality standards;
- water pollution;
- storage of petroleum products and substances which are regarded as
hazardous under applicable laws;
- plant and wildlife protection;
- reclamation and restoration of mining properties after mining is
completed;
- the discharge of materials into the environment;
- management of solid wastes generated by mining operations;
- protection of wetlands;
- management of electrical equipment containing polychlorinated
biphenyls, or PCBs;
- surface subsidence from underground mining;
- the effects that mining has on groundwater quality and availability;
and
- legislatively mandated benefits for current and retired coal miners.
In addition, the utility industry is subject to extensive regulation
regarding the environmental impact of its power generation activities which
could affect demand for our coal. The possibility exists that new legislation or
regulations, or new interpretations of exiting laws or regulations, may be
adopted which may have a significant impact on our mining operations or our
customers' ability to use coal and may require us or our customers to change our
or their operations significantly or to incur substantial costs.
We are committed to conducting mining operations in compliance with all
applicable federal, state and local laws and regulations. However, because of
extensive and comprehensive regulatory requirements, violations during mining
operations are not unusual in the industry and, notwithstanding our compliance
efforts, we do not believe these violations can be eliminated completely. None
of the violations to date or the monetary penalties assessed have been material.
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While it is not possible to quantify the costs of compliance with all
applicable federal and state laws, those costs have been and are expected to
continue to be significant. Capital expenditures for environmental matters have
not been material in recent years. We have accrued for the estimated costs of
reclamation and mine closing, including the cost of treating mine water
discharge, when necessary. The accrual for reclamation and mine closing costs is
based upon permit requirements and the costs and timing of reclamation and mine
closing procedures. Although management believes it is making adequate
provisions for all expected reclamation and other costs associated with mine
closures, future operating results would be adversely affected if we later
determine these accruals to be insufficient. Compliance with these laws has
substantially increased the cost of coal mining for all domestic coal producers.
Mining Permits and Approvals. Numerous governmental permits or approvals
are required for mining operations. We may be required to prepare and present to
federal, state or local authorities data pertaining to the effect or impact that
any proposed production of coal may have upon the environment. All requirements
imposed by any of these authorities may be costly and time-consuming and may
delay commencement or continuation of mining operations. Future legislation and
administrative regulations may emphasize the protection of the environment and,
as a consequence, our activities may be more closely regulated. Legislation and
regulations, as well as future interpretations of existing laws, may require
substantial increases in equipment and operating costs and delays, interruptions
or a termination of operations, the extent of which cannot be predicted.
Before commencing mining on a particular property, we must obtain mining
permits and approval by state regulatory authorities of a reclamation plan for
restoring, upon the completion of mining, the mined property to its prior
condition, productive use or other permitted condition. Typically we commence
actions to obtain permits between 18 and 24 months before we plan to mine a new
area. In our experience, permits generally are approved within 12 months after a
completed application is submitted. We have already secured all of the material
permits and approvals necessary to begin mining operations for our Gibson County
Coal mine. We have not experienced difficulties in obtaining mining permits in
the areas where our reserves are currently located. However, we cannot assure
you that we will not experience difficulty in obtaining mining permits in the
future.
Under some circumstances, substantial fines and penalties, including
revocation of mining permits, may be imposed under the laws described above.
Monetary sanctions and, in severe circumstances, criminal sanctions may be
imposed for failure to comply with these laws. Regulations also provide that a
mining permit can be refused or revoked if an officer, director or a shareholder
with a 10% or greater interest in the entity is affiliated with another entity
which has outstanding permit violations. Although we have been cited for
violations in the ordinary course of our business, we have never had a permit
suspended or revoked because of any violation, and the penalties assessed for
these violations have not been material.
Mine Health and Safety Laws. Stringent safety and health standards have
been imposed by federal legislation since 1969 when the Coal Mine Health and
Safety Act of 1969 was adopted. The Mine Health and Safety Act of 1969 resulted
in increased operating costs and reduced productivity. The federal Mine Safety
and Health Act of 1977, which significantly expanded the enforcement of health
and safety standards of the Mine Health and Safety Act of 1969, imposes
comprehensive safety and health standards on all mining operations. Regulations
are comprehensive and affect numerous aspects of mining operations, including
training of mine personnel, mining procedures, blasting, the equipment used in
mining operations and other matters. The Mine Safety and Health Administration
monitors compliance with these federal laws and regulations. In addition, as
part of the Mine Health and Safety Act of 1969 and the Mine Safety and Health
Act of 1977, the Black Lung Benefits Act requires payments of benefits by all
businesses that conduct current mining operations to a coal miner with black
lung and to some survivors of a miner who dies from this disease. Most of the
states where we operate also have state programs for mine safety and health
regulation and enforcement. In combination, federal and state safety and health
regulation in the coal mining industry is perhaps the most comprehensive and
pervasive system for protection of employee safety and health affecting any
segment of the industry. Even the most minute aspects of mine operations,
particularly underground mine operations, are subject to extensive regulation.
This regulation has a significant effect on our operating costs. However, our
competitors in all of the areas in which we operate are subject to the same laws
and regulations.
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Black Lung Legislation. The Black Lung Benefits Act levies a tax on
production of $1.10 per ton for underground-mined coal and $0.55 per ton for
surface-mined coal, but not to exceed 4.4% of the applicable sales price, in
order to compensate miners who are totally disabled due to black lung disease
and some survivors of miners who died from this disease, and who were last
employed as miners prior to 1970 or subsequently where no responsible coal mine
operator has been identified for claims. In addition, the Black Lung Acts
provide that some claims for which coal operators had previously been
responsible will be obligations of the government trust funded by the tax. The
Revenue Act of 1987 extended the termination date of this tax from January 1,
1996, to the earlier of January 1, 2014, or the date on which the government
trust becomes solvent. For miners last employed as miners after 1969 and who are
determined to have contracted black lung, we self-insure against potential cost
using actuarially determined estimates of the cost of present and future claims.
We are also liable under state statutes for black lung claims.
In the past, legislation on black lung reform has been introduced in
Congress, but not enacted. This legislation has been recently reintroduced. If
enacted, this legislation could:
- restrict the evidence that can be offered by a mining company;
- establish a standard for evaluation of evidence that greatly favors
black lung claimants;
- allow claimants who have been denied benefits at any time since 1981
to refile their claims for consideration under the new law;
- make surviving spouse benefits significantly easier to obtain; and
- retroactively waive repayment of preliminarily awarded benefits that
are later determined to have been improperly paid.
If this or similar legislation is passed, the number of claimants who
are awarded benefits could significantly increase. We cannot assure you that
this proposed legislation or other proposed changes in black lung legislation
will not have an adverse effect on our business.
The U.S. Department of Labor has issued proposed amendments to the
regulations implementing the federal black lung laws which, among other things,
establish a presumption in favor of a claimant's treating physician, allow
previously denied claimants to challenge benefit determinations in some
circumstances, increase the time period required for self-insured operations to
pay benefits to black lung claimants and limit a coal operator's ability to
introduce medical evidence regarding the claimant's medical condition. If
adopted, the amendments could have an adverse impact on us, the extent of which
cannot be accurately predicted.
Workers' Compensation. We are required to compensate employees for
work-related injuries. Several states in which we operate consider changes in
workers compensation laws from time to time. These changes, if enacted, could
adversely affect our financial condition and results of operation.
Retiree Health Benefits Legislation. The Coal Industry Retiree Health
Benefits Act of 1992 was enacted to provide for the funding of health benefits
for some United Mine Workers of America retirees. The act merged previously
established union benefit plans into a newly created fund into which "signatory
operators" and "related persons" are obligated to pay annual premiums for
beneficiaries. The act also created a second benefit fund for miners who retired
between July 21, 1992, and September 30, 1994, and whose former employers are no
longer in business. Because of our union-free status, we are not required to
make any payments to retired miners under the Coal Industry Retiree Health
Benefits Act of 1992, with the exception of limited payments made on behalf of
MC Mining, Inc. However, in connection with the sale of the coal assets
acquired by ARH in 1996, MAPCO Inc. agreed to retain all liabilities under the
Coal Industry Retiree Health Benefits Act of 1992.
11
<PAGE> 12
Surface Mining Control and Reclamation Act. The Surface Mining Control
and Reclamation Act establishes operational, reclamation and closure standards
for all aspects of surface mining as well as many aspects of deep mining. The
act requires that comprehensive environmental protection and reclamation
standards be met during the course of and upon completion of mining activities.
In conjunction with mining the property, we reclaim and restore the mined areas
by grading, shaping and preparing the soil for seeding. Upon completion of the
mining, reclamation generally is completed by seeding with grasses or planting
trees for a variety of uses, as specified in the approved reclamation plan. We
believe that we are in compliance in all material respects with applicable
regulations relating to reclamation.
The Surface Mining Control and Reclamation Act and similar state
statutes, require, among other things, that mined property be restored in
accordance with specified standards and approved reclamation plans. The act
requires us to restore the surface to approximate the original contours as
contemporaneously as practicable with the completion of surface mining
operations. The mine operator must submit a bond or otherwise secure the
performance of these reclamation obligations. The earliest a reclamation bond
can be released is five years after reclamation has been achieved. Federal law
and some states impose on mine operators the responsibility for replacing
certain water supplies damaged by mining operations and repairing or
compensating for damage occurring on the surface as a result of mine subsidence,
a consequence of longwall mining and possibly other mining operations. In
addition, the Abandoned Mine Lands Act, which is part of the Surface Mining
Control and Reclamation Act, imposes a tax on all current mining operations, the
proceeds of which are used to restore mines closed before 1977. The maximum tax
is $0.35 per ton on surface-mined coal and $0.15 per ton on underground-mined
coal. We have accrued for the estimated costs of reclamation and mine closing,
including the cost of treating mine water discharge when necessary.
Under the Surface Mining Control and Reclamation Act, responsibility
for unabated violations, unpaid civil penalties and unpaid reclamation fees of
independent contract mine operators and other third parties can be imputed to
other companies which are deemed, according to the regulations, to have "owned"
or "controlled" the contract mine operator. Sanctions against the "owner" or
"controller" are quite severe and can include being blocked from receiving new
permits and revocation of any permits that have been issued since the time of
the violations or, in the case of civil penalties and reclamation fees, since
the time their amounts became due. We are not aware of any currently pending or
asserted claims relating to the "ownership" or "control" theories discussed
above. However, we cannot assure you that such claims will not develop in the
future.
Clean Air Act. The federal Clean Air Act and similar state laws, which
regulate emissions into the air, affect coal mining and processing operations
primarily through permitting and/or emissions control requirements. The Clean
Air Act also indirectly affects coal mining operations by extensively regulating
the air emissions of coal-fired electric power generating plants. For example,
the Clean Air Act requires reduction of SO(2) emissions from electric power
generation plants in two phases. Only some facilities are subject to the Phase I
requirements. Beginning in year 2000, Phase II requires nearly all facilities to
reduce emissions. The affected utilities will be able to meet these requirements
by:
- switching to lower sulfur fuels;
- by installing pollution control devices such as scrubbers;
- by reducing electricity generating levels; or
- by purchasing or trading so-called pollution "credits."
Specific emissions sources receive these "credits" that utilities and
industrial concerns can trade or sell to allow other units to emit higher levels
of SO(2). In addition, the Clean Air Act requires a study of utility power plant
emission of some toxic substances and their eventual regulation, if warranted.
The effect of the Clean Air Act cannot be completely ascertained at this time,
although the SO(2) emissions reduction requirement is projected generally to
increase the demand for lower sulfur coal and potentially decrease demand for
higher sulfur coal.
12
<PAGE> 13
The Clean Air Act also indirectly affects coal mining operations by
requiring utilities that currently are major sources of nitrogen oxides in
moderate or higher ozone nonattainment areas to install reasonably available
control technology for nitrogen oxides, which are precursors of ozone. An
October 1998 Environmental Protection Agency rulemaking that would require 22
eastern states and the District of Columbia to make substantial reductions in
nitrogen oxide emissions by the year 2003 was substantially upheld by the U.S.
Court of Appeals for the D.C. Circuit on March 3, 2000. The Environmental
Protection Agency expects these states will achieve reductions by requiring
power plants to make substantial reductions in their nitrogen oxide emissions.
This in turn will require power plants to install reasonably available control
technology and additional control measures. Installation of reasonably available
control technology and additional measures required under the Environmental
Protection Agency proposal will make it more costly to operate coal-fired plants
and, depending on the requirements of individual state implementation plans and
the development of revised new source performance standards, could make coal a
less attractive fuel alternative in the planning and building of utility power
plants in the future. Any reduction in coal's share of the capacity for power
generation could have a material adverse effect on our business, financial
condition and results of operations. The effect these regulations, or other
requirements that may be imposed in the future, could have on the coal industry
in general and on our business in particular cannot be predicted with certainty.
We cannot assure you that the implementation of the Clean Air Act, the new
National Ambient Air Quality Standards or any other future regulatory provisions
will not materially adversely affect our business, financial condition or
results of operations.
In addition, the U.S. Environmental Protection Agency has already
issued and is considering further regulations relating to fugitive dust and
emissions of other coal-related pollutants such as mercury, nickel, dioxin and
fine particulates. For example, in July 1997, the Environmental Protection
Agency adopted new, more stringent National Ambient Air Quality Standards for
particulate matter which may require some states to change existing
implementation plans. These National Ambient Air Quality Standards are expected
to be implemented by 2003, although a recent decision by the U.S. Court of
Appeals for the D.C. Circuit could delay or modify the Environmental Protection
Agency's implementation of the new standards. Because coal mining operations
emit particulate matter, our mining operations and utility customers are likely
to be directly affected when the revisions to the National Ambient Air Quality
Standards are implemented by the states. These and other regulatory developments
may restrict our ability to develop new mines, or could require us or our
customers to modify existing operations, and may have a material adverse effect
on our financial condition and results of operations.
Framework Convention On Global Climate Change. The United States and
more than 160 other nations are signatories to the 1992 Framework Convention on
Global Climate Change (also known as the Kyoto Protocol) which is intended to
limit or capture emissions of greenhouse gases, such as carbon dioxide. In the
Kyoto Protocol, the signatories to the Framework Convention on Global Climate
Change established a binding set of emissions targets for developed nations. The
specific limits vary from country to country. Under the terms of the Kyoto
Protocol, the United States would be required to reduce emissions to 93% of 1990
levels over a five-year budget period from 2008 through 2012. The Clinton
Administration signed the protocol in November 1998. Although the U.S. Senate
has not ratified the Kyoto Protocol and no comprehensive regulations focusing on
greenhouse gas emissions have been enacted, efforts to control greenhouse gas
emissions could result in reduced use of coal if electric power generators
switch to lower carbon sources of fuel. These restrictions, if established
through regulation or legislation, could have a material adverse effect on our
business, financial condition and results of operations.
Clean Water Act. The federal Clean Water Act affects coal mining
operations by imposing restrictions on effluent discharge into waters. Regular
monitoring, as well as compliance with reporting requirements and performance
standards, are preconditions for the issuance and renewal of permits governing
the discharge of pollutants into water. We are also subject to Section 404 of
the Clean Water Act, which imposes permitting and mitigation requirements
associated with the dredging and filling of wetlands. The federal Clean Water
Act and equivalent state legislation, where such equivalent state
13
<PAGE> 14
legislation exists, affect coal mining operations that impact wetlands. We
believe we have obtained all necessary wetlands permits required under Section
404. However, mitigation requirements under those existing, and possible future,
wetlands permits may vary considerably. For that reason, the setting of accruals
for such mitigation projects is difficult to ascertain with certainty. We
believe that we have obtained all permits required under the Clean Water Act as
traditionally interpreted by the responsible agencies and that, although more
stringent permitting requirements may be imposed in the near future, compliance
with the Clean Water Act will not materially adversely affect our business,
financial condition and results of operations.
Safe Drinking Water Act. The federal Safe Drinking Water Act and its
state equivalents affect coal mining operations by imposing requirements on the
underground injection of fine coal slurries, fly ash, and flue gas scrubber
sludge, and by requiring a permit to conduct such underground injection
activities. The inability to obtain these permits could have a material impact
on our ability to inject materials such as fine coal refuse, fly ash, or flue
gas scrubber sludge into the inactive areas of some of our old underground mine
workings.
In addition to establishing the underground injection control program,
the federal Safe Drinking Water Act also imposes regulatory requirements on
owners and operators of "public water systems." This regulatory program could
impact our reclamation operations where subsidence, or other mining-related
problems, require the provision of drinking water to affected adjacent
homeowners. However, the federal Safe Drinking Water Act defines a "public water
system" for purposes of regulatory jurisdiction as a system for the provision to
the public of water for human consumption through pipes or other constructed
conveyances, if the system has at least fifteen service connections or regularly
serves at least twenty-five individuals. It is unlikely that any of our
reclamation activities would require the provision of such a "public water
system." While we have at least one drinking water supply source for our
employees and contractors that is subject to Safe Drinking Water Act regulation,
the federal Safe Drinking Water Act is unlikely to have a material impact on our
operations.
Comprehensive Environmental Response, Compensation and Liability Act.
CERCLA and similar state laws affect coal mining operations by, among other
things, imposing cleanup requirements for threatened or actual releases of
hazardous substances that may endanger public health or welfare or the
environment. Under CERCLA, and similar state laws, joint and several liability
may be imposed on waste generators, site owners and operators and others
regardless of fault or the legality of the original disposal activity. Some
products used by coal companies in operations, such as chemicals, generate waste
containing hazardous substances which are governed by the statute. Thus, coal
mines that we currently own or have previously owned or operated, and sites to
which we sent waste materials, may be subject to liability under CERCLA and
similar state laws. We have been, on rare occasions, the subject of
administrative proceedings, litigation and investigations relating to CERCLA
matters, none of which has had a material adverse effect on our financial
condition or results of operations. However, we cannot assure you that we will
not become involved in future proceedings, litigation or investigations or that
these liabilities will not be material.
Toxic Substances Control Act. The federal Toxic Substances Control Act
regulates, among other things, electrical equipment containing polychlorinated
biphenyls (PCBs) in excess of 50 parts-per-million. Specifically, the Toxic
Substances Control Act's PCB rules require that all PCB-containing equipment be
properly labeled, stored, and disposed of, and requires the maintenance on-site
of annual records regarding the presence and use of equipment containing PCBs in
excess of 50 parts-per-million. Because the regulated PCB-containing electrical
equipment in use in our operations is owned by the utilities that serve the
operations where they are located, and because the use of PCB-containing fluids
in such equipment is in the process of being phased out, we do not believe the
Toxic Substances Control Act will have a material impact on our operations.
Resource Conservation and Recovery Act. The federal Resource
Conservation and Recovery Act affects coal mining operations by imposing
requirements for the generation, transportation, treatment, storage, disposal
and cleanup of hazardous wastes. Although many mining wastes are excluded from
the regulatory definition of
14
<PAGE> 15
hazardous waste, and coal mining operations covered by the Surface Mining
Control and Reclamation Act permits are exempted from regulation under the
Resource Conservation and Recovery Act by statute, the Environmental Protection
Agency may consider the possibility of expanding regulation of mining wastes
under the Resource Conservation and Recovery Act. This expansion could have a
material adverse affect on our financial condition and results of operations.
Impact of Possible Changes to Regulatory Status of Coal Combustion
By-products. Pursuant to a consent decree entered into by the Environmental
Protection Agency and others, the agency is considering the option of imposing
hazardous waste regulatory controls on the disposal of some coal combustion
by-products, including the practice of using coal combustion by-products as
minefill. Such a regulatory classification may materially impact our reclamation
activities due to the use of fly ash from some of our customers' electricity
generation plants to neutralize acid mine drainage and as fill material for
reclamation projects. In addition, such a regulatory classification may have a
material adverse affect on our business by increasing our customers' costs and
creating disincentives to the use of coal. At this time, the Environmental
Protection Agency has noted that it currently lacks sufficient information with
which to assess adequately the risks associated with this practice. Therefore,
the Environmental Practice Agency has solicited comment on whether there are
some minefill practices that are universally poor and warrant specific
attention.
While we cannot predict the ultimate outcome of the Environmental
Protection Agency's assessment, we believe that the beneficial usages of coal
combustion by-products we employ do not constitute a universally poor practice
due to, among other things, the fact that our Clean Water Act discharge permits
for treated acid mine drainage contain parameters for pollutants of concern,
such as metals, and those permits require monitoring and reporting of effluent
quality data.
OTHER ENVIRONMENTAL, HEALTH AND SAFETY REGULATION
In addition to the laws and regulations described above, we are subject
to regulations regarding underground and above ground storage tanks where we may
store petroleum or other substances. Some monitoring equipment that we use is
subject to licensing under the federal Atomic Energy Act. Water supply wells
located on our property are subject to federal, state and local regulation. The
costs of compliance with these requirements should not adversely affect our
business, financial condition or results of operations.
EMPLOYEES
We have approximately 1,360 employees, including 100 corporate
employees and 1,260 employees involved in active mining operations. Our
work-force is entirely union-free. Relations with our employees are generally
good, and there have been no recent work stoppages or union organizing
campaigns among our employees.
ITEM 2. PROPERTIES
COAL RESERVES
As of December 31, 1999, we had approximately 440 million tons of coal
reserves. All of the estimates of reserves which are presented in this annual
report on Form 10-K are of proven and probable reserves. Proven and probable
reserves are reserves that we can economically produce using current extraction
technology from acreage we own or lease.
15
<PAGE> 16
The following table sets forth production data and reserve information,
as of December 31, 1999, about each of our mining complexes.
<TABLE>
<CAPTION>
1999 HEAT
PRODUCTION CONTENT
(MILLION (BTUS SULFUR ASH
OPERATIONS LOCATION MINE TYPE OF TONS) PER POUND) (%) (%)
- ------------------- ------------------- ----------- ------------ ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Illinois Basin Operations
Dotiki Webster County, KY Underground 3.6 12,500 2.9 8.1
Pattiki White County, IL Underground 2.3 11,700 3.0 7.9
Hopkins County Hopkins County, KY Surface/ 2.6 11,300 3.2 12.4
Coal Underground
Gibson County Gibson County, IN Underground 11,600 1.0 7.0
Coal (North)
Gibson County Gibson County, IN Underground 11,600 2.1 NA
Coal (South)
----
Region Total 8.5
----
East Kentucky Operations
Pontiki/Excel Martin County, KY Underground 1.8 12,800 0.7 6.7
MC Mining Pike County, KY Underground 1.0 12,800 0.7 7.2
Other Martin County, KY Underground 12,400 0.9 9.0
----
Region Total 2.8
----
Maryland Operations
Mettiki Garrett County, MD Underground 2.8 13,000 1.6 10.0
Mettiki (WV) Grant and Tucker Underground 13,000 1.6 10.0
County, WV
----
2.8
----
----
Total 14.1
====
% of Total
<CAPTION>
PROVEN AND PROBABLE RESERVES
LOW MEDIUM HIGH
OPERATIONS LOCATION SULFUR (1) SULFUR (1) SULFUR(1) TOTAL
- ------------------- ------------------- ---------- ---------- --------- -------
(TONS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Illinois Basin Operations
Dotiki Webster County, KY 73.2 73.2
Pattiki White County, IL 82.4 82.4
Hopkins County Hopkins County, KY 37.2 37.2
Coal
Gibson County Gibson County, IN 37.8 37.8
Coal (North)
Gibson County Gibson County, IN 10.9 44.1 49.2 104.2
Coal (South)
----- ----- ----- ------
Region Total 48.7 44.1 242.0 334.8
----- ----- ----- ------
East Kentucky Operations
Pontiki/Excel Martin County, KY 21.7 21.7
MC Mining Pike County, KY 23.7 23.7
Other Martin County, KY 1.3 1.3
----- ----- ----- ------
Region Total 46.7 - - 46.7
----- ----- ----- ------
Maryland Operations
Mettiki Garrett County, MD 38.6 38.6
Mettiki (WV) Grant and Tucker 20.1 20.1
County, WV
----- ----- ----- ------
- 58.7 - 58.7
----- ----- ----- ------
Total 95.4 102.8 242.0 440.2
===== ===== ===== ======
% of Total 21.7% 23.3% 55.0% 100.0%
</TABLE>
(1) We classify low-sulfur coal as coal with a sulfur content of
less than 1%, medium-sulfur coal as coal with a sulfur content
between 1% and 2% and high-sulfur coal as coal with a sulfur
content of greater than 2%.
Our reserve estimates are prepared from geological data assembled and
analyzed by our staff of geologists and engineers. This data is obtained through
our extensive, ongoing exploration drilling and in-mine channel sampling
programs. Reserve estimates will change from time to time in reflection of
mining activities, analysis of new engineering and geological data, acquisition
or divestment of reserve holdings, modification of mining plans or mining
methods, and other factors.
We estimate that approximately 68 million tons of our reserves, or
approximately 71% of our low-sulfur reserves and 15% of our total reserves at
December 31, 1999, meet compliance standards for Phase II of the Clean Air Act
Amendments. Compliance coal consists of coal that emits less than 1.2 pounds of
SO(2) per million Btu.
We lease almost all of our reserves and generally have the right to
maintain the lease in force until the exhaustion of minable and merchantable
coal located within the leased premises or a larger coal reserve area. These
leases provide for royalties to be paid to the lessor at a fixed amount per ton
or as a percentage of the sales price. Many leases require payment of minimum
royalties, payable either at the time of the execution of the lease or in
periodic installments, even if no mining activities have begun. These minimum
royalties are normally credited against the production royalties owed to a
lessor once coal production has commenced.
In connection with our corporate reorganization and subsequent IPO, we
obtained the consents of our lessors or determined that obtaining such consents
was not required. Although we believe we have obtained all necessary consents,
in the event that we have failed to obtain a necessary consent, our operations
may be adversely impacted if we experience any disruption of our mining
operations as a consequence. As noted in our Form S-1 filed in connection with
the IPO, we previously requested that the lessor of a portion of our reserves at
the MC Mining and Pontiki/Excel mines, Big Sandy Management, Inc., confirm that
a consent to these transactions was not necessary. As of the date of this annual
report on Form 10-K, Big Sandy, specifically notified of this transaction in
September of 1999, has made no assertion that its consent was required, nor has
it confirmed in writing that a consent was not necessary. While we continue to
believe that this consent was not required, we cannot assure you what the
ultimate outcome will be with respect to this matter.
16
<PAGE> 17
For economic and other operational reasons, a portion of our reserves
described above may be mined only after the construction of additional mining
facilities. The extent to which we will eventually mine our reserves will depend
on the price and demand for coal of the quality and type we control, the price
and supply of alternative fuels, and future mining practices and regulations.
RISK FACTORS
If any of the following risks were actually to occur, our business,
financial condition or results of operations could be materially adversely
affected and the trading price of our common units could decline.
Risks Inherent in Our Business
- Competition within the coal industry may adversely affect our
ability to sell coal, and excess production capacity in the industry
could put downward pressure on coal prices in the future.
- Current conditions in the coal industry may make it more difficult
for us to extend existing or enter into new long-term contracts.
This could affect the stability and profitability of our operations.
- Some of our long-term contracts contain provisions allowing for the
renegotiation of prices and, in some instances, the termination of
the contract or the suspension of purchases by customers.
- Some of our long-term contracts require us to supply all of our
customers' coal needs. If these customers' coal requirements
decline, our revenues under these contracts will also drop.
- A substantial portion of our coal has a high-sulfur content. This
coal may become more difficult to sell because the Clean Air Act may
impact the ability of electric utilities to burn high-sulfur coal
through the regulation of emissions.
- We depend on a few customers for a significant portion of our
revenues, and the loss of one or more significant customers could
affect our ability to sell coal.
- Litigation relating to disputes with our customers may result in
substantial costs, liabilities and loss of revenues.
- A loss of the benefit from state tax credits may affect adversely
our financial condition and results of operations.
- Coal mining is subject to inherent risks that are beyond our
control, and we cannot assure you that these risks will be fully
covered under our insurance policies.
- We depend on third party service providers to produce a portion of
our coal. If these providers' services were no longer available, our
ability to produce and sell coal would be adversely affected.
- Any significant increase in transportation costs or disruption of
the transportation of our coal may impair our ability to sell coal.
- We may not be able to grow successfully through future acquisitions,
and we may not be able to effectively integrate the various
businesses or properties we do acquire.
- Our business may be adversely affected if we are unable to replace
our coal reserves.
- The estimates of our reserves may prove inaccurate, and you should
not place undue reliance on these estimates.
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<PAGE> 18
- Our indebtedness may limit our ability to borrow additional funds,
make distributions to Unitholders or capitalize on business
opportunities.
- We are required to place and maintain bonds to secure our
obligations to return mined property to its original condition. The
failure to do so could result in fines and the loss of our mining
permits.
Risks Inherent in an Investment in Alliance Resource Partners
- Unitholders have limited voting rights and do not control our
Managing GP.
- We may issue additional Common Units without the approval of Common
Unitholders, which would dilute existing Unitholders' interests.
- The issuance of additional Common Units, including upon conversion
of Subordinated Units, will increase the risk that we will be unable
to pay the full minimum quarterly distribution on all Common Units.
- Cost reimbursements due to our General Partners may be substantial
and will reduce our cash available for distribution.
- Our Managing GP has a limited call right that may require
Unitholders to sell their Common Units at an undesirable time or
price.
- Unitholders may not have limited liability under some circumstances.
- Cash distributions are not guaranteed and may fluctuate with our
performance. In addition, our Managing GP's discretion in
establishing reserves may negatively impact your receipt of cash
distributions.
Regulatory Risks
- We are subject to federal, state and local regulation on numerous
matters. These regulations increase our costs of doing business and
may discourage customers from buying our coal.
- We have black lung benefits and workers' compensation obligations
that could increase if new legislation is enacted.
- The Clean Air Act affects our customers and could significantly
influence their purchasing decisions.
- The passage of legislation responsive to the Framework Convention on
Global Climate Change could result in a reduced use of coal by
electric power generators. This reduction in use could adversely
affect our revenues and results of operations.
- We are subject to the Clean Water Act, which imposes limitations and
monitoring and reporting obligations on our discharge of pollutants
into water.
- We are subject to reclamation, mine closure and real property
restoration regulations and must accrue for the estimated cost of
complying with these regulations.
- We and our customers could incur significant costs under federal and
state Superfund and waste management statutes.
Tax Risks to Common Unitholders
- The IRS could in the future choose to treat us as a corporation,
which would substantially reduce the cash available for distribution
to Unitholders.
- We have not requested an IRS ruling with respect to our tax
treatment.
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<PAGE> 19
- You may be required to pay taxes on income from us even if you
receive no cash distributions.
- Tax gain or loss on disposition of Common Units could be different
than expected.
- Common Unitholders, other than individuals who are U.S. residents,
may have adverse tax consequences from owning Units.
- We have registered with the IRS as a tax shelter. This may increase
the risk of an IRS audit of us or a Common Unitholder.
- We treat a purchaser of Common Units as having the same tax benefits
as the seller; the IRS may challenge this treatment which could
adversely affect the value of the Common Units.
- Common Unitholder will likely be subject to state and local taxes as
a result of an investment in units.
ITEM 3. LEGAL PROCEEDINGS
We are subject to various types of litigation in the ordinary course of
our business. Disputes with our customers over the provisions of long-term coal
supply contracts arise occasionally and generally relate to, among other things,
coal quality, pricing, quantity, and the existence of force majeure conditions.
Although we are not currently involved in any litigation involving our long-term
coal supply contracts, we cannot assure you that disputes will not occur in the
future or that we will be able to resolve those disputes in a satisfactory
manner. Other than the litigation with Seminole Electric Cooperative, Inc.
described in Item 8. Financial Statements and Supplementary Data. -- Note 14.
Commitments and Contingencies, we are not engaged in any litigation which we
believe is material to our operations. In addition, we are not aware of any
legal proceedings against us under the various environmental protection statutes
to which we are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED UNITHOLDER MATTERS
The Common Units representing limited partners' interest are listed on
the Nasdaq National Market under the symbol "ARLP." The Common Units began
trading on August 20, 1999, when the market price for the IPO of the Common
Units was $19.00 per unit. On March 23, 2000 the closing market price for the
Common Units was $12.88 per unit. There were approximately 6,700 record holders
and beneficial owners at December 31, 1999 (held in street name) of the
Partnership's Common Units.
The following table sets forth, the range of high and low sales price per
Common Unit and the amount of cash distribution declared with respect to the
Units, for each quarterly period since commencement of operations on August 20,
1999.
<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTIONS PER UNIT
---- --- ----------------------
<S> <C> <C> <C>
3rd Quarter 1999 (from $ 19.06 $ 13.50 $0.23 (paid November 12, 1999 for
August 20, 1999) the period from August 20, 1999,
through September 30, 1999)
4th Quarter 1999 $ 14.75 $ 12.00 $0.50 (paid February 14, 2000)
</TABLE>
19
<PAGE> 20
The Partnership has also issued 6,422,531 Subordinated Units, all of
which are held by the Special GP, for which there is no established public
trading market.
The Partnership will distribute to its partners (including holders of
Subordinated Units), on a quarterly basis, all of its Available Cash. Available
Cash generally means, with respect to any quarter of the Partnership, all cash
on hand at the end of each quarter less reserves in the amount of cash reserves
necessary or appropriate in the reasonable discretion of the Managing GP to (a)
provide for the proper conduct of the Partnership's business, (b) comply with
applicable law of any debt instrument or other agreement of the Partnership or
any of its affiliates, or (c) provide funds for distributions to unitholders
and the General Partners for any one or more of the next four quarters.
Available Cash is defined in the Partnership Agreement listed as an exhibit of
this annual report on Form 10-K. The Partnership Agreement defines minimum
quarterly distributions as $0.50 for each full fiscal quarter. Distributions of
Available Cash to the holder of the Subordinated Units are subject to the prior
rights of the holders of the Common Units to receive minimum quarterly
distributions for each quarter during the subordination period, and to receive
any arrearages in the distribution of the minimum quarterly distributions on the
Common Units for prior quarters during the subordination period. The
subordination period will generally not end before September 30, 2004. Under
certain circumstances, up to half of the Subordinated Units may convert into
Common Units before the end of the subordination period, which will generally
not occur before September 30, 2003.
ITEM 6. SELECTED FINANCIAL DATA
On August 20, 1999, the Partnership completed its IPO whereby the
Partnership became the successor to the business of the Predecessor. Our
selected pro forma and historical financial data below was derived from the
audited consolidated financial statements of the Partnership as of December 31,
1999, and for the period from commencement of the Partnership's operations on
August 20, 1999 to December 31, 1999, the audited combined financial statements
of the Predecessor, as of August 19, 1999, and for the period from January 1,
1999, to August 19, 1999, as of and for the years ended December 31, 1998, and
1997, and as of and for the five months ended December 31, 1996. The Predecessor
purchased the coal operations of MAPCO Inc. effective August 1, 1996, in a
business combination using the purchase method of accounting and the purchase
price was allocated to the assets acquired and liabilities assumed based on
their fair values. Accordingly, the audited financial data for periods prior to
August 1, 1996, is not necessarily comparable to subsequent periods. The
unaudited historical financial data below as of and for the year ended December
1995 is derived from the financial statements of the Predecessor. In our
opinion, the unaudited financial statements include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
results of the unaudited period. The amounts in the table, below, except for the
per unit data and the per ton information, are in millions.
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<PAGE> 21
<TABLE>
<CAPTION>
Partnership Predecessor
------------------------------- --------------------------------
From
Commencement For the
of Operations (on period from
Pro Forma August 20, 1999) January 1, 1999 Year Ended
Year Ended to to December 31,
December 31, December 31, August 19, --------------
1999 (1) 1999 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Sales and operating revenues
Coal sales $ 345.9 $ 128.8 $ 217.0 $ 357.4
Other sales and operating revenues 0.9 0.4 0.6 4.5
-------------- -------------- -------------- --------------
Total revenues 346.8 129.2 217.6 361.9
-------------- -------------- -------------- --------------
Expenses
Operating expenses 242.0 89.9 152.1 237.6
Outside purchases 24.2 6.4 17.7 51.2
General and administrative 15.1 6.2 8.9 15.3
Depreciation, depletion and amortization 39.7 15.1 24.6 39.8
Interest expense 19.4 5.9 0.1 0.2
Unusual items (2) -- -- -- 5.2
-------------- -------------- -------------- --------------
Total expenses 340.4 123.5 203.4 349.3
-------------- -------------- -------------- --------------
Income (loss) from operations 6.4 5.7 14.2 12.6
Other income (expense) 1.2 0.6 0.5 (0.1)
-------------- -------------- -------------- --------------
Income (loss) before income taxes 7.6 6.3 14.7 12.5
Income tax expense (benefit) 4.5 3.8
-------------- -------------- -------------- --------------
Net income (loss) $ 7.6 $ 6.3 $ 10.2 $ 8.7
============== ============== ============== ==============
Basic and diluted net income per
limited partner unit $ 0.48 $ 0.40
============== ==============
Weighted average number of limited
partner units outstanding 15,405,311 15,405,311
============== ==============
BALANCE SHEET DATA:
Working capital (3) -- $ 61.3 $ 11.2 $ 7.1
Total assets -- 314.8 262.8 261.1
Long-term debt -- 230.0 1.8 1.7
Total liabilities -- 330.7 110.2 108.3
Net Parent investment -- -- 151.6 152.8
Partners' equity (deficit) -- (15.9) -- --
OTHER OPERATING DATA:
Tons sold 15.0 5.6 9.4 15.1
Tons produced 14.1 5.3 8.8 13.4
Revenues per ton sold $ 23.12 $ 23.07 $ 23.15 $ 23.97
Cost per ton sold (4) $ 18.75 $ 18.30 $ 19.01 $ 20.14
OTHER FINANCIAL DATA:
EBITDA (5) $ 66.7 $ 27.3 $ 39.4 $ 52.5
Net cash provided by (used in) operating activities -- (14.7) 32.9 50.5
Net cash used in investing activities -- (43.1) (21.5) (35.6)
Net cash provided by (used in) financing activities -- 65.8 (11.4) (14.9)
Maintenance capital expenditures (6) 6.0 6.0 15.5 17.2
<CAPTION>
Predecessor
--------------------------------------------------------------------
Five Seven
Year Ended Months Months Year
December 31, Ended Ended Ended
-------------- December 31, July 31, December 31,
1997 1996 1996 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Sales and operating revenues
Coal sales $ 305.3 $ 133.9 $ 184.1 $ 294.6
Other sales and operating revenues 8.5 4.4 7.5 16.4
-------------- -------------- -------------- --------------
Total revenues 313.8 138.3 191.6 311.0
-------------- -------------- -------------- --------------
Expenses
Operating expenses 197.4 79.2 110.7 173.1
Outside purchases 49.8 34.7 45.7 69.7
General and administrative 15.4 5.9 7.3 10.9
Depreciation, depletion and amortization 33.7 11.9 7.7 24.8
Interest expense -- -- -- --
Unusual items (2) -- -- -- 107.5
-------------- -------------- -------------- --------------
Total expenses 296.3 131.7 171.4 386.0
-------------- -------------- -------------- --------------
Income (loss) from operations 17.5 6.6 20.2 (75.0)
Other income (expense) 0.5 0.3 -- --
-------------- -------------- -------------- --------------
Income (loss) before income taxes 18.0 6.9 20.2 (75.0)
Income tax expense (benefit) 4.3 (0.9) 5.5 (32.2)
-------------- -------------- -------------- --------------
Net income (loss) $ 13.7 $ 7.8 $ 14.7 $ (42.8)
============== ============== ============== ==============
Basic and diluted net income per
limited partner unit
Weighted average number of limited
partner units outstanding
BALANCE SHEET DATA:
Working capital (3) $ 10.3 $ 15.9 $ 24.6 $ 32.4
Total assets 245.8 262.0 270.7 254.9
Long-term debt 1.9 -- -- --
Total liabilities 87.0 85.8 85.0 83.9
Net Parent investment 158.8 176.2 185.7 171.0
Partners' equity (deficit) -- -- -- --
OTHER OPERATING DATA:
Tons sold 12.4 5.1 6.9 10.9
Tons produced 10.9 3.9 5.3 8.8
Revenues per ton sold $ 25.31 $ 27.12 $ 27.77 $ 28.53
Cost per ton sold (4) $ 21.18 $ 23.49 $ 23.72 $ 23.28
OTHER FINANCIAL DATA:
EBITDA (5) $ 51.7 $ 18.8 $ 27.9 $ (50.2)
Net cash provided by (used in) operating activities 53.2 23.0 16.7 16.0
Net cash used in investing activities (22.4) (13.0) (16.7) (17.7)
Net cash provided by (used in) financing activities (30.8) (10.0) -- 1.7
Maintenance capital expenditures (6) 15.2 2.7 10.8 14.9
</TABLE>
(1) The unaudited selected pro forma financial and operating data for the year
ended December 31, 1999, is based on the historical financial statements of
the Partnership from the Partnership's commencement of operations on August
20, 1999, through December 31, 1999, and the Predecessor for the period
from January 1, 1999, through August 19, 1999. The pro forma results of
operations reflect certain pro forma adjustments to the historical results
of operations as if the Partnership had been formed on January 1, 1999. The
pro forma adjustments include (a) pro forma interest on debt assumed by the
Partnership and (b) the elimination of income tax expense as income taxes
will be borne by the partners and not the Partnership. The pro forma
adjustments do not include approximately $1.0 million of general and
administrative expenses that the Partnership believes will be incurred as a
result of its being a public entity.
(2) Represents impairment of long-lived assets in 1995 and the net loss
incurred during the temporary closing of one of our mining complexes in the
second half of 1998. The impairment of long-lived assets in 1995 represents
the impairment loss recorded in accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" to reduce the net book
value of the predecessor entity to the estimated purchase price, net of
related transaction fees, from the sale to The Beacon Group and management.
The letter of intent for the sale was entered into in December 1995, and
the related stock purchase agreement was finalized with an effective date
beginning August 1, 1996.
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<PAGE> 22
(3) Excludes accounts receivable from affiliates for the Predecessor prior to
July 31, 1996. No such receivables are present for the Partnership or the
Predecessor for all periods subsequent to July 31, 1996.
(4) Cost per ton is based on the total of operating expenses, outside purchases
and general and administrative expenses divided by tons sold.
(5) EBITDA is defined as income (loss) before interest expense, income taxes
and depreciation, depletion and amortization. EBITDA has not been adjusted
to add back unusual items. EBITDA should not be considered as an
alternative to net income, income (loss) before income taxes, cash flows
from operating activities or any other measure of financial performance
presented in accordance with generally accepted accounting principles.
EBITDA is not intended to represent cash flow and does not represent the
measure of cash available for distribution, but provides additional
information for evaluating our ability to make the minimum quarterly
distribution.
(6) Maintenance capital expenditures for the Partnership, as defined under the
terms of the partnership agreement, are defined as those capital
expenditures required to maintain, over the long term, the operating
capacity of our capital assets. Maintenance capital expenditures for the
Predecessor reflect our historical designation of maintenance capital
expenditures.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The following discussion of the financial condition and results of
operations for the Partnership and its Predecessor should be read in conjunction
with the historical financial statements and notes thereto included elsewhere in
this annual report on Form 10-K. For more detailed information regarding the
basis of presentation for the following financial information, see "Item 8.
Financial Statements and Supplementary Data. -- Note 1. Organization and
Presentation."
We are a diversified producer and marketer of coal to major United
States utilities and industrial users. In 1999, our total production was 14.1
million tons and our total sales were 15.0 million tons. The coal we produced in
1999 was approximately 19.9% low-sulfur coal, 19.9% medium-sulfur coal and 60.2%
high-sulfur coal.
At December 31, 1999, we had approximately 440 million tons of proven
and probable coal reserves in Illinois, Indiana, Kentucky, Maryland and West
Virginia. We believe we control adequate reserves to implement our currently
contemplated mining plans. In addition, there are substantial unleased reserves
on adjacent properties that we intend to acquire or lease as our mining
operations approach these areas.
In 1999, approximately 77% of our sales tonnage was consumed by
electric utilities with the balance consumed by cogeneration plants and
industrial users. Our largest customers in 1999 were Seminole Electric
Cooperative, Inc., Tennessee Valley Authority, and Virginia Electric and Power
Company. We have had relationships with each of these customers for at least 15
years. In 1999, approximately 75% of our sales tonnage, including approximately
84% of our medium- and high-sulfur coal sales tonnage, was sold under long-term
contracts. The balance of our sales were made on the spot market. In June 1999,
we entered into a long-term contract to provide 23 million tons of low-sulfur
coal to PSI Energy, Inc., a subsidiary of Cinergy Corporation, through December
2012. Our long-term contracts contribute to our stability and profitability by
providing greater predictability of sales volumes and sales prices. In 1999,
approximately 85% of our medium- and high-sulfur coal was sold to utility plants
with installed pollution control devices, also known as scrubbers, to remove
sulfur dioxide.
One of our business strategies is to continue to make productivity
improvements to remain a low cost producer in each region in which we operate.
Our principal expenses related to the production of coal are labor and benefits,
22
<PAGE> 23
equipment, materials and supplies, maintenance, royalties and excise taxes.
Unlike most of our competitors in the eastern United States, we employ a totally
union-free workforce. Many of the benefits of the union-free workforce are not
necessarily reflected in direct costs, but are related to higher productivity.
In addition, while we do not pay our customers' transportation costs, they may
be a substantial and often the determining factor in a coal consumer's
contracting decision. Our mining operations are located near many of the major
eastern utility generating plants and on major coal hauling railroads in the
eastern United States. We believe this gives us a transportation cost advantage
compared to many of our competitors.
In 1998 and 1999, our financial performance was impacted by the
following:
- In January 1998, we acquired the assets that comprise our Hopkins
County Coal operations for approximately $7.3 million in cash and
direct acquisition costs of $0.8 million. In accordance with our
acquisition plan, we spent approximately $9.4 million to rebuild
older equipment and purchase new or refurbished equipment. We began
to realize higher productivity as a result of these capital
investments beginning in the third quarter of 1998 and have
continued to realize the full impact of these efficiencies during
1999.
- In September 1998, we suspended operations at our Pontiki mine
and terminated all 267 members of our workforce due to adverse
market conditions. While we had originally intended to idle the
mine for an indefinite period, we were able to procure a new
long-term coal supply agreement with A.E.I. Coal Sales, Inc.,
justifying re-opening the mine in late 1998. Under this coal supply
agreement, we shipped 1.1 million tons during 1999. This agreement
provides for the shipment of 1.5 million tons per year during the
seven-year period of January 1, 2000, to December 31, 2006. As a
result, this operation was restructured with a new mine plan,
operating structure, and workforce hired by Excel Mining, LLC, an
affiliate of Pontiki Coal, LLC. While idled, the mine incurred a
net loss of approximately $5.2 million, consisting of workers'
compensation accruals of $1.2 million and severance payments
consistent with the WARN Act, of $1.2 million as well as the costs
associated with maintaining an idled mine of $2.8 million. The $1.2
million of wage costs associated with the WARN Act have been paid.
The $1.2 million of workers' compensation accruals is management's
estimate of amounts that may be required to be paid to certain
former Pontiki miners who may pursue worker compensation claims. Of
this estimated amount, approximately $400,000 is expected to be
paid over three years, $500,000 over eight years and $300,000 over
thirty years. The timing of these payments is governed by the level
and type of award (for example, permanent total disability,
permanent partial disability and legal and medical expenses) which
management has estimated based on past experience. Other than the
$1.2 million of workers' compensation accruals already recorded by
Pontiki, we do not believe there are any additional workers'
compensation costs to be accrued in connection with the suspension
of operations at Pontiki and the termination of its workforce.
During late 1998 and early 1999, Pontiki/Excel's cost per ton was
adversely impacted by reduced production as the new mine plan was
implemented and the mine moved toward its current higher production
level.
- We conduct a coal brokerage business, which markets both steam
and metallurgical coals. Because our coal brokerage operations
generate lower margins than our direct coal sales, changes in our
levels of brokerage activity have a greater impact on revenues than
on margins. Since 1996, we have experienced a steady decline in
brokerage sales, most of which are for export. These declining
volumes are largely attributable to competition from lower cost
foreign production. The brokerage business is not expected to be a
material part of our business in the future.
23
<PAGE> 24
RESULTS OF OPERATIONS
In comparing 1999 to 1998, the Partnership and Predecessor periods for
1999 have been combined. Since the Partnership maintained the historical basis
of the Predecessor's net assets, management believes that the combined
Partnership and Predecessor results for 1999 are comparable with 1998. The
interest expense associated with the debt incurred concurrent with the closing
of the IPO is applicable only to the Partnership period. See "Item 8. Financial
Statements and Supplementary Data. -- Note 1. Organization and Presentation."
1999 Compared with 1998
Coal sales. Coal sales for 1999 declined 3.2% to $345.9 million from
$357.4 million for 1998. The decrease of $11.5 million is primarily attributable
to lower coal export brokerage volumes partially offset by improved results from
the Partnership's restructured Pontiki/Excel operation and full-year benefits
from the capital invested at the Hopkins County Coal operation. The lower
brokerage volumes are largely attributable to reduced participation in coal
export brokerage markets. The brokerage business is not expected to be material
in the future. Because the coal brokerage operations generate lower margins than
direct coal sales, changes in the levels of brokerage activity have a greater
impact on revenues and outside purchases than on margins. Tons sold decreased
less than 1.0% to 15.0 million tons for 1999 from 15.1 million tons for 1998.
Tons produced increased 5.1% to 14.1 million tons for 1999 from 13.4 million
tons for 1998.
Other sales and operating revenues. Other sales and operating revenues
declined 79.0% to $0.9 million for 1999 from $4.5 million from 1998. The
decrease of $3.6 million was primarily due to lower volumes at the Mt. Vernon
facility due to the dispute with Seminole Electric Cooperative, Inc. See "Item
8. Financial Statements and Supplementary Data. -- Note 14. Commitments and
Contingencies."
Operating expenses. Operating expenses were comparable for 1999 and 1998
at $242.0 million and $237.6 million, an increase of 1.9%.
Outside purchases. Outside purchases declined 52.8% to $24.2 million for
1999 from $51.2 million for 1998. The decrease of $27.0 million was the result
of lower coal export brokerage volumes. See coal sales above concerning the
decrease in coal export brokerage volumes.
General and administrative. General and administrative expenses were
comparable for 1999 and 1998 at $15.2 million and $15.3 million, a decrease of
less than 1.0%
Depreciation, depletion and amortization. Depreciation, depletion and
amortization expense were comparable for 1999 and 1998 at $39.7 million and
$39.8 million, a decrease of less than 1.0%
Unusual item. In response to market conditions, the Pontiki mine ceased
operations and terminated substantially all of its workforce in September 1998.
During the idle status period, which ended in November 1998, Pontiki incurred a
net loss of approximately $5.2 million consisting of estimated amounts for
increased workers' compensation claims of $1.2 million and severance payments
consistent with the WARN Act of $1.2 million as well as the costs associated
with maintaining an idled mine of $2.8 million.
Income before income taxes. Income before income taxes increased 67.3% to
$21.0 million for 1999 compared to $12.5 million for 1998. The increase of $8.5
million was primarily attributable to improved productivity, which includes the
benefits of the restructured operation at Pontiki/Excel following the idle
status period of the mine, which resulted in the $5.2 million unusual item
recorded in 1998 as discussed above, and the capital investments at the Hopkins
County Coal operation, partially offset by the losses incurred at Mt. Vernon due
to the dispute with Seminole Electric Cooperative, Inc.
Income tax expense. The Partnership is a limited partnership. As a
result, the Partnership's earnings or losses for federal income taxes purposes
will be included in the tax returns of the individual partners. Accordingly, no
recognition
24
<PAGE> 25
has been given to income taxes in the accompanying financial statements of the
Partnership. The Predecessor is included in the consolidated federal income tax
return of ARH. Federal and state income taxes are calculated as if the
Predecessor had filed its return on a separate company basis utilizing an
effective income tax rate of 31%.
EBITDA. EBITDA (income from operations before net interest expense,
income taxes, depreciation, and depletion and amortization) increased 26.9% to
$66.7 million for 1999 compared with $52.5 million for 1998. The $14.2 increase
is attributable to the same factors that contributed to the increase in income
before income taxes.
1998 Compared With 1997
Coal sales. Coal sales increased 17.1% to $357.4 million for 1998 from
$305.3 million for 1997. Total tons sold increased 21.8% to 15.1 million tons
for 1998 from 12.4 million tons for 1997. The increase of $52.1 million in coal
sales is attributable primarily to:
- the acquisition of Hopkins County Coal in January 1998 which
accounted for $41.1 million of our increased sales;
- increased volumes at MC Mining which accounted for $6.8 million
of our increased sales; and
- increased shipments at Dotiki, Pattiki and Mettiki which
accounted for $16.1 million of our increased sales.
The increase in coal sales was partially offset by lower sales at
Pontiki/Excel of $16.7 million reflecting lower productivity during 1998 and the
temporary suspension of operations in September 1998. Tons produced in 1998
increased 22.9% to 13.4 million tons from 10.9 million tons in 1997.
Other sales and operating revenues. Other sales and operating revenues
decreased 47.7% to $4.5 million for 1998 compared with $8.6 million for 1997. In
1997, other sales included the sale of coke to a foreign steel producer. The
decrease of $4.1 million was primarily due to a reduction in these coke sales.
Operating expenses. Operating expenses increased 20.4% to $237.6
million for 1998 from $197.4 million in 1997. The increase of $40.2 million in
operating expenses is attributable primarily to:
- the acquisition of Hopkins County Coal in January 1998, which
accounted for $42.9 million of our increased operating expenses;
and
- increased volumes at MC Mining, which accounted for $6.8 million
of our increased operating expenses.
The increase in operating expenses was partially offset by a reduction
of operating expenses of $10.9 million at Pontiki/Excel reflecting lower
production during 1998 and the temporary suspension of operations in September
1998. Operating expense per ton sold decreased 4.9% to $20.14 in 1998 from
$21.18 in 1997, primarily due to increased productivity at our Dotiki and
Pattiki mines, offset by the higher cost per ton at our Pontiki mine.
Outside purchases. Outside purchases of coal and coke increased 2.8% to
$51.2 million in 1998 from $49.8 million in 1997. The increase of $1.4 million
was the result of higher coal brokerage volumes offset by a reduction in coke
sales.
General and administrative. General and administrative expenses were
comparable for 1998 and 1997 at $15.3 million and $15.4 million, a decrease of
less than 1.0%
Depreciation, depletion and amortization. Depreciation, depletion and
amortization increased 18.1% to $39.8 million for 1998 compared with $33.7
million for 1997. The increase of $6.1 million was primarily due to the
acquisition of the Hopkins County Coal operation.
25
<PAGE> 26
Unusual item. Pontiki/Excel ceased operations from September to
November 1998. While idled, the mine incurred a net loss of approximately $5.2
million, consisting of workers' compensation accruals and severance payments
consistent with the federal WARN Act, as well as the costs associated with
maintaining an idled mine.
Income tax expense. Income tax expense was $3.9 million for 1998 and
$4.3 million for 1997. The effective rate increased to 31% in 1998 compared with
24% in 1997. The increase in the effective rate is primarily attributable to an
increase in the deferred tax asset valuation allowance partially offset by the
additional benefit of excess of tax over book depletion.
EBITDA. EBITDA (income from operations before net interest expense,
income taxes, depreciation, and depletion and amortization) was comparable for
1998 and 1997 at $52.5 million and $51.7 million, which represents an increase
of 1.6%.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash provided by operating activities was $18.2 million in 1999
compared to $50.5 million in 1998. The decrease in cash flows provided by
operating activities is principally attributable to the increase in trade
receivables subsequent to the IPO and concurrent transactions that occurred on
August 20, 1999. In conjunction with these transactions, the Special GP retained
approximately $37.9 million of trade receivables.
Net cash used in investing activities increased to $64.7 million in
1999 compared to $35.6 million in 1998. The increase in net cash used in
investing activities is principally attributable to the purchase of U.S.
Treasuries and the capital expenditures described below.
Net cash provided by financing activities was $54.4 million for 1999
compared to net cash used in financing activities of $14.9 million for 1998. The
increase in cash provided by financing activities is principally attributable to
the IPO and concurrent transactions that occurred on August 20, 1999.
Capital Expenditures
Capital expenditures increased to $39.2 million in 1999 compared to
$27.7 million in 1998. The increase is primarily attributable to a major
enhancement of the Dotiki preparation plant and a coal reserve acquisition
contiguous to the Dotiki mine. The Partnership liquidated approximately $8.4
million of U.S Treasury Notes to fund various qualifying capital expenditures
with the remaining expenditures funded through cash generated from operations.
We currently expect that our average annual maintenance capital expenditures
will be approximately $21.0 million. We currently expect to fund our anticipated
capital expenditures with cash generated from operations and the utilization of
the revolving credit facility described below.
Notes Offering and Credit Facility
Concurrently with the closing of the IPO, the Special GP issued and the
Intermediate Partnership assumed the obligations under $180 million principal
amount of 8.31% senior notes due August 20, 2014. The Special GP also entered
into and the Intermediate Partnership assumed the obligations under a $100
million credit facility. The credit facility consists of three tranches,
including a $50 million term loan facility, a $25 million working capital
facility and a $25 million revolving credit facility. The Partnership has drawn
$50 million under the term loan facility but has not drawn any money under
either the working capital facility or the revolving credit facility. The
weighted average interest rate on the term loan facility at December 31, 1999,
was 7.07%. The credit facility agreement expires August 2004. The senior notes
and credit facility are secured by a pledge of the stock of all of the
subsidiaries of Alliance Coal, LLC. The senior notes and credit facility contain
various restrictions and affirmative covenants, including the amount of
distributions by the Intermediate Partnership and the incurrence of other debt.
26
<PAGE> 27
Accruals of Other Liabilities
We accrue for costs we will incur in the future to satisfy obligations.
We have accrued for deferred credits and other liabilities, including current
obligations totaling $61.9 million and $64.3 million at December 31, 1999 and
1998. These accruals are chiefly comprised of workers' compensation benefits,
black lung benefits, and costs associated with reclamation and mine closing.
These obligations are self-insured and are funded at the time the expense is
incurred. The accruals of these items are based on estimates of future
liabilities, planned legislation and other developments. Thus, from time to
time, the Partnership's results of operations may be significantly affected by
changes to these deferred credits and other liabilities. See "Item 8. Financial
Statements and Supplementary Data. -- Note 11. Reclamation and Mine Closing
Costs and Note 12. Pneumoconiosis ("Black Lung") Benefits."
We are required to pay black lung benefits to eligible and former
employees under the Black Lung Benefits Act of 1969, the Black Lung Benefits
Revenue Act of 1977 and the Black Lung Benefits Reform Act of 1977. We also are
liable under various state statutes for similar claims. We provide self-insured
accruals for present and future liabilities for these benefits. We have accrued
liabilities of $22.2 million and $22.7 million for these benefits at December
31, 1999 and 1998.
We accrue for costs associated with reclamation and mine closing. We
have estimated the costs and timing of future reclamation and mine closing costs
and recorded those estimates on a present value basis. We have accrued
liabilities of $14.8 million and $13.8 million at December 31, 1999 and 1998 for
these costs.
We accrue for workers' compensation claims resulting from traumatic
injuries based on actuarial valuations and periodically adjust these estimates
based on the estimated costs of claims made. We have accrued liabilities of
$19.5 million and $18.1 million at December 31, 1999 and 1998 for these costs.
INFLATION
Inflation in the United States has been relatively low in recent years
and did not have a material impact on our results of operations for the years
ended December 31, 1999, 1998 or 1997.
IMPACT OF YEAR 2000 ISSUE
The year 2000 issue was the result of computer programs being written
using two digits rather than four to define the applicable year. Any software,
hardware and equipment and embedded chip systems that are date-sensitive may
recognize a date using "-00" as the year 1900 rather than the year 2000.
We completed our year 2000 readiness assessment to identify, remedy and
test our year 2000 systems compliance, including but not limited to, financial
systems applications, human resources and payroll systems applications, hardware
and equipment, and third-party developed software. Our project was completed on
schedule during the fourth quarter of 1999. Approximately $0.5 million was
incurred to modify, upgrade and/or replace non-compliant systems.
We have not experienced any significant impact on our systems or
operations as a result of the year 2000 issue. We do not expect any significant
problems in the future related to the year 2000 issue. However, we will continue
to monitor our systems.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). The statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. The Partnership has not determined the impact on its
financial statements that may
27
<PAGE> 28
result from adoption of SFAS 133, which is required to be implemented by the
Partnership no later than January 1, 2001.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Almost all of the Predecessor's transactions were, and almost all of the
Partnership's transactions are, denominated in U.S. dollars, and as a result, it
does not have material exposure to currency exchange-rate risks.
The Predecessor did not, and the Partnership does not, engage in any
interest rate, foreign currency exchange rate or commodity price-hedging
transactions.
The Intermediate Partnership assumed obligations under a $100 million
credit facility. Borrowings under the credit facility are at variable rates and
as a result the Partnership has interest rate exposure.
The table below provides information about the Partnership's market
sensitive financial instruments and constitutes a "forward-looking statement."
The fair values of long-term debt are estimated using discounted cash flow
analyses, based upon the Partnership's current incremental borrowing rates for
similar types of borrowing arrangements as of December 31, 1999. The carrying
amounts and fair values of financial instruments are as follows (in thousands):
<TABLE>
<CAPTION>
FAIR VALUE
DECEMBER 31,
EXPECTED MATURITY DATES 2000 2001 2002 2003 2004 THEREAFTER TOTAL 1999
- ----------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Senior Notes-fixed rate $ -- $ -- $ -- $ -- $ -- $ 180,000 $ 180,000 $ 165,000
Weighted Average interest rate 8.31%
Term Loan-floating rate $ -- $ 3,750 $ 15,000 $ 16,250 $ 15,000 $ -- $ 50,000 $ 50,000
Weighted Average interest rate 7.07% 7.07% 7.07% 7.07%
</TABLE>
Since the long-term debt as of December 31, 1998 was immaterial and the
debt was retired during 1999, we did not include a table of long-term debt
maturities as of December 31, 1998.
28
<PAGE> 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of the Managing General Partner and the Partners of
Alliance Resource Partners, L.P.:
We have audited the accompanying consolidated balance sheet of Alliance Resource
Partners, L.P. and subsidiaries (the "Partnership") as of December 31, 1999 and
the combined balance sheet of Alliance Resource Group (the "Predecessor") as of
December 31, 1998, the related consolidated and combined statements of income
and cash flows for the period from the Partnership's commencement of operations
(on August 20, 1999) to December 31, 1999 and the Predecessor period from
January 1, 1999 to August 19, 1999 and the years ended December 31, 1998 and
1997 and the statement of Partners' capital (deficit) for the period from the
Partnership's commencement of operations (on August 20, 1999) to December 31,
1999. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated and combined financial statements present
fairly, in all material respects, the financial position of the Partnership at
December 31, 1999 and the Predecessor at December 31, 1998 and the results of
their operations and their cash flows for the period from the Partnership's
commencement of operations (on August 20, 1999) to December 31, 1999 and the
Predecessor period from January 1, 1999 to August 19, 1999 and the years ended
December 31, 1998 and 1997 in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche LLP
Tulsa, Oklahoma
January 26, 2000, except for
Note 20 as to which the dates are
March 17, 2000 and March 23, 2000
29
<PAGE> 30
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(IN THOUSANDS, EXCEPT UNIT DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PARTNERSHIP PREDECESSOR
DECEMBER 31, DECEMBER 31,
ASSETS 1999 1998
-------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,000 $ --
Trade receivables 33,056 31,268
Marketable securities (at cost, which approximates fair value) 42,339 --
Income tax receivable -- 503
Inventories 21,130 20,055
Advance royalties 1,557 2,501
Prepaid expenses and other assets 923 1,456
-------------- --------------
Total current assets 107,005 55,783
PROPERTY, PLANT AND EQUIPMENT AT COST 278,221 240,294
LESS ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION (102,709) (69,158)
-------------- --------------
175,512 171,136
OTHER ASSETS:
Advance royalties 8,306 8,880
Coal supply agreements, net 19,879 24,062
Other long-term assets 4,112 1,235
-------------- --------------
$ 314,814 $ 261,096
============== ==============
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 19,377 $ 24,527
Due to affiliates 806 --
Accrued taxes other than income taxes 4,574 4,526
Accrued payroll and related expenses 8,811 9,269
Accrued interest 5,491 --
Workers' compensation and pneumoconiosis benefits 4,317 4,707
Other current liabilities 2,937 5,302
Current maturities, long-term debt -- 350
-------------- --------------
Total current liabilities 46,313 48,681
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities 230,000 1,687
Deferred income taxes -- 3,906
Accrued pneumoconiosis benefits 21,655 22,233
Workers' compensation 15,696 13,934
Reclamation and mine closing 13,407 12,824
Other liabilities 3,671 5,062
-------------- --------------
Total liabilities 330,742 108,327
COMMITMENTS AND CONTINGENCIES
NET PARENT INVESTMENT -- 152,769
PARTNERS' CAPITAL (DEFICIT):
Common Unitholders 8,982,780 units outstanding 158,705 --
Subordinated Unitholder 6,422,531 units outstanding 123,273 --
General Partners (297,906) --
-------------- --------------
Total Partners' capital (deficit) (15,928) --
-------------- --------------
$ 314,814 $ 261,096
============== ==============
</TABLE>
See notes to consolidated and combined financial statements.
30
<PAGE> 31
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
FOR THE PERIOD FROM THE PARTNERSHIP'S COMMENCEMENT OF OPERATIONS (ON
AUGUST 20, 1999) TO DECEMBER 31, 1999 AND THE PREDECESSOR PERIOD FROM JANUARY 1,
1999 TO AUGUST 19, 1999, AND THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PARTNERSHIP PREDECESSOR
-------------------- -----------------------------------------------
FROM
COMMENCEMENT FOR THE
OF OPERATIONS PERIOD FROM YEARS ENDED
(ON AUGUST 20, 1999) JANUARY 1, 1999 DECEMBER 31,
TO TO ------------------------
DECEMBER 31, 1999 AUGUST 19, 1999 1998 1997
-------------------- -------------------- ---------- ----------
<S> <C> <C> <C> <C>
SALES AND OPERATING REVENUES:
Coal sales $ 128,860 $ 217,033 $ 357,440 $ 305,270
Other sales and operating revenues 358 577 4,453 8,550
-------------------- -------------------- ---------- ----------
Total revenues 129,218 217,610 361,893 313,820
-------------------- -------------------- ---------- ----------
EXPENSES:
Operating expenses 89,945 152,066 237,576 197,422
Outside purchases 6,429 17,738 51,151 49,800
General and administrative 6,245 8,912 15,301 15,417
Depreciation, depletion and amortization 15,081 24,622 39,838 33,667
Interest expense (net of interest income of $999
for the partnership period) 5,887 100 169 29
Unusual item -- -- 5,211 --
-------------------- -------------------- ---------- ----------
Total operating expenses 123,587 203,438 349,246 296,335
-------------------- -------------------- ---------- ----------
INCOME FROM OPERATIONS 5,631 14,172 12,647 17,485
OTHER INCOME (EXPENSE) 641 531 (113) 520
-------------------- -------------------- ---------- ----------
INCOME BEFORE INCOME TAXES 6,272 14,703 12,534 18,005
INCOME TAX EXPENSE -- 4,498 3,866 4,288
-------------------- -------------------- ---------- ----------
NET INCOME $ 6,272 $ 10,205 $ 8,668 $ 13,717
==================== ==================== ========== ==========
GENERAL PARTNERS' INTEREST
IN NET INCOME $ 125
====================
LIMITED PARTNERS' INTEREST
IN NET INCOME $ 6,147
====================
BASIC AND DILUTED NET INCOME
PER LIMITED PARTNER UNIT $ 0.40
====================
WEIGHTED AVERAGE NUMBER
OF UNITS OUTSTANDING 15,405,311
====================
</TABLE>
See notes to consolidated and combined financial statements.
31
<PAGE> 32
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOW
FOR THE PERIOD FROM THE PARTNERSHIP'S COMMENCEMENT OF OPERATIONS (ON AUGUST 20,
1999) TO DECEMBER 31, 1999 AND THE PREDECESSOR PERIOD FROM JANUARY 1, 1999 TO
AUGUST 19, 1999, AND THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PARTNERSHIP PREDECESSOR
-------------------- -----------------------------------------
FROM
COMMENCEMENT FOR THE
OF OPERATIONS PERIOD FROM YEARS ENDED
(ON AUGUST 20, 1999) JANUARY 1, 1999 DECEMBER 31,
TO TO --------------------
DECEMBER 31, 1999 AUGUST 19, 1999 1998 1997
-------------------- ----------------- -------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,272 $ 10,205 $ 8,668 $ 13,717
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, depletion and amortization 15,081 24,622 39,838 33,667
Deferred income taxes -- 639 (1,750) (1,937)
Reclamation and mine closings 348 457 705 339
Coal inventory adjustment to market 729 -- 1,743 547
Other (605) (114) 34 134
Changes in operating assets and liabilities, net of effects
from 1998 purchase of coal business:
Trade receivables (33,048) (6,521) 229 11,955
Income tax receivable/payable -- 651 2,482 (3,539)
Inventories (1,433) (371) (6,563) (4,229)
Advance royalties 366 1,153 579 1,856
Accounts payable (7,410) (129) 2,296 (6,216)
Due to affiliates 3,252 -- -- --
Accrued taxes other than income taxes (630) 678 1,137 293
Accrued payroll and related benefits 844 (828) 491 1,666
Accrued pneumoconiosis benefits (1,122) 544 839 209
Workers' compensation 2,222 (460) 817 903
Other 452 2,370 (1,048) 3,860
-------------------- ----------------- -------- --------
Total net adjustments (20,954) 22,691 41,829 39,508
-------------------- ----------------- -------- --------
Net cash provided by (used in) operating activities (14,682) 32,896 50,497 53,225
-------------------- ----------------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for purchase of business -- -- (7,310) --
Direct acquisition costs -- -- (821) --
Purchase of property, plant and equipment (17,173) (21,984) (27,669) (22,436)
Proceeds from sale of property, plant and equipment 125 447 185 49
Purchase of marketable securities (51,287) -- -- --
Proceeds from sale of marketable securities 25,225 -- -- --
-------------------- ----------------- -------- --------
Net cash used in investing activities (43,110) (21,537) (35,615) (22,387)
-------------------- ----------------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from initial public offering (Note 1) 137,872 -- -- --
Cash contribution by General Partner 5,917 -- -- --
Distributions upon formation (Note 1) (64,750) -- -- --
Payment of formation costs (4,140) -- -- --
Deferred financing cost (3,517) -- -- --
Payments on long-term debt (1,975) -- (350) --
Distribution to Partners (3,615) -- -- --
Dividend to Parent -- -- (8,642) (13,795)
Return of capital to Parent -- (11,359) (5,890) (17,043)
-------------------- ----------------- -------- --------
Net cash provided by (used in) financing activities 65,792 (11,359) (14,882) (30,838)
-------------------- ----------------- -------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS AND
BALANCE AT END OF PERIOD $ 8,000 $ -- $ -- $ --
==================== ================= ======== ========
</TABLE>
See notes to consolidated and combined financial statements.
32
<PAGE> 33
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
FROM THE PARTNERSHIP'S COMMENCEMENT OF OPERATIONS (ON AUGUST 20, 1999) TO
DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT UNIT DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF LIMITED TOTAL
PARTNER UNITS MINIMUM PARTNERS'
------------------------ GENERAL PENSION CAPITAL
COMMON SUBORDINATED COMMON SUBORDINATED PARTNERS LIABILITY (DEFICIT)
--------- ------------ --------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at commencement of
operations (on August 20, 1999) -- -- $ -- $ 1 $ -- $ -- $ 1
Issuance of units to public 7,750,000 -- 133,732 -- -- -- 133,732
Contribution of net assets of
Predecessor 1,232,780 6,422,531 23,455 122,186 (24,612) (459) 120,570
Managing General Partner
contribution -- -- -- -- 5,917 -- 5,917
Amount retained by Special
General Partner from
debt borrowings assumed
by the Partnership -- -- -- -- (214,514) -- (214,514)
Distribution at time of formation -- -- -- -- (64,750) -- (64,750)
Distribution to Partners -- -- (2,066) (1,477) (72) -- (3,615)
Comprehensive income:
Net income from commencement
of operations (on August 20,
1999) to December 31, 1999 -- -- 3,584 2,563 125 -- 6,272
Minimum pension liability -- -- -- -- -- 459 459
--------- ------------ --------- ------------ --------- --------- ---------
Total comprehensive income -- -- 3,584 2,563 125 459 6,731
--------- ------------ --------- ------------ --------- --------- ---------
Balance at December 31, 1999 8,982,780 6,422,531 $ 158,705 $ 123,273 $(297,906) $ -- $ (15,928)
========= ============ ========= ============ ========= ========= =========
</TABLE>
See notes to consolidated and combined financial statements.
33
<PAGE> 34
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS FOR THE PERIOD FROM THE
PARTNERSHIP'S COMMENCEMENT OF OPERATIONS (ON AUGUST 20, 1999) TO DECEMBER 31,
1999 AND THE PREDECESSOR PERIOD FROM JANUARY 1, 1999 TO AUGUST 19, 1999, AND THE
YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND PRESENTATION
Alliance Resource Partners, L.P. is a Delaware limited partnership that was
formed on May 17, 1999, to acquire, own and operate certain coal production
and marketing assets of Alliance Resource Holdings, Inc., a Delaware
corporation ("ARH" or "Parent") (formerly known as Alliance Coal
Corporation) and substantially all of its operating subsidiaries
(collectively, the "Partnership").
Prior to August 20, 1999, (a) MAPCO Coal Inc., a Delaware corporation and
direct wholly-owned subsidiary of ARH merged with and into Alliance Coal,
LLC, a Delaware limited liability company ("Alliance Coal"), which prior to
August 20, 1999 was also a wholly-owned subsidiary of ARH, (b) several
other indirect corporate subsidiaries of ARH were merged with and into
corresponding limited liability companies, each of which is a wholly-owned
subsidiary of Alliance Coal and (c) two indirect limited liability
company subsidiaries of ARH became subsidiaries of Alliance Coal as a
result of the merger described in clause (a) above. Collectively, the coal
production and marketing assets and operating subsidiaries of ARH acquired
by the Partnership are referred to as the Alliance Resource Group (the
"Predecessor.") The Delaware limited partnerships and limited liability
companies that comprise the Partnership are as follows: Alliance Resource
Partners, L.P., Alliance Resource Operating Partners, L.P. (the
"Intermediate Partnership"), Alliance Coal, LLC (the holding company for
operations), Alliance Land, LLC, Alliance Properties, LLC, Backbone
Mountain, LLC, Excel Mining, LLC, Gibson County Coal, LLC, Hopkins County
Coal, LLC, MC Mining, LLC, Mettiki Coal, LLC, Mettiki Coal (WV), LLC, Mt.
Vernon Transfer Terminal, LLC, Pontiki Coal, LLC, Toptiki Coal, LLC,
Webster County Coal, LLC, and White County Coal, LLC.
The accompanying consolidated financial statements include the accounts and
operations of the limited partnerships and limited liability companies
disclosed above and present the financial position as of December 31, 1999
and the results of their operations, cash flows and changes in partners'
capital (deficit) for the period from commencement of operations on August
20, 1999 to December 31, 1999. All material intercompany transactions and
accounts have been eliminated. The accompanying combined financial
statements include the accounts and operations of the Predecessor for the
periods indicated. All significant intercompany transactions and accounts
have been eliminated.
Initial Public Offering and Concurrent Transactions
On August 20, 1999, the Partnership completed its initial public offering
(the "IPO") of 7,750,000 Common Units ("Common Units") representing limited
partner interests in the Partnership at a price of $19.00 per unit.
Concurrently with the closing of the IPO, the Partnership entered into a
contribution and assumption agreement (the "Contribution Agreement"), dated
August 20, 1999, among the Partnership and the other parties named therein,
whereby, among other things, ARH contributed its 100% member interest in
Alliance Coal, which is the sole member of fourteen subsidiary operating
limited liability companies, to the Intermediate Partnership, and the
Intermediate Partnership holds a 99.999% non-managing member interest in
Alliance Coal. The Partnership and the Intermediate Partnership are managed
by Alliance Resource Management GP, LLC, a Delaware limited liability
company (the "Managing GP"), which, as a result of the consummation of the
transactions under the Contribution Agreement, holds (a) a 0.99% and
1.0001% managing general partner interest in the Partnership and the
Intermediate Partnership, respectively, and (b) a 0.001% managing member
interest in Alliance Coal. Also, as a result of the consummation of the
transactions completed under the Contribution Agreement, Alliance Resource
GP, LLC, a Delaware limited liability company and wholly-owned subsidiary
of ARH (the "Special GP"), holds, (a) 1,232,780 Common Units, (b)
6,422,531 Subordinated Units ("Subordinated Units") convertible into Common
Units in the future upon the occurrence of certain events and (c) a 0.01%
special general partner interest in each of the Partnership and the
Intermediate Partnership.
34
<PAGE> 35
Concurrently with the closing of the IPO, the Special GP issued and the
Intermediate Partnership assumed the obligations under a $180 million
principal amount of 8.31% senior notes due August 20, 2014. The Special GP
also entered into and the Intermediate Partnership assumed the obligations
under a $100 million credit facility.
Consistent with guidance provided by the Emerging Issues Task Force in
Issue No. 87-21 "Change of Accounting Basis in Master Limited Partnership
Transactions", the Partnership maintained the historical cost of the $121
million of net assets received under the Contribution Agreement.
Analysis of Pro Forma Results of Operations (Unaudited)
For the years ended December 31, 1999 and 1998, the pro forma total
revenues would have been approximately $346,828,000 and $361,893,000,
respectively. For the years ended December 31, 1999 and 1998, the pro forma
net income (loss) would have been approximately $7,567,000 and $(6,740,000)
and net income (loss) per limited partner unit would have been $0.48 and
$(0.43), respectively. The pro forma results of operations for the years
ended December 31, 1999 and 1998, are derived from the historical financial
statements of the Partnership from the commencement of operations on August
20, 1999 through December 31, 1999 and the Predecessor for the period from
January 1, 1999 through August 19, 1999, and January 1, 1998 through
December 31, 1998. The pro forma results of operations reflect certain pro
forma adjustments to the historical results of operations as if the
Partnership had been formed on January 1, 1998. The pro forma adjustments
include (i) pro forma interest on debt assumed by the Partnership and (ii)
the elimination of income tax expense as income taxes will be borne by the
partners and not the Partnership.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES - The preparation of consolidated and combined financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts and disclosures in the consolidated and combined financial
statements. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amount for accounts
receivable, marketable securities and accounts payable approximates fair
value because of the short maturity of those instruments. At December 31,
1999, the fair value of long-term debt was approximately $215 million. The
fair value of long-term debt is based on interest rates that are currently
available to the Partnership for issuance of debt with similar terms and
remaining maturities.
CASH MANAGEMENT - The Partnership maintains its cash management program
independent from ARH. However, the Predecessor participated in the cash
management program of ARH prior to August 20, 1999. At the end of each
business day, the operating cash accounts for the Predecessor were swept to
the related operating cash accounts maintained by the treasury function for
ARH. The Partnership and Predecessor reclassified outstanding checks of
$3,844,000 and $6,308,000 at December 31, 1999 and 1998, respectively, to
accounts payable in the consolidated and combined balance sheets.
35
<PAGE> 36
MARKETABLE SECURITIES - The Partnership has investments in six month U.S.
Treasury notes which secure the term loan facility (Note 7). These
investments are classified as available-for-sale debt securities and are
restricted for the sole purpose of funding capital expenditures. At
December 31, 1999, the cost of these investments approximates fair value
and no effect of unrealized gains (losses) is reflected in Partners'
capital (deficit).
INVENTORIES - Coal inventories are stated at the lower of cost or market on
a first-in, first-out basis. Supplies inventories are stated at the lower
of cost or market on an average cost basis.
PROPERTY, PLANT AND EQUIPMENT - Additions and replacements constituting
improvements are capitalized. Maintenance, repairs, and minor replacements
are expensed as incurred. Depreciation and amortization is computed
principally on the straight-line method based upon the estimated useful
lives of the assets or the estimated life of each mine (9 to 15 years at
revaluation date of August 1, 1996), whichever is less and for 5 years on
certain assets related to the 1998 business acquisition. Depreciable lives
for mining equipment and processing facilities range from 1 to 15 years.
Depreciable lives for land and land improvements and depletable lives for
mineral rights range from 5 to 15 years. Depreciable lives for buildings,
office equipment and improvements range from 1 to 13 years. Gains or losses
arising from retirements are included in current operations. Depletion of
mineral rights is provided on the basis of tonnage mined in relation to
estimated recoverable tonnage.
LONG-LIVED ASSETS - The Partnership reviews the carrying value of
long-lived assets and certain identifiable intangibles whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable based upon estimated undiscounted future cash flows. The amount
of an impairment is measured by the difference between the carrying value
and the fair value of the asset, which is based on cash flows from that
asset, discounted at a rate commensurate with the risk involved.
ADVANCE ROYALTIES - Rights to coal mineral leases are often acquired
through advance royalty payments. Management assesses the recoverability of
royalty prepayments based on estimated future production and capitalizes
these amounts accordingly. Royalty prepayments expected to be recouped
within one year are classified as a current asset. As mining occurs on
those leases, the royalty prepayments are included in the cost of mined
coal. Royalty prepayments estimated to be nonrecoverable are expensed.
COAL SUPPLY AGREEMENTS - The Predecessor purchased the coal operations of
MAPCO Inc. effective August 1, 1996, in a business combination using the
purchase method of accounting. A portion of the acquisition costs was
allocated to coal supply agreements. This allocated cost is being amortized
on the basis of coal shipped in relation to total coal to be supplied
during the respective contract term. The amortization periods end on
various dates from September 2002 to December 2005. Accumulated
amortization for coal supply agreements was $18,584,000 and $14,401,000 at
December 31, 1999 and 1998, respectively.
RECLAMATION AND MINE CLOSING COSTS - Estimates of the cost of future mine
reclamation and closing procedures of currently active mines are recorded
on a present value basis. Those costs relate to sealing portals at
underground mines and to reclaiming the final pit and support acreage at
surface mines. Other costs common to both types of mining are related to
removing or covering refuse piles and settling ponds and dismantling
preparation plants and other facilities and roadway infrastructure. Ongoing
reclamation costs principally involve restoration of disturbed land and are
expensed as incurred during the mining process.
WORKERS' COMPENSATION AND PNEUMOCONIOSIS ("BLACK LUNG") BENEFITS - The
Partnership is self-insured for workers' compensation benefits, including
black lung benefits. The Partnership accrues a workers' compensation
liability for the estimated present value of current and future workers'
compensation benefits based on actuarial valuations.
36
<PAGE> 37
INCOME TAXES - No provision for income taxes related to the operations of
the Partnership is included in the accompanying consolidated financial
statements because, as a Partnership, it is not subject to federal or state
income tax and the tax effect of its activities accrues to the unitholders.
Net income for financial statement purposes may differ significantly from
taxable income reportable to unitholders as a result of differences between
the tax bases and financial reporting bases of assets and liabilities and
the taxable income allocation requirements under the Partnership agreement.
The Predecessor is included in the combined U.S. income tax returns of ARH.
The Predecessor has provided for income taxes on its separate taxable
income and other tax attributes. Deferred income taxes are computed based
on recognition of future tax expense or benefits, measured by enacted tax
rates, that are attributable to taxable or deductible temporary differences
between financial statement and income tax reporting bases of assets and
liabilities.
REVENUE RECOGNITION - Revenues are recognized when coal is shipped from the
mine. Revenues not arising from coal sales, which primarily consist of
transloading fees, are included in operating revenues and are recognized as
services are performed.
NET INCOME PER UNIT - Basic and diluted net income per unit is determined
by dividing net income, after deducting the General Partners' 2% interest,
by the weighted average number of outstanding Common Units and Subordinated
Units (a total of 15,405,311 units as of December 31, 1999).
SEGMENT REPORTING - The Partnership has no reportable segments due to its
operations consisting solely of producing and marketing coal. The
Partnership has disclosed major customer sales information (Note 15) and
geographic areas of operation (Note 16).
NEW ACCOUNTING STANDARDS - In June 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). The statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. The Partnership has not determined the impact on its financial
statements that may result from adoption of SFAS 133, which is required no
later than January 1, 2001.
RECLASSIFICATIONS - Certain reclassifications have been made to the 1998
and 1997 combined financial statements to conform to the classifications
used in 1999.
3. BUSINESS ACQUISITION
Effective January 23, 1998, the Predecessor acquired substantially all of
the assets and assumed certain liabilities, excluding working capital, of
an unrelated coal company's west Kentucky coal operations, now Hopkins
County Coal, LLC, for cash of approximately $7,310,000 and direct
acquisition costs of $821,000. The acquisition was accounted for using the
purchase method of accounting. Accordingly, the purchase price was
allocated to the assets acquired and liabilities assumed based on their
estimated fair values of $25,320,000 and $17,189,000, respectively. The
results of operations are included in the Partnership's consolidated and
combined financial statements from the acquisition date and are not
considered significant.
4. UNUSUAL ITEM
In response to market conditions, one of the Predecessor's operating mines
ceased operations and terminated all of its workforce in September 1998.
Management planned to maintain the mine in an indefinite idle status
pending improvement in market conditions. Shortly after the mine closure,
the management executed a long term coal supply contract for the mine and
the mine resumed production in late 1998. During the idle status period,
the mine incurred a net loss of approximately
37
<PAGE> 38
$5,211,000 consisting of estimated amounts for increased workers'
compensation claims of $1,200,000 and severance payments consistent with
the federal Worker Adjustment and Returning Notification, or "WARN" Act, of
$1,200,000 as well as the costs associated with maintaining the idled mine
of $2,811,000.
5. INVENTORIES
Inventories consist of the following at December 31, (in thousands):
<TABLE>
<CAPTION>
PARTNERSHIP PREDECESSOR
1999 1998
----------- -----------
<S> <C> <C>
Coal $ 15,180 $ 14,308
Supplies 5,950 5,747
---------- ----------
$ 21,130 $ 20,055
========== ==========
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31, (in
thousands):
<TABLE>
<CAPTION>
PARTNERSHIP PREDECESSOR
1999 1998
----------- -----------
<S> <C> <C>
Mining equipment and processing facilities $ 236,252 $ 214,016
Land and mineral rights 17,282 7,387
Buildings, office equipment and improvements 17,780 16,130
Construction in progress 6,907 2,761
---------- ----------
278,221 240,294
Less accumulated depreciation, depletion and amortization (102,709) (69,158)
---------- ----------
$ 175,512 $ 171,136
========== ==========
</TABLE>
7. LONG-TERM DEBT
Long-term debt consists of the following at December 31, (in thousands):
<TABLE>
<CAPTION>
PARTNERSHIP PREDECESSOR
1999 1998
----------- -----------
<S> <C> <C>
Senior notes $ 180,000 $ --
Term loan 50,000 --
Promissory note, net of discount of $764 at December 31, 1998 -- 2,037
---------- ----------
230,000 2,037
Less current maturities -- (350)
---------- ----------
$ 230,000 $ 1,687
========== ==========
</TABLE>
The Special GP issued and the Intermediate Partnership assumed obligations
under a $180 million principal amount of senior notes pursuant to a Note
Purchase Agreement with a group of institutional investors in a private
placement offering. The senior notes are payable in ten annual installments
of $18 million beginning in August 2005 and bear interest at 8.31%, payable
semi-annually.
38
<PAGE> 39
The Special GP also entered into and the Intermediate Partnership assumed
obligations under a $100 million credit facility consisting of three
tranches, including a $50 million term loan facility, a $25 million working
capital facility, and a $25 million revolving credit facility. In
connection with the closing of the IPO, the Special GP borrowed $50 million
under the term loan facility and the Special GP and Intermediate
Partnership purchased $50 million of U.S. Treasury Notes, which secure the
term loan. The U.S. Treasury Notes may be liquidated for the sole purpose
of funding capital expenditures. As of December 31, 1999, the Partnership
had liquidated approximately $8.4 million of U.S. Treasury Notes to fund
various qualifying capital expenditures.
The working capital facility can be used to provide working capital and, if
necessary, to fund distributions to unitholders. The revolving credit
facility can be used for general business purposes, including capital
expenditures and acquisitions. The rate of interest charged is adjusted
quarterly based on a pricing grid which is a function of the ratio of the
Partnership's debt to cash flow. The credit facility provides the
Partnership the option of borrowing at either (1) the London Interbank
Offered Rate ("LIBOR") or (2) the "Base Rate" which is equal to the greater
of (a) the Chase Prime Rate, or (b) the Federal Funds Rate plus 1/2 of 1%,
plus, in either option, an applicable margin. The weighted average interest
rate on the term loan facility at December 31, 1999 was 7.07%. In
accordance with the pricing grid, a commitment fee ranging from 0.375% to
0.500% per annum is paid quarterly on the unused portion of the working
capital and revolving credit facilities. There were no amounts outstanding
under the Partnership's working capital facility or revolving credit
facility as of December 31, 1999. The credit facility expires August 2004.
The senior notes and credit facility are secured by a pledge of the stock
of all the subsidiaries of Alliance Coal. The senior notes and credit
facility contains various restrictive and affirmative covenants, including
the amount of distributions by the Intermediate Partnership and the
incurrence of other debt. The Partnership was in compliance with the
covenants of both the credit facility and senior notes at December 31,
1999.
The Partnership incurred debt issuance costs aggregating approximately
$3,517,000, which have been deferred and are being amortized as a component
of interest expense over the term of the notes.
Aggregate maturities of long-term debt are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
<S> <C>
2000 $ --
2001 3,750
2002 15,000
2003 16,250
2004 15,000
Thereafter 180,000
-----------
$ 230,000
===========
</TABLE>
8. DISTRIBUTIONS OF AVAILABLE CASH
The Partnership will distribute 100% of its available cash within 45 days
after the end of each quarter to unitholders of record and to the General
Partners. Available cash is generally defined as all cash and cash
equivalents of the Partnership on hand at the end of each quarter less
reserves established by the Managing GP in its reasonable discretion for
future cash requirements. These reserves are retained to provide for the
proper conduct of the Partnership's business, the payment of debt principal
and interest and to provide funds for future distributions.
39
<PAGE> 40
Distributions of available cash to the holder of Subordinated Units are
subject to the prior rights of holders of Common Units to receive the
minimum quarterly distribution ("MQD") for each quarter during the
subordination period and to receive any arrearages in the distribution of
the MQD on the Common Units for the prior quarters during the subordination
period. The MQD is $0.50 per unit ($2.00 per unit on an annual basis). Upon
expiration of the subordination period, which will generally not occur
before September 30, 2004, all Subordinated Units will be converted on a
one-for-one basis into Common Units and will then participate, on a pro
rata basis with all other Common Units in future distributions of available
cash. However, under certain circumstances, up to 50% of the Subordinated
Units may convert into Common Units on or after September 30, 2003. Common
Units will not accrue arrearages with respect to distributions for any
quarter after the subordination period and Subordinated Units will not
accrue any arrearages with respect to distributions for any quarter.
If quarterly distributions of available cash exceed the MQD or the target
distributions levels, the General Partners will receive distributions based
on specified increasing percentages of the available cash that exceeds the
MQD or target distribution level. The target distribution levels are based
on the amounts of available cash from the Partnership's operating surplus
distributed for a given quarter that exceed distributions for the MQD and
common unit arrearages, if any.
For the 42-day period from the Partnership's commencement of operations (on
August 20, 1999) through September 30, 1999, the Partnership paid a
pro-rata MQD distribution of $0.23 per unit on its outstanding Common and
Subordinated Units amounting to approximately $3,543,000. On January 26,
2000, the Partnership declared a MQD, for the period from October 1, 1999
to December 31, 1999, of $0.50 per unit on its outstanding Common and
Subordinated Units totaling approximately $7,703,000.
9. INCOME TAXES
The Predecessor recognized a deferred tax asset for the future tax benefits
attributable to deductible temporary differences and other credit
carryforwards to the extent that realization of such benefits was more
likely than not. Realization of these future tax benefits was dependent on
the Predecessor's ability to generate future taxable income, which was not
assured. Management for the Predecessor believed that future taxable income
would be sufficient to recognize only a portion of the tax benefits and had
established a valuation allowance.
Due to the Predecessor's inclusion in ARH's consolidated U.S. income tax
returns, ARH allocated alternative minimum tax to the Predecessor. The
Predecessor had alternative minimum tax credit carryforwards of $2,361,000
at December 31, 1998 that were available for use in ARH's consolidated U.S.
income tax returns in future periods. A valuation allowance was established
for the total estimated future tax effects of the alternative minimum tax
credit carryforwards since utilization on future U.S. income tax returns
was not being considered more likely than not.
Concurrent with the closing of the IPO, on August 20, 1999 and in
connection with the Contribution Agreement, ARH retained the current and
deferred income taxes of the Predecessor.
40
<PAGE> 41
The tax effects of significant items comprising the Predecessor's net
deferred tax liability at December 31, 1998 are as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax liabilities:
Differences between book and tax basis of property $ 18,489
Differences between book and tax basis of advance royalties 1,238
Other 2,601
----------
Deferred tax liability 22,328
----------
Deferred tax assets:
Accrued workers' compensation and pneumoconiosis benefits 14,856
Accrued reclamation and mine closing 5,520
Accrued expenses not currently deductible 4,349
Coal supply agreements 5,838
Alternative minimum tax credit carryforwards for future use
in ARH tax returns 2,361
----------
32,924
Valuation allowance (14,502)
----------
Deferred tax asset 18,422
----------
Net deferred tax liability $ 3,906
==========
</TABLE>
Income before income taxes is derived from domestic operations.
Significant components of income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM YEARS ENDED
JANUARY 1, 1999 DECEMBER 31,
TO --------------------
AUGUST 19, 1999 1998 1997
--------------- -------- --------
<S> <C> <C> <C>
Current:
Federal $ 3,376 $ 4,815 $ 5,184
State 483 801 1,041
--------------- -------- --------
3,859 5,616 6,225
Deferred:
Federal 595 (1,531) (1,695)
State 44 (219) (242)
--------------- -------- --------
639 (1,750) (1,937)
--------------- -------- --------
Income tax expense $ 4,498 $ 3,866 $ 4,288
=============== ======== ========
</TABLE>
41
<PAGE> 42
A reconciliation of the statutory U.S. federal income tax rate and the
Predecessor's effective income tax rate is as follows:
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM YEARS ENDED
JANUARY 1, 1999 DECEMBER 31,
TO ----------------------
AUGUST 19, 1999 1998 1997
--------------- --------- ---------
<S> <C> <C> <C>
Statutory rate 35% 35% 35%
Increase (decrease) resulting from:
Excess of tax over book depletion (21) (29) (21)
Alternative minimum tax credit
carryforwards 3 6 7
State income taxes, net of federal
benefit 3 4 4
Valuation allowance 10 14 (3)
Other 1 1 2
--------------- --------- ---------
Effective income tax rate 31% 31% 24%
=============== ========= =========
</TABLE>
10. EMPLOYEE BENEFIT PLANS
LONG-TERM INCENTIVE PLAN - Effective January 1, 2000, the Managing GP
adopted a Long-Term Incentive Plan (the "LTIP") for the benefit of
providing incentive compensation awards to its employees, non-employee
directors, and employees of the Partnership. Annual grant levels for
designated participants are recommended by the chief executive officer of
the Managing GP, subject to the review and approval of the Compensation
Committee. Grants are made either of restricted units, which are "phantom"
units that entitle the grantee to receive a Common Unit or an equivalent
amount of cash upon the vesting of a phantom unit, or options to purchase
Common Units. Common Units to be delivered upon the vesting of restricted
units will be acquired by the Managing GP in the open market or directly
from ARH or any other third party. The aggregate number of units reserved
for issuance under the LTIP is 600,000. Effective January 1, 2000, the
Compensation Committee approved initial grants of 142,100 restricted units,
which vest on September 30, 2002. The Partnership agreement provides that
the Managing GP be reimbursed for all compensation expenses incurred on
behalf of the Partnership.
DEFINED CONTRIBUTION PLANS - The Partnership's employees currently
participate in a defined contribution profit sharing and savings plan
sponsored by the Partnership, which is the same plan sponsored by the
Predecessor. This plan covers substantially all employees. Plan
participants may elect to make voluntary contributions to this plan up to a
specified amount of their compensation. The Partnership makes contributions
based on matching 75% of employee contributions up to 3% of their annual
compensation as well as an additional nonmatching contribution of 3/4 of 1%
of their compensation. Additionally, the Partnership contributes a defined
percentage of eligible earnings for employees not covered by the defined
benefit plan described below. The Partnership's expense for its plan was
approximately $715,000 for the period from August 20, 1999 to December 31,
1999. The Predecessor's expense for the plan was $1,226,000 for the period
from January 1, 1999 to August 19, 1999, $1,944,000 and $1,542,000 for the
years ended December 31, 1998 and 1997, respectively.
DEFINED BENEFIT PLANS - Substantially all employees at the mining
operations participate in a defined benefit plan sponsored by the
Partnership, which is the same plan sponsored by the Predecessor.
42
<PAGE> 43
The benefit formula is a fixed dollar unit based on years of service.
The following sets forth changes in benefit obligations and plan assets for
the years ended December 31, 1999 and 1998 and the funded status of the
plans reconciled with amounts reported in the Partnership's consolidated
and the Predecessor's combined financial statements at December 31, 1999
and 1998, respectively. The Partnership and Predecessor periods for 1999
have been combined. Since the Partnership maintained the historical basis
of the Predecessor's net assets, management believes that the combined
Partnership and Predecessor amounts for 1999 are comparable with 1998
(dollars in thousands):
<TABLE>
<CAPTION>
COMBINED
PARTNERSHIP/PREDECESSOR PREDECESSOR
1999 1998
---------- ----------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATIONS:
Benefit obligations at beginning of year $ 6,742 $ 3,501
Service cost 2,107 2,980
Interest cost 452 240
Actuarial (gain) loss (1,435) 166
Benefits paid (92) (145)
---------- ----------
Benefit obligation at end of year $ 7,774 $ 6,742
---------- ----------
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year 2,911 --
Employer contribution 4,736 2,940
Actual return on plan assets 710 116
Benefits paid (92) (145)
---------- ----------
Fair value of plan assets at end of year 8,265 2,911
---------- ----------
Funded status 491 (3,831)
Unrecognized prior service cost 332 380
Unrecognized actuarial (gain) loss (1,273) 459
---------- ----------
Net amount recognized $ (450) $ (2,992)
========== ==========
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31:
Discount rate 7.75% 6.75%
Expected return on plan assets 9.00% 9.00%
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost $ 2,107 $ 2,980
Interest cost 452 240
Expected return on plan assets (413) (135)
Prior service cost 48 48
---------- ----------
Net periodic benefit cost $ 2,194 $ 3,133
========== ==========
Effect on minimum pension liability $ (459) $ 186
========== ==========
</TABLE>
43
<PAGE> 44
11. RECLAMATION AND MINE CLOSING COSTS
The majority of the Partnership's operations are governed by various state
statutes and the Federal Surface Mining Control and Reclamation Act of
1977, which establish reclamation and mine closing standards. These
regulations, among other requirements, require restoration of property in
accordance with specified standards and an approved reclamation plan. The
Partnership has estimated the costs and timing of future reclamation and
mine closing costs and recorded those estimates on a present value basis
using a 6% discount rate.
Discounting resulted in reducing the accrual for reclamation and mine
closing costs by $5,489,000 and $6,738,000 at December 31, 1999 and 1998,
respectively. Estimated payments of reclamation and mine closing costs as
of December 31, 1999 are as follows (in thousands):
<TABLE>
<S> <C>
2000 $ 1,389
2001 699
2002 727
2003 1,141
2004 1,566
Thereafter 14,763
------------
Aggregate undiscounted reclamation and mine closing 20,285
Effect of discounting 5,489
------------
Total reclamation and mine closing costs 14,796
Less current portion 1,389
------------
Reclamation and mine closing costs $ 13,407
============
</TABLE>
The following table presents the activity affecting the reclamation and
mine closing liability (in thousands):
<TABLE>
<CAPTION>
PARTNERSHIP PREDECESSOR
----------------- -----------------------------------------
FROM
COMMENCEMENT FOR THE
OF OPERATIONS PERIOD FROM YEAR ENDED
(ON AUGUST 20, 1999) JANUARY 1, 1999 DECEMBER 31,
TO TO ----------------------
DECEMBER 31, 1999 AUGUST 19, 1999 1998 1997
----------------- --------------- --------- ---------
<S> <C> <C> <C> <C>
Beginning balance $ 13,856 $ 13,800 $ 5,439 $ 5,313
Accrual 348 457 705 339
Payments (394) (401) (1,544) (213)
Allocation of liability associated
with acquisition 986 -- 9,200 --
----------------- --------------- --------- ---------
Ending balance $ 14,796 $ 13,856 $ 13,800 $ 5,439
================= =============== ========= =========
</TABLE>
12. PNEUMOCONIOSIS ("BLACK LUNG") BENEFITS
Certain mine operating entities of the Partnership are liable under state
statutes and the Federal Coal Mine Health and Safety Act of 1969, as
amended, to pay black lung benefits to eligible employees and former
employees and their dependents. These subsidiaries provide self-insurance
accruals, determined by independent actuaries, at the present value of the
actuarially computed present and future liabilities for such benefits. The
actuarial studies utilize a 6% discount rate and various assumptions as to
the frequency of future claims, inflation, employee turnover and life
expectancies.
44
<PAGE> 45
The cost or reduction of cost due to change in the estimate of black lung
benefits charged (credited) to operations for the period from the
Partnership's commencement of operations on August 20, 1999 to December 31,
1999 and for the Predecessor period from January 1, 1999 to August 19,
1999, and the years ended December 31, 1998 and 1997 was $(1,028,000),
$726,000, $1,139,000, and $1,252,000, respectively.
13. RELATED PARTY TRANSACTIONS
The Partnership Agreement provides that the Managing GP and its affiliates
be reimbursed for all direct and indirect expenses it incurs or payments it
makes on behalf of the Partnership including management's salaries and
related benefits, accounting, treasury, land administration, environmental
and permitting management, disability and workers' compensation management,
legal and information technology services. The Managing GP may determine in
its sole discretion the expenses that are allocable to the Partnership.
Total costs reimbursed to the Managing GP and its affiliates by the
Partnership were approximately $1,283,000 for the period from the
Partnership's commencement of operations on August 20, 1999 to December 31,
1999.
ARH allocated certain direct and indirect general and administrative
expenses to the Predecessor. These allocations were primarily based on the
relative size of the direct mining operating costs incurred by each of the
mine locations of the Predecessor. The allocations of general and
administrative expenses to the Predecessor were approximately $2,982,000,
$2,595,000 and $2,942,000 for the period from January 1, 1999 to August 19,
1999 and for the years ended December 31, 1998 and 1997, respectively.
Management is of the opinion that the allocations used are reasonable and
appropriate.
During November 1999, the Managing GP was authorized by its Board of
Directors to purchase up to 1.0 million Common Units of the Partnership. As
of December 31, 1999 the Managing GP had purchased 164,000 Common Units in
the open market at prevailing market prices.
14. COMMITMENTS AND CONTINGENCIES
COMMITMENTS - The Partnership leases buildings and equipment under
operating lease agreements which provide for the payment of both minimum
and contingent rentals. Rent expense under all operating leases was
$801,000, $496,000, $1,169,000, and $1,142,000 for the period from the
Partnership's commencement of operations on August 20, 1999 to December 31,
1999 and the Predecessor period from January 1, 1999 to August 19, 1999,
and the years ended December 31, 1998 and 1997, respectively.
Future minimum payments under operating leases are $2.9 million in total of
which $452,000 is payable each year in 2000 and 2001, $408,000 in 2002,
$274,000 in 2003, $284,000 in 2004 and $1,063,000 thereafter.
CONTRACTUAL COMMITMENTS - In connection with development of a new mining
complex, the Partnership has entered into contractual commitments for mine
construction of approximately $6.8 million at December 31, 1999.
TRANSLOADING FACILITY DISPUTE - The Partnership is currently involved in
litigation with Seminole Electric Cooperative, Inc. ("Seminole") with
respect to a long-term contract for the transloading of coal from rail to
barge through the Partnership's terminal in Indiana. Seminole has filed a
lawsuit to terminate this contract and is seeking declaratory judgment as
to the damages owed to the Partnership. The provisions of the contract
stipulate the calculation of damages to be paid in the event of breach.
Rather than pay the amount of damages stipulated, Seminole is seeking the
court's agreement that the proper damage award should be calculated based
on the Partnership's loss of net profits from the terminal for the term of
the agreement.
45
<PAGE> 46
Seminole has ceased transloading any coal shipments through this terminal
and is transporting coal deliveries under the supply contract by rail. The
Partnership is currently exploring alternative uses for this terminal. The
Partnership intends to vigorously defend its contract rights and believes
that it will prevail in the determination of the amount of damages Seminole
owes under the contract and believes those damages will be in excess of the
carrying value of this terminal.
GENERAL LITIGATION - The Partnership is involved in various lawsuits,
claims and regulatory proceedings incidental to its business. In the
opinion of management, the outcome of such matters will not have a material
adverse effect on the Partnership's business, combined financial position
or results of operations.
15. SIGNIFICANT CUSTOMERS
The Partnership has significant long-term coal supply agreements some of
which contain price adjustment provisions designed to reflect changes in
market conditions, labor and other production costs and, when the coal is
sold other than FOB the mine, changes in railroad and/or barge freight
rates. Sales to major customers which exceed ten percent of total net sales
are as follows (in thousands):
<TABLE>
<CAPTION>
PARTNERSHIP PREDECESSOR
-------------------- ---------------------------------------
FROM
COMMENCEMENT FOR THE
OF OPERATIONS PERIOD FROM YEARS ENDED
(ON AUGUST 20, 1999) JANUARY 1, 1999 DECEMBER 31,
TO TO ---------------------
DECEMBER 31, 1999 AUGUST 19, 1999 1998 1997
-------------------- --------------- --------- ---------
<S> <C> <C> <C> <C>
Customer A $ 26,970 $ 40,685 $ 56,351 $ 40,297
Customer B 20,512 34,686 56,280 50,219
Customer C 16,090 31,315 69,651 57,382
</TABLE>
The coal supply agreements with customer A expire at dates between 2000 and
2003. The coal supply agreements with customers B and C expire in 2006 and
2010, respectively.
16. GEOGRAPHIC INFORMATION
Included in the consolidated and combined financial statements are the
following revenues and long-lived assets relating to geographic locations
(in thousands):
<TABLE>
<CAPTION>
PARTNERSHIP PREDECESSOR
-------------------- ---------------------------------------
FROM
COMMENCEMENT FOR THE
OF OPERATIONS PERIOD FROM YEARS ENDED
(ON AUGUST 20, 1999) JANUARY 1, 1999 DECEMBER 31,
TO TO ----------------------
DECEMBER 31, 1999 AUGUST 19, 1999 1998 1997
-------------------- --------------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
United States $ 129,218 $ 211,740 $ 330,312 $ 267,096
Other foreign countries -- 5,870 31,581 46,724
-------------------- --------------- --------- ---------
$ 129,218 $ 217,610 $ 361,893 $ 313,820
==================== =============== ========= =========
Long-lived assets:
United States $ 203,697 $ 200,057 $ 204,078 $ 193,085
Other foreign countries -- -- -- --
-------------------- --------------- --------- ---------
$ 203,697 $ 200,057 $ 204,078 $ 193,085
==================== =============== ========= =========
</TABLE>
46
<PAGE> 47
17. SUPPLEMENTAL CASH FLOW INFORMATION
The Partnership's and Predecessor's supplemental disclosure of cash flow
information and other non-cash investing and financing activities were as
follows (in thousands):
<TABLE>
<CAPTION>
PARTNERSHIP PREDECESSOR
-------------------- ---------------------------------------
FROM
COMMENCEMENT FOR THE
OF OPERATIONS PERIOD FROM YEARS ENDED
(ON AUGUST 20, 1999) JANUARY 1, 1999 DECEMBER 31,
TO TO ---------------------
DECEMBER 31, 1999 AUGUST 19, 1999 1998 1997
-------------------- --------------- --------- ---------
<S> <C> <C> <C> <C>
Cash paid for:
Interest $ 1,173 $ -- $ -- $ --
Income taxes paid through
Parent (Note 9) -- 3,504 3,135 9,764
Non-cash investing and financing activities:
Debt transferred from Special GP 230,000 -- -- --
Marketable securities transferred -- -- --
from Special GP 15,486 -- -- --
Issuance of promissory note for --
acquisition of minerals and
other assets -- -- -- 2,186
</TABLE>
18. NET PARENT INVESTMENT
The Net Parent Investment in the Predecessor is comprised of the following
for the period from January 1, 1999 through August 19, 1999 and the years
ended December 31, 1998 and 1997 (in thousands):
<TABLE>
<S> <C>
Predecessor balance, January 1, 1997 $ 176,213
Net income 13,717
Dividends to Parent (13,795)
Return of capital to Parent (17,043)
Other (273)
---------
Predecessor balance, December 31, 1997 158,819
Net income 8,668
Dividends to Parent (8,642)
Return of capital to Parent (5,890)
Other (186)
---------
Predecessor balance, December 31, 1998 152,769
Net income 10,205
Return of capital to Parent (11,359)
---------
Predecessor balance, August 19, 1999 $ 151,615
=========
</TABLE>
47
<PAGE> 48
19. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
On August 20, 1999, the Partnership completed its IPO in which the
Partnership became the successor to the business of the Predecessor.
Accordingly, no recognition has been given to income taxes in the financial
statements of the Partnership as income taxes will be borne by the partners
and not the Partnership. Additionally, interest expense associated with the
debt incurred concurrent with the closing of the IPO is applicable only to
the Partnership period. Accordingly, the quarterly operating results prior
to August 20, 1999 are not necessarily comparable to subsequent periods.
A summary of the quarterly operating results for the Partnership and
Predecessor is as follows (in thousands, except unit and per unit data):
<TABLE>
<CAPTION>
PREDECESSOR PARTNERSHIP
-------------------------------------- -------------------------------------------
FROM
COMMENCEMENT
QUARTER ENDED JULY 1, 1999 OF OPERATIONS
------------------------ TO (ON AUGUST 20, 1999)
MARCH 31, JUNE 30, AUGUST 19, TO QUARTER ENDED
1999 1999 1999 SEPTEMBER 30, 1999 DECEMBER 31, 1999
---------- ------------ ---------- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 83,062 $ 86,745 $ 47,803 $ 44,052 $ 85,166
Operating income 4,273 6,995 3,004 5,019 6,499
Net income 2,969 4,934 2,302 3,509 2,763
Basic and diluted net
income per unit -- -- -- $ 0.22 $ 0.18
Weighted average number
of units outstanding -- -- -- 15,405,311 15,405,311
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR
QUARTER ENDED
------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1998 1998 1998(1) 1998(1)
---------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Revenues $ 88,322 $ 90,969 $ 98,428 $ 84,174
Operating income 4,750 929 2,484 4,653
Net income 3,324 672 1,611 3,061
</TABLE>
(1) In response to market conditions, the Pontiki mine ceased operation
and terminated substantially all of its workforce in September 1998.
During the idle status period, which ended in late 1998, Pontiki
incurred a net loss of approximately $5.2 million, $3.8 million was
recorded in the quarter ended September 30, 1998 and $1.4 million was
recorded in the quarter ended December 31, 1998 (Note 4).
Operating income in the above table represents income from operations
before interest expense.
20. SUBSEQUENT EVENTS
On March 17, 2000, the Special GP exercised two separate options and paid
approximately $2.0 million, for the rights to acquire substantial tracts of
coal reserves in western Kentucky. Upon completion of the acquisition, the
Special GP may elect to either lease or assign the coal reserves to the
Partnership in return for payment of all amounts the Special GP expends in
connection with the coal reserve acquisition. The closing is anticipated to
occur during the third quarter of 2000, however, the Special GP can make no
assurances that it will be able to consummate the transaction.
On March 23, 2000, the Partnership entered into an arrangement with the
Special GP for construction of a coal preparation plant and ancillary
facilities (collectively the "coal preparation plant") at a new mining
complex currently under development. Under the terms of the arrangement,
the Special GP is constructing the coal preparation plant at an anticipated
cost of approximately $23.1 million and has the
48
<PAGE> 49
option to sell or lease the coal preparation plant to the Partnership when
construction is completed. At December 31, 1999, the Partnership has
incurred and capitalized costs of approximately $300,000 related to site
preparation for the coal preparation plant at the mining complex.
49
<PAGE> 50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE MANAGING GENERAL PARTNER
As is commonly the case with publicly-traded limited partnerships, we are
managed and operated by our managing general partner. The following table shows
information for the directors and executive officers of the Managing GP.
Executive officers and directors are elected for one-year terms.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE MANAGING GENERAL PARTNER
- ---- --- ------------------------------------------
<S> <C> <C>
Joseph W. Craft III 49 President, Chief Executive Officer and Director
Thomas L. Pearson 46 Senior Vice President - Law and Administration,
General Counsel and Secretary
Michael L. Greenwood 44 Senior Vice President - Chief Financial Officer and
Treasurer
Charles R. Wesley 46 Senior Vice President - Operations
Gary J. Rathburn 49 Senior Vice President - Marketing
John J. MacWilliams 44 Director
Preston R. Miller, Jr. 51 Director
John P. Neafsey 60 Director
John H. Robinson 49 Director
Paul R. Tregurtha 65 Director
</TABLE>
Joseph W. Craft III has worked for us since 1980. Prior to the
formation of ARH, Mr. Craft was a Senior Vice President of MAPCO Inc., serving
as General Counsel and Chief Financial Officer and since 1986 as President of
MAPCO Coal Inc. Prior to working with us, Mr. Craft was an attorney at Falcon
Coal Corporation and Diamond Shamrock Coal Corporation. Mr. Craft holds a
Bachelor of Science degree in Accounting and a Doctor of Jurisprudence from the
University of Kentucky. Mr. Craft also is a graduate of the Senior Executive
program of the Alfred P. Sloan School of Management at Massachusetts Institute
of Technology. Mr. Craft has held numerous industry leadership positions
including past Chairman of the National Coal Council, a Board and Executive
Committee member of the National Mining Association, and a Director of the
Center for Energy and Economic Development.
Thomas L. Pearson has worked for us since 1989. Prior to the formation
of ARH, he was Assistant General Counsel of MAPCO Inc. and served as General
Counsel of MAPCO Coal Inc. from 1989-1996 and has served as Secretary since
1989. Prior to working with us, Mr. Pearson was the General Counsel and
Secretary of McLouth Steel Products Corporation, one of the largest integrated
steel producers in the United States; and Corporate Counsel of Midland-Ross
Corporation, a multi-national company with numerous international joint venture
companies and projects. Previously, he was a senior associate with the Arter &
Hadden law firm in Cleveland, Ohio. In addition to his responsibilities at ARH,
Mr. Pearson is or has been active in a number of educational, charitable and
business organizations, including the following: Vice Chairman, Legal Affairs
Committee, National Mining Association; Member, Dean's Committee, The University
of Iowa College of Law; and Contributions Committee, Greater Cleveland United
Way. Mr. Pearson holds a Bachelor of Arts degree in History and Communications
from DePauw University and a Doctor of Jurisprudence from The University of
Iowa.
Michael L. Greenwood has worked for us since 1986. Prior to the
formation of ARH, Mr. Greenwood served in various financial management
capacities, including General Manager - Finance of MAPCO Coal Inc., General
Manager of Planning and Financial Analysis and Manager - Mergers and
Acquisitions of MAPCO Inc. Prior to working for us, Mr. Greenwood held financial
planning and business development management positions in the energy industry
with Davis Investments, The Williams Companies and Penn Central Corporation. Mr.
Greenwood holds a Bachelor of Science degree in Business Administration from
Oklahoma State University and a Master of Business Administration degree from
the University of Tulsa. Mr. Greenwood has also completed executive programs at
Northwestern University, Southern Methodist University and The Center for
Creative Leadership.
Charles R. Wesley has worked for us since 1974. Mr. Wesley joined the
Partnership's Webster County Coal, LLC subsidiary in 1974 as an engineering
co-op student and worked through the ranks to become General Superintendent. In
1992 he became Vice President of Operations for Mettiki Coal Corporation. He has
held his position as Senior Vice President of Operations since 1996. Mr. Wesley
has served the industry as past president of the West Kentucky Mining Institute
and National
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<PAGE> 51
Mine Rescue Association Post 11. He has also served on the board of the Kentucky
Mining Institute. Mr. Wesley holds a Bachelor of Science degree in Mining
Engineering from the University of Kentucky.
Gary J. Rathburn has worked for us since 1980 when he joined MAPCO Coal
Inc. as Manager of Brokerage Coals. Since 1980, Mr. Rathburn has managed all
phases of the marketing group involving transportation and distribution,
international sales and the brokering of coal. Prior to working for us, Mr.
Rathburn was employed by Eastern Associated Coal Corporation in its
International Sales and Brokerage groups for seven years. Mr. Rathburn has been
active in industry groups such as the Maryland Coal Association, The North
Carolina Coal Institute and the National Mining Association. Mr. Rathburn was a
Director of The National Coal Association and Chairman of the Coal Exporters
Association for several years. Mr. Rathburn holds a Bachelor of Arts degree in
Political Science from the University of Pittsburgh and has participated in
industry-related programs at the World Trade Institute, Princeton University and
the Colorado School of Mines.
John J. MacWilliams has been a General Partner of The Beacon Group, LP
(the "Beacon Group") since May 1993. Prior to the formation of The Beacon
Group, Mr. MacWilliams was an Executive Director of Goldman Sachs International
in London, where he was responsible for heading the firm's International
Structured Financing Group. Prior to moving to London, Mr. MacWilliams was a
Vice President in the Investment Banking Division of Goldman, Sachs & Co. in New
York. Prior to joining Goldman Sachs, Mr. MacWilliams was an attorney at Davis
Polk & Wardwell in New York, where he worked on international bank financings,
partnership financings, and mergers and acquisitions. Mr. MacWilliams is a
graduate of Harvard Law School (J.D.), Massachusetts Institute of Technology
(M.S.), and Stanford University (B.A.).
Preston R. Miller, Jr. has been a General Partner of The Beacon Group
since June 1993. Prior to the formation of The Beacon Group, Mr. Miller was
employed for fourteen years by Goldman, Sachs & Co. in New York City,
where he was a Vice President in the Structured Finance Group and had global
responsibility for the coverage of the independent power industry and for
asset-backed power generation and oil and gas financings. Mr. Miller also has a
background in credit analysis, and was head of the revenue bond rating group at
Standard & Poor's Corp. prior to joining Goldman Sachs. Mr. Miller is a graduate
of Harvard University (M.P.A.) and Yale University (B.A.).
John P. Neafsey has served as Chairman of ARH since September 1996 and
has served as President of JN Associates, an investment consulting firm, since
January 1994. Prior to the formation of ARH, Mr. Neafsey served as President and
CEO of Greenwich Capital Markets and served on its Board of Directors since its
founding in 1983. In addition, Mr. Neafsey held numerous other positions during
his twenty-three years at The Sun Company, including: Executive Vice President
responsible for Canadian operations, Sun Coal Company and Helios Capital
Corporation; Chief Financial Officer; and other executive management positions
with numerous subsidiary companies. In addition to his responsibilities at ARH,
Mr. Neafsey is or has been active in a number of educational, charitable and
business organizations, including the following: Member of the Board of
Directors of The West Pharmaceutical Services Company and the Provident Mutual
Life Insurance Company; Trustee of Cornell University; Board Member,
Crozer-Chester Medical Center, the Drama Guild, and The American Petroleum
Institute. Mr. Neafsey is a graduate of Cornell University (B.S./M.S.
(Engineering) and M.B.A. (Finance)).
John H. Robinson was elected a director in December 1999. In April
2000, Mr. Robinson will join Amey, PLC as Managing Director of its newly-formed
Technology Services Division. Mr. Robinson previously served as Vice Chairman
and Chief Development Officer of Black & Veatch, from January 1997 through March
2000. He was also the Chairman of Black & Veatch UK Lt. and was responsible for
guiding strategic development of the firm. He is an Executive Director of Amey,
PLC and also is a director of Commerce Bancshares Corporation, Coeur Mining
Corporation and Protection One, Inc. and serves on numerous civic and
professional boards in his community. Mr. Robinson is a graduate of the
University of Kansas (B.S. and M.S. (Engineering)). Mr. Robinson has also
completed the Owner/President Management Program at the Harvard School of
Business.
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<PAGE> 52
Paul R. Tregurtha was elected a director in December 1999. Mr.
Tregurtha serves as Chairman and Chief Executive Officer of Mormac Marine Group,
Inc., Chairman and Chief Executive Officer of Moran Towing Corporation, and
Chairman of MAC Acquisitions, Inc., the parent of Meridian Aggregates Company.
He is a director and principal officer of several companies involved in water
transportation and natural resources including Mormac, Moran, The Interlake
Steamship Company, Lakes Shipping Company, and Meridian Aggregates Company. Mr.
Tregurtha is also a director of FleetBoston Financial and FPL Group, parent of
Florida Power & Light Company. Mr. Tregurtha holds a degree in mechanical
engineering from Cornell University, where he serves as Trustee Emeritus. Before
graduating with distinction as a Baker Scholar from Harvard's Graduate School of
Business Administration, Mr. Tregurtha served as an officer in the U.S. Air
Force.
Section 16(a) Beneficial Ownership Reporting Compliance.
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires directors, executive officers and persons who beneficially own more
than ten percent of a registered class of the Partnership's equity securities to
file with the SEC initial reports of ownership and reports or changes in
ownership of such equity securities. Such persons are also required to furnish
the Partnership with copies of all Section 16(a) forms that they file. Based
solely upon a review of the copies of the forms furnished to it, or written
representations from certain reporting persons that no Forms 5 were required,
the Partnership believes that during 1999 none of its officers and directors was
delinquent with respect to any of the filing requirements under Rule 16(a) other
than (a) Messrs. Robinson and Tregurtha, neither of whom timely filed a Form 3
upon initial appointment to the Board of Directors of the Managing GP, but for
whom Form 3s have since been filed, (b) Messrs. Rathburn and Wesley, neither of
whom timely filed a Form 4 for the month of October, but have since filed their
Form 4s, (c) Mr. Neafsey did not timely file a Form 4 for the month of November,
but has since filed this Form 4, and (d) Mr. Craft did not timely file a Form 4
for the months of August and September 1999, regarding purchases made by a
private foundation for which he serves as a trustee and disclaims beneficial
ownership, but has since filed these Form 4s.
Reimbursement of Expenses of the Managing GP and its Affiliates
The Managing GP does not receive any management fee or other compensation
in connection with its management of us. The Managing GP and its affiliates,
including ARH, are reimbursed for all expenses incurred on our behalf, including
the costs of employee, officer and director compensation and benefits properly
allocable to us, and all other expenses necessary or appropriate to the conduct
of our business of, and allocable to, us. Our Partnership Agreement provides
that the Managing GP will determine the expenses that are allocable to us in any
reasonable manner determined by the Managing GP in its sole discretion.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The Partnership was formed in May 1999 but did not commence business until
August 1999. Mr. Craft, the General Partners' President and CEO, received
$109,850 for services to the Partnership in 1999. No other officer of the
General Partner received compensation for services to the Partnership in 1999 in
amounts greater than $100,000.
We made no grants of restricted units or options to acquire Common Units
in 1999 and there were no such restricted units or unit options outstanding
prior to or on December 31, 1999. See "Long-Term Incentive Plan".
COMPENSATION OF DIRECTORS
The Managing GP has adopted a Directors Compensation Program (the
"Directors Plan") and a Deferred Compensation Plan for Directors (the "Plan").
Under the Directors Plan, each non-employee Director will be paid an annual
retainer for calendar years 1999 and 2000 to be paid in advance on a quarterly
basis of $4,000 and $20,000, respectively. The annual retainer will be paid in
Common Units of the Partnership determined by dividing the pro rata annual
retainer payable on such date
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<PAGE> 53
by the closing sales price per Common Unit averaged over the immediately
preceding ten trading days. Each non-employee director may elect to defer all or
a portion of his or her compensation under the Plan.
EMPLOYMENT AGREEMENTS
The executive officers of the Managing GP and some additional members
of senior management will enter into employment agreements among the executive
officer or member of senior management, on the one hand, and the Managing GP and
ARH, on the other. We reimburse the Managing GP for the compensation and
benefits costs under these agreements. This summary of the terms of the
employment agreements does not purport to be complete, but outlines their
material provisions. A form of the agreements with each of Messrs. Craft,
Pearson, Greenwood, Wesley and Rathburn are filed as exhibits.
Each of the employment agreements has an initial term that expires on
December 31, 2001, but will automatically be extended for successive one-year
terms unless either party gives 12 months prior notice to the other party. The
employment agreements provide for a base salary, subject to review annually, of
$292,950, $177,000, $151,400, $187,000 and $152,000 for Messrs. Craft, Pearson,
Greenwood, Wesley and Rathburn, respectively. The employment agreements provide
for continued salary payments, bonus and benefits for a period of three years,
in the case of Mr. Craft, and 18 months, in the case of Messrs. Pearson,
Greenwood, Wesley and Rathburn, following termination of employment, except in
the case of a change of control of the Managing GP.
In the case of a "change of control" as defined in the agreements, in
lieu of the continuation of salary and benefits, that executive will be entitled
to a lump sum payment in an amount equal to three times base salary plus bonus,
in the case of Mr. Craft, and two times base salary plus bonus in the case of
Messrs. Pearson, Greenwood, Wesley and Rathburn. Unless the executive waives his
or her right to the continuation of base salary and bonus, the agreements
provide for a noncompetition period of 18 months. The noncompetition period does
not apply after a change in control. Amounts paid by the Managing GP pursuant to
the employment agreements will be reimbursed by the Partnership.
The executives who are subject to employment agreements also
participate in the Short- and Long-Term Incentive Plans of the Managing GP
described below along with other members of management. They also are entitled
to participate in the other employee benefit plans and programs that the
Managing GP provides for its employees.
LONG-TERM INCENTIVE PLAN
Effective January 1, 2000, the Managing GP adopted the Long-Term
Incentive Plan (the "LTIP") for employees and directors of the Managing GP and
its affiliates who perform services for us. The summary of the LTIP contained
herein does not purport to be complete but outlines its material provisions.
The LTIP is administered by the Compensation Committee of the Managing
GP's Board of Directors. Annual grant levels for designated employees and
directors will be recommended by the President and CEO of the Managing GP,
subject to the review and approval of the Compensation Committee. We will
reimburse the Managing GP for all costs incurred pursuant to the programs
described below. Grants are made either of restricted units, which are "phantom"
units that entitle the grantee to receive a Common Unit or an equivalent amount
of cash upon the vesting of a phantom unit, or options to purchase Common Units.
Common Units to be delivered upon the vesting of restricted units or to be
issued upon exercise of a unit option will be acquired by the Managing GP in the
open market at a price equal to the then-prevailing price, or directly from ARH
or any other third party, including units newly issued by us, or use units
already owned by the Managing GP, or any combination of the foregoing. The
Managing GP is entitled to reimbursement by us for the cost incurred in
acquiring these Common Units or in paying cash in lieu of Common Units upon
vesting of the restricted units. If we issue new Common Units upon payment of
the restricted units or unit options instead of purchasing them, the total
number of Common Units outstanding will increase. The aggregate number of units
reserved for issuance under the LTIP is 600,000. Effective as of January 1,
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2000, the Compensation Committee approved initial grants of 142,100 restricted
units which vest on September 30, 2002.
Restricted Units. Restricted units will vest over a period of time as
determined by the Compensation Committee. However, if a grantee's employment is
terminated for any reason prior to the vesting of any restricted units, those
restricted units will be automatically forfeited, unless the Compensation
Committee, in its sole discretion, provides otherwise. In addition, vested
restricted units will not be payable before the conversion of any Subordinated
Units and will only become payable upon, and in the same proportion as, the
conversion of Subordinated Units into Common Units.
The issuance of the Common Units pursuant to the restricted unit plan
is intended to serve as a means of incentive compensation for performance and
not primarily as an opportunity to participate in the equity appreciation in
respect of the Common Units. Therefore, no consideration will be payable by the
plan participants upon receipt of the Common Units, and we receive no
remuneration for these units. Following the subordination period, the
Compensation Committee, in it discretion, may grant distribution equivalent
rights with respect to restricted units.
Unit Options. We have not made any grants of unit options. The
Compensation Committee may, in the future, determine to make unit option grants
to employees and directors containing the specific terms that they determine.
When granted, unit options will have an exercise price set by the Compensation
Committee which may be above, below or equal to the fair market value of a
Common Unit on the date of grant. Unit options, if any, granted during the
subordination period will become exercisable upon, and in the same proportions
as, the conversion of the Subordinated Units to Common Units, or at a later date
as determined by the Compensation Committee in its sole discretion.
The Managing GP's Board of Directors, in its discretion, may terminate
the LTIP at any time with respect to any Common Units for which a grant has not
theretofore been made. The Managing GP's Board of Directors will also have the
right to alter or amend the LTIP or any part of it from time to time, subject to
unitholder approval as required by the exchange upon which the Common Units may
be listed at that time; provided, however, that no change in any outstanding
grant may be made that would materially impair the rights of the participant
without the consent of the affected participant. In addition, the Managing GP
may, in its discretion, establish such additional compensation and incentive
arrangements as it deems appropriate to motivate and reward its employees. The
Managing GP is reimbursed for all compensation expenses incurred on our behalf.
SHORT-TERM INCENTIVE PLAN
Effective January 1, 1999, the Managing GP adopted a Short-Term
Incentive Plan (the "STIP") for management and other salaried employees. The
STIP is designed to enhance the financial performance by rewarding management
and salaried employees of the Managing GP and Partnership with cash awards for
achieving an annual financial performance objective. The annual performance
objective for each year is recommended by the President and CEO of the Managing
GP and approved by the Compensation Committee of its Board of Directors prior to
January 1 of that year. The STIP is administered by the Compensation Committee.
Individual participants and payments each year are determined by and in the
discretion of the Compensation Committee, and the Managing GP is able to amend
the plan at any time. The Managing GP is entitled to reimbursement by us for the
costs incurred under the STIP.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 31,
1999, regarding the beneficial ownership of units held by (a) each person known
by the Managing GP to be the beneficial owner of 5% or more of the units, (b)
each director and executive officer of the Managing GP and (c) by all directors
and executive officers of the Managing GP as a group. The Managing GP is owned
by funds affiliated with The Beacon Group and members of management. The Special
GP is a wholly-owned
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<PAGE> 55
subsidiary of ARH. The address of ARH, the Managing GP and the Special GP, is
1717 South Boulder Avenue, Tulsa, Oklahoma 74119.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF PERCENTAGE
COMMON COMMON SUBORDINATED SUBORDINATED OF TOTAL
UNITS UNITS UNITS UNITS UNITS
BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED OWNED OWNED OWNED OWNED
- -------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Resource GP, LLC (2) 1,232,780 13.72% 6,422,531 100% 49.7%
Alliance Resource Management GP, LLC (3) 164,000 1.83% -- -- 1.1%
Joseph W. Craft III (1) (7) 73,500 * -- -- *
Thomas L. Pearson (1) 9,521 * -- -- *
Michael L. Greenwood (1) 29,950 * -- -- *
Charles R. Wesley (1) 16,600 * -- -- *
Gary J. Rathburn (1) 8,000 * -- -- *
John J. MacWilliams (4) 1,396,780 15.55% 6,422,531 100% 50.8%
Preston R. Miller, Jr. (4) 1,396,780 15.55% 6,422,531 100% 50.8%
John P. Neafsey (1) 15,000 * -- -- *
John H. Robinson (5) -- -- -- -- --
Paul R. Tregurtha (6) -- -- -- -- --
All directors and executive officers as
a group (10 persons) 1,549,351 17.25% 6,422,531 100% 51.7%
</TABLE>
* Less than one percent.
(1) The address of Messrs. Craft, Pearson, Greenwood, Wesley, Rathburn and
Neafsey is also 1717 South Boulder Avenue, Tulsa, Oklahoma 74119.
(2) ARH may be deemed to beneficially own the Common Units and the Subordinated
Units held by the Special GP, as a result of ARH's ownership of all of the
membership interests in the Special GP. MPC Partners, LP may also be deemed
to beneficially own the Common Units and the Subordinated Units held by the
Special GP as a result of MPC Partners' ownership of 86.2% of ARH's
outstanding common stock.
(3) The Managing GP is an affiliate of the Special GP, and as a consequence,
the Special GP may be deemed to beneficially own the Common Units held by
the Managing GP.
(4) Messrs. MacWilliams and Miller may also be deemed to share beneficial
ownership of the Common Units and the Subordinated Units held by the
Special GP and the Managing GP by virtue of their status as partners of The
Beacon Group, an affiliate of MPC Partners. Messrs. MacWilliams and Miller
disclaim beneficial ownership of the Common and Subordinated Units held by
the Special GP and the Managing GP. The address of Messrs. MacWilliams and
Miller is 399 Park Avenue, New York, New York 10022.
(5) The address of Mr. Robinson is 11401 Lamar, Overland Park, Kansas 66211.
(6) The address of Mr. Tregurtha is 3 Landmark Square, Stamford, Connecticut
06901.
(7) Mr. Craft owns 60,000 Common Units and may also be deemed to share
beneficial ownership of 13,500 Common Units held by a private foundation
for which he serves as a trustee. Mr. Craft disclaims beneficial ownership
of the Common Units held by the private foundation.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Special GP owns 1,232,780 Common Units and 6,422,531 Subordinated Units
representing an aggregate 48.7% limited partner interest in Alliance Resource
Partners. In addition, the General Partners own an aggregate 2% general partner
interest in Alliance Resource Partners, the Intermediate Partnership and the
subsidiaries on a combined basis. The Managing GP's ability, as Managing GP, to
manage and operate Alliance Resource Partners and its ownership of 164,000
Common Units together with the Special GP's ownership of 1,232,780 Common Units
and 6,422,531 Subordinated Units, effectively gives the General Partners the
ability to veto some actions of Alliance Resource Partners and to control the
management of Alliance Resource Partners.
AGREEMENTS GOVERNING CERTAIN TRANSACTIONS CONCURRENT WITH THE IPO
Alliance Resource Partners, the General Partners, the Intermediate
Partnership and some other parties entered into various documents and agreements
that resulted in certain transactions, including the vesting of assets in, and
the assumption of liabilities by, the subsidiaries, and the distribution of the
IPO proceeds. These agreements were not the result of arm's-length negotiations,
and we cannot assure you that they, or that any of the transactions that they
provide for, were effected on terms at least as favorable to the parties to
these agreements as they could have been obtained from unaffiliated third
parties. All of the transaction expenses incurred in connection with these
transactions, including the expenses associated with vesting assets into our
subsidiaries, were paid from the proceeds of the IPO.
FINANCING TRANSACTIONS CONCURRENT WITH THE IPO
We have extensive ongoing relationships with ARH and its stockholders.
These relationships include ARH's wholly-owned subsidiary, Alliance Resource GP,
LLC, which serves as our Special GP, and the ownership of Alliance Resource
Management GP, LLC, which serves as our Managing GP, by the stockholders of ARH.
See "Omnibus Agreement" below.
The Special GP distributed $279.3 million in net proceeds retained or
received by it in the IPO, the private placement of senior notes and borrowings
under the term loan facility to ARH, which is owned by management and funds
managed by The Beacon Group and its affiliates. In addition, the Special GP
retained $37.9 million of working capital assets, some portion of which it
distributed to ARH.
In connection with the IPO, ARH made 20-day unsecured loans in an aggregate
amount of up to $1.3 million at an annual interest rate of 6.84% to some of the
officers and employees of our General Partners and their respective
subsidiaries, who used the funds to purchase Common Units in this IPO, which
unsecured loans were repaid within the required time period.
UNIT PURCHASE PROGRAM BY MANAGING GP
The Managing GP authorized a Common Unit purchase program in November 1999
for the purchase of up to the greater of one million Common Units or $15 million
of Common Units. Through December 31, 1999, the Managing GP purchased 164,000
Common Units. The Common Units purchased by the Managing GP retain their rights
to receive quarterly distributions of Available Cash.
TRANSACTIONS BETWEEN US AND THE SPECIAL GP
We have entered into an arrangement with the Special GP involving the
proposed acquisition of two tracts of reserves in western Kentucky. In March
2000, we assigned to the Special GP, at our cost of approximately $200,000, two
options to acquire these properties. This transaction was reviewed and approved
by the Conflicts Committee. Later in the same month, the Special GP exercised
the options by making a payment of $1.8 million to the grantor of the options.
Upon closing of the acquisition, the Special GP, in its discretion, may choose
to lease these properties back to us or assign the option properties back to us
in return for payment for all amounts it expended in connection with the
project, plus a market rate of interest. The Special GP expects to close the
acquisition of these properties by the end of September 2000; however, we can
make no assurances that we will be able to do so. See "Item 8. Financial
Statements and Supplementary Data. -- Note 20. Subsequent Events."
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We have also entered into an arrangement with the Special GP for the
construction of the preparation plant and ancillary facilities at our Gibson
County Coal mine. This transaction was reviewed and approved by the Conflicts
Committee. Under the terms of the arrangement, the Special GP is constructing
the preparation plant and ancillary facilities at an approximate cost of $23.1
million. Upon completion, the Special GP will have the option to sell the
preparation plant and ancillary facilities to us or to assign its rights to a
third-party financing entity. In the event the Special GP elects to sell or
lease the preparation plant and ancillary facilities to us, the sale price will
amount to the Special GP's construction costs, plus a market rate of interest on
its investment. If the Special GP elects not to sell the preparation plant and
ancillary facilities to us, we will enter into an operating lease with the
Special GP or the third-party financing entity with the option to purchase the
preparation plant and ancillary facilities at the end of the lease term.
We may enter into similar arrangements in the future to support the
acquisition of additional reserve properties or to develop facilities at our
existing mining complexes.
PURCHASE OF MANAGING GENERAL PARTNER INTEREST
As a result of the IPO, management and funds managed by The Beacon
Group and its affiliates purchased 25.9% and 74.1% interests, respectively, in
the Managing GP for approximately $5.9 million. In connection with these
purchases, ARH made 20-day secured loans in an aggregate amount of $5.9 million
at an annual rate of 6.84% to those parties who used the funds to purchase their
interests in the Managing GP, which loans were repaid within the required time
period. In turn, the Managing GP purchased its general partner interest in the
Partnership for the same amount.
OMNIBUS AGREEMENT
Concurrent with the closing of the IPO, we entered into an agreement
with ARH and the General Partners, which governs potential competition among us
and the other parties to this agreement. ARH agreed, and caused its controlled
affiliates to agree, for so long as management and funds managed by The Beacon
Group and its affiliates control the Managing GP, not to engage in the business
of mining, marketing or transporting coal in the United States unless it first
offers Alliance Resource Partners the opportunity to engage in a potential
activity or acquire a potential business, and the Board of Directors of the
Managing GP, with the concurrence of its Conflicts Committee, elects to cause us
not to pursue such opportunity or acquisition. In addition, ARH has the ability
to purchase businesses, the majority value of which is not mining, marketing or
transporting coal, provided ARH offers the Partnership the opportunity to
purchase the coal assets following their acquisition. The restriction does not
apply to the assets retained and business conducted by ARH at the closing of the
IPO. Except as provided above, ARH and its controlled affiliates are prohibited
from engaging in activities in which they compete directly with the Partnership.
In addition, The Beacon Group, and the funds it manages, are prohibited from
owning or engaging in businesses which compete with the Partnership. In addition
to its non-competition provisions, this agreement contains provisions which
indemnify the Partnership against liabilities associated with certain assets and
businesses of ARH which were disposed of or liquidated prior to consummating the
IPO.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements.
The response to this portion of Item 14 is submitted as a separate
section herein under Part II, Item 8 - Financial Statements and
Supplementary Data.
(a)(2) Financial Statement Schedules.
No schedules are required to be presented by Alliance Resource
Partners.
(a)(3) Index of Exhibits.
3.1 Amended and Restated Agreement of Limited Partnership of
Alliance Resource Partners, L.P.
3.2 Amended and Restated Agreement of Limited Partnership of
Alliance Resource Operating Partners, L.P.
*3.3 Certificate of Limited Partnership of Alliance Resource
Partners, L.P.(Incorporated by reference to Exhibit 3.6 of the
Registrant's Registration Statement on Form S-1 filed with the
Commission on May 20, 1999).
*3.4 Certificate of Limited Partnership of Alliance Resource
Operating Partners, L.P,(Incorporated by reference to Exhibit
3.8 of the Registrants Statement on Form S-1/A filed with the
Commission on July 20, 1999).
4.1 Form of Common Unit Certificate(Included as Exhibit A to the
Amended and Restated Agreement of Limited Partnership of
Alliance Resource Partners, L.P.).
10.1 Credit Agreement, dated as of August 16, 1999, among Alliance
Resource GP, LLC, The Chase Manhattan Bank (as paying agent),
Deutsche Bank AG, New York Branch (as documentation agent),
Citicorp USA, Inc. and The Chase Manhattan Bank (as
co-administrative agents) and the lenders named therein.
10.2 Note Purchase Agreement, dated as of August 16, 1999, among
Alliance Resource GP, LLC and the purchasers named therein.
10.3 Contribution and Assumption Agreement, dated August 16, 1999,
among Alliance Resource Holdings, Inc., Alliance Resource
Management GP, LLC, Alliance Resource GP, LLC, Alliance Resource
Partners, L.P., Alliance Resource Operating Partners, L.P. and
the other parties named therein.
10.4 Omnibus Agreement, dated August 16, 1999, among Alliance
Resource Holdings, Inc., Alliance Resource Management GP, LLC,
Alliance Resource GP, LLC and Alliance Resource Partners, L.P.
*10.5 Restated and Amended Coal Supply Agreement, dated February 1,
1986, among Seminole Electric Cooperative, Inc., Webster County
Coal Corporation and White County Coal Corporation.
(Incorporated by reference to Exhibit 10.9 of the Registrant's
Registration Statement on Form S-1/A filed with the Commission
on July 20, 1999).
*10.6 Contract for Purchase and Sale of Coal, dated January 31, 1995,
between Tennessee Valley Authority and Webster County Coal
Corporation. (Incorporated by reference to Exhibit 10.10 of the
Registrant's Registration Statement on Form S-1/A filed with the
Commission on July 20, 1999).
*10.7 Assignment/Transfer Agreement between Andalex Resources, Inc.,
Hopkins County Coal, LLC, Webster County Coal Corporation and
Tennessee Valley Authority, dated January 23, 1998, with Exhibit
A-Contract for Purchase and Sale of Coal between Tennessee
Valley Authority and Andalex Resources, Inc., dated January 31,
1995.(Incorporated by reference to Exhibit 10.11 of the
Registration Statement on Form S-1/A filed with the Commission
on July 20, 1999).
58
<PAGE> 59
*10.8 Contract for Purchase and Sale of Coal, dated July 7, 1998,
between Tennessee Valley Authority and Webster County Coal
Corporation.(Incorporated by reference to Exhibit 10.12 of the
Registrant's Registration Statement on Form S-1/A filed with the
Commission on July 20, 1999).
*10.9 Contract for Purchase and Sale of Coal, dated July 7, 1998,
between Tennessee Valley Authority and White County Coal
Corporation.(Incorporated by reference to Exhibit 10.13 of the
Registrant's Registration Statement on Form S-1/A filed with the
Commission on July 20, 1999).
*10.10 Agreement for Supply of Coal to the Mt. Storm Power Station,
dated January 15, 1996, between Virginia Electric and Power
Company and Mettiki Coal Corporation.(Incorporated by reference
to Exhibit 10.(t) to MAPCO Inc.'s Form 10-K, filed April 1,
1996, Filed No. 1-5254).
10.11 Alliance Resource Management GP, LLC 2000 Long-term Incentive
Plan (as amended).
10.12 Alliance Resource Management GP, LLC Short-term Incentive Plan.
*10.13 Form of Employment Agreement for Messrs. Craft, Pearson,
Greenwood, Wesley, and Rathburn. (Incorporated by reference to
Exhibit 10.6 of Registrant's Statement on Form S-1/A filed
with the Commission on August 9, 1999).
21.1 List of Subsidiaries.
27.1 Financial Data Schedule.
*Incorporated by reference from the Partnership's Registration
Statement on Form S-1 (Registration No. 333-78845) and from previous
filings with the Securities and Exchange Commission.
(b) Reports on Form 8-K:
None.
59
<PAGE> 60
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, in Tulsa, Oklahoma, on March 23, 2000.
ALLIANCE RESOURCE PARTNERS, L.P.
By: Alliance Resource Management GP, LLC
its managing general partner
/s/ Michael L. Greenwood
--------------------------------------
Michael L. Greenwood
Senior Vice President,
Chief Financial Officer
and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Joseph W. Craft III President, Chief Executive March 23, 2000
- -------------------------- Officer and Director
Joseph W. Craft III (Principal Executive Officer)
/s/ Michael L. Greenwood Senior Vice President, March 23, 2000
- -------------------------- Chief Financial Officer
Michael L. Greenwood and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
/s/ John J. MacWilliams Director March 23, 2000
- --------------------------
John J. MacWilliams
/s/ Preston R. Miller, Jr. Director March 23, 2000
- --------------------------
Preston R. Miller, Jr.
/s/ John P. Neafsey Director March 23, 2000
- --------------------------
John P. Neafsey
/s/ John H. Robinson Director March 23, 2000
- --------------------------
John H. Robinson
/s/ Paul R. Tregurtha Director March 23, 2000
- --------------------------
Paul R. Tregurtha
60
<PAGE> 61
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
3.1 Amended and Restated Agreement of Limited Partnership of
Alliance Resource Partners, L.P.
3.2 Amended and Restated Agreement of Limited Partnership of
Alliance Resource Operating Partners, L.P.
*3.3 Certificate of Limited Partnership of Alliance Resource
Partners, L.P.(Incorporated by reference to Exhibit 3.6 of the
Registrant's Registration Statement on Form S-1 filed with the
Commission on May 20, 1999).
*3.4 Certificate of Limited Partnership of Alliance Resource
Operating Partners, L.P, (Incorporated by reference to Exhibit
3.8 of the Registrants Statement on Form S-1/A filed with the
Commission on July 20, 1999).
4.1 Form of Common Unit Certificate (Included as Exhibit A to the
Amended and Restated Agreement of Limited Partnership of
Alliance Resource Partners, L.P.).
10.1 Credit Agreement, dated as of August 16, 1999, among Alliance
Resource GP, LLC, The Chase Manhattan Bank (as paying agent),
Deutsche Bank AG, New York Branch (as documentation agent),
Citicorp USA, Inc. and The Chase Manhattan Bank (as
co-administrative agents) and the lenders named therein.
10.2 Note Purchase Agreement, dated as of August 16, 1999, among
Alliance Resource GP, LLC and the purchasers named therein.
10.3 Contribution and Assumption Agreement, dated August 16, 1999,
among Alliance Resource Holdings, Inc., Alliance Resource
Management GP, LLC, Alliance Resource GP, LLC, Alliance Resource
Partners, L.P., Alliance Resource Operating Partners, L.P. and
the other parties named therein.
10.4 Omnibus Agreement, dated August 16, 1999, among Alliance
Resource Holdings, Inc., Alliance Resource Management GP, LLC,
Alliance Resource GP, LLC and Alliance Resource Partners, L.P.
*10.5 Restated and Amended Coal Supply Agreement, dated February 1,
1986, among Seminole Electric Cooperative, Inc., Webster County
Coal Corporation and White County Coal Corporation.
(Incorporated by reference to Exhibit 10.9 of the Registrant's
Registration Statement on Form S-1/A filed with the Commission
on July 20, 1999).
*10.6 Contract for Purchase and Sale of Coal, dated January 31, 1995,
between Tennessee Valley Authority and Webster County Coal
Corporation. (Incorporated by reference to Exhibit 10.10 of the
Registrant's Registration Statement on Form S-1/A filed with the
Commission on July 20, 1999).
</TABLE>
<PAGE> 62
<TABLE>
<S> <C>
*10.7 Assignment/Transfer Agreement between Andalex Resources, Inc.,
Hopkins County Coal, LLC, Webster County Coal Corporation and
Tennessee Valley Authority, dated January 23, 1998, with Exhibit
A-Contract for Purchase and Sale of Coal between Tennessee
Valley Authority and Andalex Resources, Inc., dated January 31,
1995.(Incorporated by reference to Exhibit 10.11 of the
Registration Statement on Form S-1/A filed with the Commission
on July 20, 1999).
*10.8 Contract for Purchase and Sale of Coal, dated July 7, 1998,
between Tennessee Valley Authority and Webster County Coal
Corporation.(Incorporated by reference to Exhibit 10.12 of the
Registrant's Registration Statement on Form S-1/A filed with the
Commission on July 20, 1999).
*10.9 Contract for Purchase and Sale of Coal, dated July 7, 1998,
between Tennessee Valley Authority and White County Coal
Corporation.(Incorporated by reference to Exhibit 10.13 of the
Registrant's Registration Statement on Form S-1/A filed with the
Commission on July 20, 1999).
*10.10 Agreement for Supply of Coal to the Mt. Storm Power Station,
dated January 15, 1996, between Virginia Electric and Power
Company and Mettiki Coal Corporation.(Incorporated by reference
to Exhibit 10.(t) to MAPCO Inc.'s Form 10-K, filed April 1,
1996, Filed No. 1-5254).
10.11 Alliance Resource Management GP, LLC 2000 Long-term Incentive
Plan (as amended).
10.12 Alliance Resource Management GP, LLC Short-term Incentive Plan.
10.13 Form of Employment Agreement for Messrs. Craft, Pearson,
Greenwood, Wesley, and Rathburn. (Incorporated by reference to
Exhibit 10.6 of Registrant's Statement on Form S-1/A filed with
the Commission on August 9, 1999).
21.1 List of Subsidiaries.
27.1 Financial Data Schedule.
</TABLE>
*Incorporated by reference from the Partnership's Registration Statement on
Form S-1 (Registration No. 333-78845) and from previous filings with the
Securities and Exchange Commission.
<PAGE> 1
EXHIBIT 3.1
Execution Copy
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ALLIANCE RESOURCE PARTNERS, L.P.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.1 Definitions.................................................................. 1
SECTION 1.2 Construction................................................................. 15
ARTICLE II
ORGANIZATION
SECTION 2.1 Formation.................................................................... 15
SECTION 2.2 Name......................................................................... 16
SECTION 2.3 Registered Office; Registered Agent; Principal Office; Other Offices......... 16
SECTION 2.4 Purpose and Business......................................................... 16
SECTION 2.5 Powers....................................................................... 16
SECTION 2.6 Power of Attorney............................................................ 17
SECTION 2.7 Term......................................................................... 18
SECTION 2.8 Title to Partnership Assets.................................................. 18
ARTICLE III
RIGHTS OF LIMITED PARTNERS
SECTION 3.1 Limitation of Liability...................................................... 18
SECTION 3.2 Management of Business 18
SECTION 3.3 Outside Activities of the Limited Partners................................... 18
SECTION 3.4 Rights of Limited Partners................................................... 19
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS
SECTION 4.1 Certificates................................................................. 19
SECTION 4.2 Mutilated, Destroyed, Lost or Stolen Certificates............................ 20
SECTION 4.3 Record Holders............................................................... 20
SECTION 4.4 Transfer Generally........................................................... 21
SECTION 4.5 Registration and Transfer of Limited Partner Interests....................... 21
SECTION 4.6 Transfer of the General Partners' General Partner Interests.................. 22
SECTION 4.7 Transfer of Incentive Distribution Rights.................................... 22
SECTION 4.8 Restrictions on Transfers.................................................... 23
SECTION 4.9 Citizenship Certificates; Non-citizen Assignees.............................. 23
SECTION 4.10 Redemption of Partnership Interests of Non-citizen Assignees................. 24
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
SECTION 5.1 Organizational Contributions................................................. 25
SECTION 5.2 Contributions by the General Partners and their Affiliates................... 25
SECTION 5.3 Contributions by Initial Limited Partners and Reimbursement of the Special
General Partner........................................................... 25
SECTION 5.4 Interest and Withdrawal...................................................... 26
SECTION 5.5 Capital Accounts............................................................. 26
SECTION 5.6 Issuances of Additional Partnership Securities............................... 28
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 5.7 Limitations on Issuance of Additional Partnership Securities................. 29
SECTION 5.8 Conversion of Subordinated Units............................................. 30
SECTION 5.9 Limited Preemptive Right..................................................... 31
SECTION 5.10 Splits and Combinations...................................................... 31
SECTION 5.11 Fully Paid and Non-Assessable Nature of Limited Partner Interests............ 32
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
SECTION 6.1 Allocations for Capital Account Purposes..................................... 32
SECTION 6.2 Allocations for Tax Purposes................................................. 37
SECTION 6.3 Requirement and Characterization of Distributions; Distributions to Record 39
Holders...................................................................
SECTION 6.4 Distributions of Available Cash from Operating Surplus....................... 39
SECTION 6.5 Distributions of Available Cash from Capital Surplus......................... 40
SECTION 6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution Levels 41
SECTION 6.7 Special Provisions Relating to the Holders of Subordinated Units............. 41
SECTION 6.8 Special Provisions Relating to the Holders of Incentive Distribution Rights.. 41
SECTION 6.9 Entity-Level Taxation........................................................ 42
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
SECTION 7.1 Management................................................................... 42
SECTION 7.2 Certificate of Limited Partnership........................................... 44
SECTION 7.3 Restrictions on General Partners' Authority.................................. 44
SECTION 7.4 Reimbursement of the General Partners........................................ 44
SECTION 7.5 Outside Activities........................................................... 45
SECTION 7.6 Loans from the General Partners; Loans or Contributions from the Partnership;
Contracts with Affiliates; Certain Restrictions on the General Partners... 46
SECTION 7.7 Indemnification.............................................................. 47
SECTION 7.8 Liability of Indemnitees..................................................... 48
SECTION 7.9 Resolution of Conflicts of Interest.......................................... 49
SECTION 7.10 Other Matters Concerning the General Partners................................ 50
SECTION 7.11 Purchase or Sale of Partnership Securities................................... 50
SECTION 7.12 Registration Rights of the General Partners and their Affiliates............. 51
SECTION 7.13 Reliance by Third Parties.................................................... 52
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 8.1 Records and Accounting....................................................... 53
SECTION 8.2 Fiscal Year.................................................................. 53
SECTION 8.3 Reports...................................................................... 53
ARTICLE IX
TAX MATTERS
SECTION 9.1 Tax Returns and Information.................................................. 53
SECTION 9.2 Tax Elections................................................................ 53
SECTION 9.3 Tax Controversies............................................................ 54
SECTION 9.4 Withholding.................................................................. 54
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE X
ADMISSION OF PARTNERS
SECTION 10.1 Admission of Initial Limited Partners........................................ 54
SECTION 10.2 Admission of Substituted Limited Partner..................................... 54
SECTION 10.3 Admission of Successor General Partners...................................... 55
SECTION 10.4 Admission of Additional Limited Partners..................................... 55
SECTION 10.5 Amendment of Agreement and Certificate of Limited Partnership................ 55
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
SECTION 11.1 Withdrawal of the Managing General Partner................................... 56
SECTION 11.2 Removal of the Managing General Partner...................................... 57
SECTION 11.3 Interest of Departing Partner and Successor General Partners................. 57
SECTION 11.4 Withdrawal or Removal of Special General Partner............................. 58
SECTION 11.5 Termination of Subordination Period, Conversion of Subordinated Units and
Extinguishment of Cumulative Common Unit Arrearages....................... 59
SECTION 11.6 Withdrawal of Limited Partners............................................... 59
ARTICLE XII
DISSOLUTION AND LIQUIDATION
SECTION 12.1 Dissolution.................................................................. 60
SECTION 12.2 Continuation of the Business of the Partnership After Dissolution............ 60
SECTION 12.3 Liquidator................................................................... 61
SECTION 12.4 Liquidation.................................................................. 61
SECTION 12.5 Cancellation of Certificate of Limited Partnership........................... 62
SECTION 12.6 Return of Contributions...................................................... 62
SECTION 12.7 Waiver of Partition.......................................................... 62
SECTION 12.8 Capital Account Restoration.................................................. 62
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
SECTION 13.1 Amendment to be Adopted Solely by the Managing General Partner............... 62
SECTION 13.2 Amendment Procedures......................................................... 63
SECTION 13.3 Amendment Requirements....................................................... 63
SECTION 13.4 Special Meetings............................................................. 64
SECTION 13.5 Notice of a Meeting.......................................................... 64
SECTION 13.6 Record Date.................................................................. 65
SECTION 13.7 Adjournment.................................................................. 65
SECTION 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes................... 65
SECTION 13.9 Quorum....................................................................... 65
SECTION 13.10 Conduct of a Meeting......................................................... 66
SECTION 13.11 Action Without a Meeting..................................................... 66
SECTION 13.12 Voting and Other Rights...................................................... 66
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
ARTICLE XIV
MERGER
SECTION 14.1 Authority.................................................................... 67
SECTION 14.2 Procedure for Merger or Consolidation........................................ 67
SECTION 14.3 Approval by Limited Partners of Merger or Consolidation...................... 68
SECTION 14.4 Certificate of Merger........................................................ 68
SECTION 14.5 Effect of Merger............................................................. 68
ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
SECTION 15.1 Right to Acquire Limited Partner Interests 69
ARTICLE XVI
GENERAL PROVISIONS
SECTION 16.1 Addresses and Notices........................................................ 70
SECTION 16.2 Further Action............................................................... 70
SECTION 16.3 Binding Effect............................................................... 71
SECTION 16.4 Integration.................................................................. 71
SECTION 16.5 Creditors.................................................................... 71
SECTION 16.6 Waiver....................................................................... 71
SECTION 16.7 Counterparts................................................................. 71
SECTION 16.8 Applicable Law............................................................... 71
SECTION 16.9 Invalidity of Provisions..................................................... 71
SECTION 16.10 Consent of Partners.......................................................... 71
</TABLE>
iv
<PAGE> 6
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
ALLIANCE RESOURCE PARTNERS, L.P.
THIS FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
ALLIANCE RESOURCE PARTNERS, L.P. dated as of August 20, 1999, is entered into by
and among Alliance Resource Management GP, LLC, a Delaware limited liability
company, as the Managing General Partner, Alliance Resource GP, LLC, a Delaware
limited liability company, as the Special General Partner, and Thomas L.
Pearson, as the Organizational Limited Partner, together with any other Persons
who become Partners in the Partnership or parties hereto as provided herein. In
consideration of the covenants, conditions and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Acquisition" means any transaction in which any Group Member acquires
(through an asset acquisition, merger, stock acquisition or other form of
investment) control over all or a portion of the assets, properties or business
of another Person for the purpose of increasing, over the long term, the
operating capacity of the Partnership Group from the operating capacity of the
Partnership Group existing immediately prior to such transaction.
"Additional Book Basis" means the portion of any remaining Carrying Value
of an Adjusted Property that is attributable to positive adjustments made to
such Carrying Value as a result of Book-Up Events. For purposes of determining
the extent that Carrying Value constitutes Additional Book Basis:
(i) Any negative adjustment made to the Carrying Value of an Adjusted
Property as a result of either a Book- Down Event or a Book-Up Event shall
first be deemed to offset or decrease that portion of the Carrying Value of
such Adjusted Property that is attributable to any prior positive
adjustments made thereto pursuant to a Book-Up Event or Book-Down Event.
(ii) If Carrying Value that constitutes Additional Book Basis is
reduced as a result of a Book-Down Event and the Carrying Value of other
property is increased as a result of such Book-Down Event, an allocable
portion of any such increase in Carrying Value shall be treated as
Additional Book Basis; provided that the amount treated as Additional Book
Basis pursuant hereto as a result of such Book-Down Event shall not exceed
the amount by which the Aggregate Remaining Net Positive Adjustments after
such Book-Down Event exceeds the remaining Additional Book Basis
attributable to all of the Partnership's Adjusted Property after such
Book-Down Event (determined without regard to the application of this
clause (ii) to such Book-Down Event).
"Additional Book Basis Derivative Items" means any Book Basis Derivative
Items that are computed with reference to Additional Book Basis. To the extent
that the Additional Book Basis attributable to all of the Partnership's Adjusted
Property as of the beginning of any taxable period exceeds the Aggregate
Remaining Net Positive Adjustments as of the beginning of such period (the
"Excess Additional Book Basis"), the Additional Book Basis Derivative Items for
such period shall be reduced by the amount that bears the same ratio to the
amount of Additional Book Basis Derivative Items determined without regard to
this sentence as the Excess Additional Book Basis bears to the Additional Book
Basis as of the beginning of such period.
"Additional Limited Partner" means a Person admitted to the Partnership as
a Limited Partner pursuant to Section 10.4 and who is shown as such on the books
and records of the Partnership.
1
<PAGE> 7
"Adjusted Capital Account" means the Capital Account maintained for each
Partner as of the end of each fiscal year of the Partnership, (a) increased by
any amounts that such Partner is obligated to restore under the standards set by
Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b)
decreased by (i) the amount of all losses and deductions that, as of the end of
such fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such fiscal year, are reasonably expected to be made to
such Partner in subsequent years in accordance with the terms of this Agreement
or otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases as a result of a minimum gain chargeback pursuant to Section 6.1(d)(i)
or 6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended
to comply with the provisions of Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. The
"Adjusted Capital Account" of a Partner in respect of a General Partner
Interest, a Common Unit, a Subordinated Unit or an Incentive Distribution Right
or any other specified interest in the Partnership shall be the amount which
such Adjusted Capital Account would be if such General Partner Interest, Common
Unit, Subordinated Unit, Incentive Distribution Right or other interest in the
Partnership were the only interest in the Partnership held by such Partner from
and after the date on which such General Partner Interest, Common Unit,
Subordinated Unit, Incentive Distribution Right or other interest was first
issued.
"Adjusted Operating Surplus" means, with respect to any period, Operating
Surplus generated during such period (a) less (i) any net increase in Working
Capital Borrowings during such period and (ii) any net reduction in cash
reserves for Operating Expenditures during such period not relating to an
Operating Expenditure made during such period, and (b) plus (i) any net decrease
in Working Capital Borrowings during such period, and (ii) any net increase in
cash reserves for Operating Expenditures during such period required by any debt
instrument for the repayment of principal, interest or premium. Adjusted
Operating Surplus does not include that portion of Operating Surplus included in
clause (a)(i) of the definition of Operating Surplus.
"Adjusted Property" means any property the Carrying Value of which has been
adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"Aggregate Remaining Net Positive Adjustments" means, as of the end of any
taxable period, the sum of the Remaining Net Positive Adjustments of all the
Partners.
"Agreed Allocation" means any allocation, other than a Required Allocation,
of an item of income, gain, loss or deduction pursuant to the provisions of
Section 6.1, including, without limitation, a Curative Allocation (if
appropriate to the context in which the term "Agreed Allocation" is used).
"Agreed Value" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution as determined
by the Managing General Partner using such reasonable method of valuation as it
may adopt. The Managing General Partner shall, in its discretion, use such
method as it deems reasonable and appropriate to allocate the aggregate Agreed
Value of Contributed Properties contributed to the Partnership in a single or
integrated transaction among each separate property on a basis proportional to
the fair market value of each Contributed Property.
"Agreement" means this First Amended and Restated Agreement of Limited
Partnership of Alliance Resource Partners, L.P., as it may be amended,
supplemented or restated from time to time.
2
<PAGE> 8
"Assignee" means a Non-citizen Assignee or a Person to whom one or more
Limited Partner Interests have been transferred in a manner permitted under this
Agreement and who has executed and delivered a Transfer Application as required
by this Agreement, but who has not been admitted as a Substituted Limited
Partner.
"Associate" means, when used to indicate a relationship with any Person,
(a) any corporation or organization of which such Person is a director, officer
or partner or is, directly or indirectly, the owner of 20% or more of any class
of voting stock or other voting interest; (b) any trust or other estate in which
such Person has at least a 20% beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity; and (c) any relative or
spouse of such Person, or any relative of such spouse, who has the same
principal residence as such Person.
"Available Cash" means, with respect to any Quarter ending prior to the
Liquidation Date, and without duplication:
(a) the sum of (i) all cash and cash equivalents of the Partnership
Group on hand at the end of such Quarter, and (ii) all additional cash and
cash equivalents of the Partnership Group on hand on the date of
determination of Available Cash with respect to such Quarter resulting from
Working Capital Borrowings made subsequent to the end of such Quarter, less
(b) the amount of any cash reserves that are necessary or appropriate
in the reasonable discretion of the Managing General Partner to (i) provide
for the proper conduct of the business of the Partnership Group (including
reserves for future capital expenditures and for anticipated future credit
needs of the Partnership Group) subsequent to such Quarter, (ii) comply
with applicable law or any loan agreement, security agreement, mortgage,
debt instrument or other agreement or obligation to which any Group Member
is a party or by which it is bound or its assets are subject or (iii)
provide funds for distributions under Section 6.4 or 6.5 in respect of any
one or more of the next four Quarters; provided, however, that the Managing
General Partner may not establish cash reserves pursuant to (iii) above if
the effect of such reserves would be that the Partnership is unable to
distribute the Minimum Quarterly Distribution on all Common Units, plus any
Cumulative Common Unit Arrearage on all Common Units, with respect to such
Quarter; and, provided further, that disbursements made by a Group Member
or cash reserves established, increased or reduced after the end of such
Quarter but on or before the date of determination of Available Cash with
respect to such Quarter shall be deemed to have been made, established,
increased or reduced, for purposes of determining Available Cash, within
such Quarter if the Managing General Partner so determines.
Notwithstanding the foregoing, "Available Cash" with respect to the Quarter
in which the Liquidation Date occurs and any subsequent Quarter shall equal
zero.
"Book Basis Derivative Items" means any item of income, deduction, gain or
loss included in the determination of Net Income or Net Loss that is computed
with reference to the Carrying Value of an Adjusted Property (e.g.,
depreciation, depletion, or gain or loss with respect to an Adjusted Property).
"Book-Down Event" means an event which triggers a negative adjustment to
the Capital Accounts of the Partners pursuant to Section 5.5(d).
"Book-Tax Disparity" means with respect to any item of Contributed Property
or Adjusted Property, as of the date of any determination, the difference
between the Carrying Value of such Contributed Property or Adjusted Property and
the adjusted basis thereof for federal income tax purposes as of such date. A
Partner's share of the Partnership's Book- Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the difference
between such Partner's Capital Account balance as maintained pursuant to Section
5.5 and the hypothetical balance of such Partner's Capital Account computed as
if it had been maintained strictly in accordance with federal income tax
accounting principles.
"Book-Up Event" means an event which triggers a positive adjustment to the
Capital Accounts of the Partners pursuant to Section 5.5(d).
3
<PAGE> 9
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America or the states of New York or Texas shall not be regarded as a Business
Day.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 5.5. The "Capital Account" of a Partner in respect of a
General Partner Interest, a Common Unit, a Subordinated Unit, an Incentive
Distribution Right or any other Partnership Interest shall be the amount which
such Capital Account would be if such
General Partner Interest, Common Unit, Subordinated Unit, Incentive Distribution
Right or other Partnership Interest were the only interest in the Partnership
held by such Partner from and after the date on which such General Partner
Interest, Common Unit, Subordinated Unit, Incentive Distribution Right or other
Partnership Interest was first issued.
"Capital Contribution" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership
pursuant to this Agreement or the Contribution Agreement.
"Capital Improvement" means any (a) addition or improvement to the capital
assets owned by any Group Member or (b) acquisition of existing, or the
construction of new, capital assets (including, without limitation, coal mines,
preparation plants and related assets), in each case if such addition,
improvement, acquisition or construction is made to increase over the long term
the operating capacity of the Partnership Group from the operating capacity of
the Partnership Group existing immediately prior to such addition, improvement,
acquisition or construction.
"Capital Surplus" has the meaning assigned to such term in Section 6.3(a).
"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' and
Assignees' Capital Accounts in respect of such Contributed Property, and (b)
with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Sections 5.5(d)(i) and 5.5(d)(ii) and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the Managing
General Partner.
"Cause" means a court of competent jurisdiction has entered a final,
non-appealable judgment finding a General Partner liable for actual fraud, gross
negligence or willful or wanton misconduct in its capacity as a general partner
of the Partnership.
"Certificate" means a certificate (i) substantially in the form of Exhibit
A to this Agreement, (ii) issued in global form in accordance with the rules and
regulations of the Depositary or (iii) in such other form as may be adopted by
the Managing General Partner in its discretion, issued by the Partnership
evidencing ownership of one or more Common Units or a certificate, in such form
as may be adopted by the Managing General Partner in its discretion, issued by
the Partnership evidencing ownership of one or more other Partnership
Securities.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the State of
Delaware as referenced in Section 2.1, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.
"Citizenship Certification" means a properly completed certificate in such
form as may be specified by the Managing General Partner by which an Assignee or
a Limited Partner certifies that he (and if he is a nominee holding for the
account of another Person, that to the best of his knowledge such other Person)
is an Eligible Citizen.
"Claim" has the meaning assigned to such term in Section 7.12(c).
"Closing Date" means the first date on which Common Units are sold by the
Partnership to the Underwriters pursuant to the provisions of the Underwriting
Agreement.
"Closing Price" has the meaning assigned to such term in Section 15.1(a).
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"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
successor law.
"Combined Interest" has the meaning assigned to such term in Section
11.3(a).
"Commission" means the United States Securities and Exchange Commission.
"Common Unit" means a Partnership Security representing a fractional part
of the Partnership Interests of all Limited Partners and Assignees and of the
General Partners (exclusive of their interests as holders of the General Partner
Interests and, with respect to the Managing General Partner, the Incentive
Distribution Rights) and having the rights and obligations specified with
respect to Common Units in this Agreement. The term "Common Unit" does not refer
to a Subordinated Unit prior to its conversion into a Common Unit pursuant to
the terms hereof.
"Common Unit Arrearage" means, with respect to any Common Unit, whenever
issued, as to any Quarter within the Subordination Period, the excess, if any,
of (a) the Minimum Quarterly Distribution with respect to a Common Unit in
respect of such Quarter over (b) the sum of all Available Cash distributed with
respect to a Common Unit in respect of such Quarter pursuant to Section
6.4(a)(i).
"Conflicts Committee" means a committee of the Board of Directors of the
Managing General Partner composed entirely of two or more directors who are
neither security holders, officers nor employees of the Managing General Partner
nor officers, directors or employees of any Affiliate of the Managing General
Partner.
"Contributed Property" means each property or other asset, in such form as
may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership. Once the Carrying Value of a Contributed Property is adjusted
pursuant to Section 5.5(d), such property shall no longer constitute a
Contributed Property, but shall be deemed an Adjusted Property.
"Contribution Agreement" means that certain Contribution and Assumption
Agreement, dated as of the Closing Date, among the Managing General Partner, the
Special General Partner, the Partnership, the Intermediate Partnership, the
Operating Subsidiary and certain other parties, together with the additional
conveyance documents and instruments contemplated or referenced thereunder.
"Cumulative Common Unit Arrearage" means, with respect to any Common Unit,
whenever issued, and as of the end of any Quarter, the excess, if any, of (a)
the sum resulting from adding together the Common Unit Arrearage as to an
Initial Common Unit for each of the Quarters within the Subordination Period
ending on or before the last day of such Quarter over (b) the sum of any
distributions theretofore made pursuant to Section 6.4(a)(ii) and the second
sentence of Section 6.5 with respect to an Initial Common Unit (including any
distributions to be made in respect of the last of such Quarters).
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(xi).
"Current Market Price" has the meaning assigned to such term in Section
15.1(a).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del C.ss.17-101, et seq., as amended, supplemented or restated from time to
time, and any successor to such statute.
"Departing Partner" means a former General Partner from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1, 11.2 or 11.4.
"Depositary" means, with respect to any Units issued in global form, The
Depository Trust Company and its successors and permitted assigns.
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"Economic Risk of Loss" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"Eligible Citizen" means a Person qualified to own interests in real
property in jurisdictions in which any Group Member does business or proposes to
do business from time to time, and whose status as a Limited Partner or Assignee
does not or would not subject such Group Member to a significant risk of
cancellation or forfeiture of any of its properties or any interest therein.
"Estimated Maintenance Capital Expenditures" means an estimate made in good
faith by the board of directors of the Managing General Partner (with the
concurrence of the Conflicts Committee) of the average quarterly Maintenance
Capital Expenditures that the Partnership will incur over the long term. The
board of directors of the Managing General Partner will be permitted to make
such estimate in any manner it determines reasonable in its sole discretion. The
estimate will be made annually and whenever an event occurs that is likely to
result in a material adjustment to the amount of Maintenance Capital
Expenditures on a long term basis. The Partnership shall disclose to its
Partners the amount of Estimated Maintenance Capital Expenditures. Except as
provided in the definition of Subordination Period, any adjustments to Estimated
Maintenance Capital Expenditures shall be prospective only.
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
"Expansion Capital Expenditures" means cash capital expenditures for
Acquisitions or Capital Improvements. Expansion Capital Expenditures shall not
include Maintenance Capital Expenditures.
"Final Subordinated Units" has the meaning assigned to such term in Section
6.1(d)(x).
"First Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(D).
"First Target Distribution" means $.55 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on September 30,
1999, it means the product of $.55 multiplied by a fraction of which the
numerator is the number of days in such period, and of which the denominator is
92), subject to adjustment in accordance with Sections 6.6 and 6.9.
"General Partners" means the Managing General Partner and the Special
General Partner and their successors and permitted assigns as managing general
partner and special general partner, respectively, of the Partnership.
"General Partner Interest" means the ownership interest of a General
Partner in the Partnership (in its capacity as a general partner without
reference to any Limited Partner Interest held by it) which may be evidenced by
Partnership Securities or a combination thereof or interest therein, and
includes any and all benefits to which a General Partner is entitled as provided
in this Agreement, together with all obligations of a General Partner to comply
with the terms and provisions of this Agreement.
"Group" means a Person that with or through any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting (except voting pursuant to a revocable proxy or
consent given to such Person in response to a proxy or consent solicitation made
to 10 or more Persons) or disposing of any Partnership Securities with any other
Person that beneficially owns, or whose Affiliates or Associates beneficially
own, directly or indirectly, Partnership Securities.
"Group Member" means a member of the Partnership Group.
"Holder" as used in Section 7.12, has the meaning assigned to such term in
Section 7.12(a).
"Incentive Distribution Right" means a non-voting Limited Partner Interest
issued to the Managing General Partner in connection with the transfer of all of
its limited partner interests in the Intermediate Partnership to the Partnership
and substantially all of its member interests in the Operating Subsidiary to the
Intermediate Partnership pursuant to Section 5.2, which Partnership Interest
will confer upon the holder thereof only the rights and obligations specifically
provided in this Agreement with respect to Incentive Distribution Rights (and no
other rights otherwise available to or
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other obligations of a holder of a Partnership Interest). Notwithstanding
anything in this Agreement to the contrary, the holder of an Incentive
Distribution Right shall not be entitled to vote such Incentive Distribution
Right on any Partnership matter except as may otherwise be required by law.
"Incentive Distributions" means any amount of cash distributed to the
holders of the Incentive Distribution Rights pursuant to Sections 6.4(a)(v),
(vi) and (vii) and 6.4(b)(iii), (iv) and (v).
"Indemnified Persons" has the meaning assigned to such term in Section
7.12(c).
"Indemnitee" means (a) each General Partner, (b) any Departing Partner, (c)
any Person who is or was an Affiliate of a General Partner or any Departing
Partner, (d) any Person who is or was a member, partner, officer, director,
employee, agent or trustee of any Group Member, a General Partner or any
Departing Partner or any Affiliate of any Group Member, a General Partner or any
Departing Partner, and (e) any Person who is or was serving at the request of a
General Partner or any Departing Partner or any Affiliate of a General Partner
or any Departing Partner as an officer, director, employee, member, partner,
agent, fiduciary or trustee of another Person; provided, that a Person shall not
be an Indemnitee by reason of providing, on a fee-for-services basis, trustee,
fiduciary or custodial services.
"Initial Common Units" means the Common Units sold in the Initial Offering.
"Initial Limited Partners" means the General Partners (with respect to the
Subordinated Units and the Incentive Distribution Rights received by them
pursuant to Section 5.2) and the Underwriters, in each case upon being admitted
to the Partnership in accordance with Section 10.1.
"Initial Offering" means the initial offering and sale of Common Units to
the public, as described in the Registration Statement.
"Initial Unit Price" means (a) with respect to the Common Units and the
Subordinated Units, the initial public offering price per Common Unit at which
the Underwriters offered the Common Units to the public for sale as set forth on
the cover page of the prospectus included as part of the Registration Statement
and first issued at or after the time the Registration Statement first became
effective or (b) with respect to any other class or series of Units, the price
per Unit at which such class or series of Units is initially sold by the
Partnership, as determined by the Managing General Partner, in each case
adjusted as the Managing General Partner determines to be appropriate to give
effect to any distribution, subdivision or combination of Units.
"Interim Capital Transactions" means the following transactions if they
occur prior to the Liquidation Date: (a) borrowings, refinancings or refundings
of indebtedness and sales of debt securities (other than Working Capital
Borrowings and other than for items purchased on open account in the ordinary
course of business) by any Group Member; (b) sales of equity interests by any
Group Member (excluding the Common Units sold to the Underwriters pursuant to
the exercise of their over-allotment option); and (c) sales or other voluntary
or involuntary dispositions of any assets of any Group Member other than (i)
sales or other dispositions of inventory, accounts receivable and other assets
in the ordinary course of business, and (ii) sales or other dispositions of
assets as part of normal retirements or replacements.
"Intermediate Partnership" means Alliance Resource Operating Partners,
L.P., a Delaware limited partnership, and any successors thereto.
"Intermediate Partnership Agreement" means the Agreement of Limited
Partnership of Alliance Resource Operating Partners, L.P., as it may be amended,
supplemented or restated from time to time.
"Issue Price" means the price at which a Unit is purchased from the
Partnership, after taking into account any sales commission or underwriting
discount charged to the Partnership.
"Limited Partner" means, unless the context otherwise requires, (a) the
Organizational Limited Partner prior to his withdrawal from the Partnership,
each Initial Limited Partner, each Substituted Limited Partner, each Additional
Limited
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Partner and any Departing Partner upon the change of its status from Managing
General Partner to Limited Partner pursuant to Section 11.3 or (b) solely for
purposes of Articles V, VI, VII and IX and Sections 12.3 and 12.4, each
Assignee; provided, however, that when the term "Limited Partner" is used herein
in the context of any vote or other approval, including without limitation
Articles XIII and XIV, such term shall not, solely for such purpose, include any
holder of an Incentive Distribution Right except as may otherwise be required by
law.
"Limited Partner Interest" means the ownership interest of a Limited
Partner or Assignee in the Partnership, which may be evidenced by Common Units,
Subordinated Units, Incentive Distribution Rights or other Partnership
Securities or a combination thereof or interest therein, and includes any and
all benefits to which such Limited Partner or Assignee is entitled as provided
in this Agreement, together with all obligations of such Limited Partner or
Assignee to comply with the terms and provisions of this Agreement; provided,
however, that when the term "Limited Partner Interest" is used herein in the
context of any vote or other approval, including without limitation Articles
XIII and XIV, such term shall not, solely for such purpose, include any holder
of an Incentive Distribution Right except as may otherwise be required by law.
"Liquidation Date" means (a) in the case of an event giving rise to the
dissolution of the Partnership of the type described in clauses (a) and (b) of
the first sentence of Section 12.2, the date on which the applicable time period
during which the holders of Outstanding Units have the right to elect to
reconstitute the Partnership and continue its business has expired without such
an election being made, and (b) in the case of any other event giving rise to
the dissolution of the Partnership, the date on which such event occurs.
"Liquidator" means one or more Persons selected by the Managing General
Partner to perform the functions described in Section 12.3 as liquidating
trustee of the Partnership within the meaning of the Delaware Act.
"Maintenance Capital Expenditures" means cash capital expenditures
(including expenditures for the addition or improvement to the capital assets
owned by any Group Member or for the acquisition of existing, or the
construction of new, capital assets (including, without limitation, coal mines,
preparation plants and related assets) if such expenditure is made to maintain
over the long term the operating capacity of the capital assets of the
Partnership Group, as such assets existed at the time of such expenditure.
Maintenance Capital Expenditures shall not include Expansion Capital
Expenditures, but shall include reclamation expenses.
"Managing General Partner" means Alliance Resource Management GP, LLC and
its successors and permitted assigns as managing general partner of the
Partnership.
"Merger Agreement" has the meaning assigned to such term in Section 14.1.
"Minimum Quarterly Distribution" means $.50 per Unit per Quarter (or with
respect to the period commencing on the Closing Date and ending on September 30,
1999, it means the product of $.50 multiplied by a fraction of which the
numerator is the number of days in such period and of which the denominator is
92), subject to adjustment in accordance with Sections 6.6 and 6.9.
"National Securities Exchange" means an exchange registered with the
Commission under Section 6(a) of the Securities Exchange Act of 1934, as
amended, supplemented or restated from time to time, and any successor to such
statute, or the Nasdaq Stock Market or any successor thereto.
"Net Agreed Value" means, (a) in the case of any Contributed Property, the
Agreed Value of such property reduced by any liabilities either assumed by the
Partnership upon such contribution or to which such property is subject when
contributed, and (b) in the case of any property distributed to a Partner or
Assignee by the Partnership, the Partnership's Carrying Value of such property
(as adjusted pursuant to Section 5.5(d)(ii)) at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner or
Assignee upon such distribution or to which such property is subject at the time
of distribution, in either case, as determined under Section 752 of the Code.
"Net Income" means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such
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<PAGE> 14
taxable year over the Partnership's items of loss and deduction (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Income shall be determined in accordance with Section 5.5(b) and shall
not include any items specially allocated under Section 6.1(d); provided that
the determination of the items that have been specially allocated under Section
6.1(d) shall be made as if Section 6.1(d)(xii) were not in this Agreement.
"Net Loss" means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of income and gain (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Loss shall be determined in accordance with Section 5.5(b) and shall not
include any items specially allocated under Section 6.1(d); provided that the
determination of the items that have been specially allocated under Section
6.1(d) shall be made as if Section 6.1(d)(xii) were not in this Agreement.
"Net Positive Adjustments" means, with respect to any Partner, the excess,
if any, of the total positive adjustments over the total negative adjustments
made to the Capital Account of such Partner pursuant to Book-Up Events and Book-
Down Events.
"Net Termination Gain" means, for any taxable year, the sum, if positive,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date. The items included in the determination of Net
Termination Gain shall be determined in accordance with Section 5.5(b) and shall
not include any items of income, gain or loss specially allocated under Section
6.1(d).
"Net Termination Loss" means, for any taxable year, the sum, if negative,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date. The items included in the determination of Net
Termination Loss shall be determined in accordance with Section 5.5(b) and shall
not include any items of income, gain or loss specially allocated under Section
6.1(d).
"Non-citizen Assignee" means a Person whom the Managing General Partner has
determined in its discretion does not constitute an Eligible Citizen and as to
whose Partnership Interest the Managing General Partner has become the
Substituted Limited Partner, pursuant to Section 4.9.
"Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Partners pursuant to Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and
6.2(b)(iii) if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.
"Nonrecourse Deductions" means any and all items of loss, deduction or
expenditure (including, without limitation, any expenditure described in Section
705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury
Regulation Section 1.704-2(b), are attributable to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
"Notice of Election to Purchase" has the meaning assigned to such term in
Section 15.1(b).
"Omnibus Agreement" means that Omnibus Agreement, dated as of the Closing
Date, among Alliance Resource Holdings, Inc., the Managing General Partner, the
Special General Partner, the Partnership, the Intermediate Partnership and the
Operating Subsidiary.
"Operating Expenditures" means all Partnership Group expenditures,
including, but not limited to, taxes, reimbursements of the Managing General
Partner, repayment of Working Capital Borrowings, debt service payments and
capital expenditures, subject to the following:
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(a) Payments (including prepayments) of principal of and premium on
indebtedness other than Working Capital Borrowings shall not constitute
Operating Expenditures; and
(b) Operating Expenditures shall not include Expansion Capital
Expenditures or actual Maintenance Capital Expenditures but shall include
Estimated Maintenance Capital Expenditures.
(c) Operating Expenditures shall not include (i) payment of transaction
expenses relating to Interim Capital Transactions or (ii) distribution to
partners.
"Operating Subsidiary" means Alliance Coal, LLC, a Delaware limited
liability company, and any successors thereto.
"Operating Subsidiary Agreement" means the Limited Liability Company
Agreement of the Operating Subsidiary, as it may be amended, supplemented or
restated from time to time.
"Operating Surplus" means, with respect to any period ending prior to the
Liquidation Date, on a cumulative basis and without duplication,
(a) the sum of (i) $20.0 million plus all cash and cash equivalents of
the Partnership Group on hand as of the close of business on the Closing
Date, (ii) all cash receipts of the Partnership Group for the period
beginning on the Closing Date and ending with the last day of such period,
other than cash receipts from Interim Capital Transactions (except to the
extent specified in Section 6.5) and (iii) all cash receipts of the
Partnership Group after the end of such period but on or before the date of
determination of Operating Surplus with respect to such period resulting
from Working Capital Borrowings, less
(b) the sum of (i) Operating Expenditures for the period beginning on
the Closing Date and ending with the last day of such period and (ii) the
amount of cash reserves that is necessary or advisable in the reasonable
discretion of the Managing General Partner to provide funds for future
Operating Expenditures; provided, however, that disbursements made
(including contributions to a Group Member or disbursements on behalf of a
Group Member) or cash reserves established, increased or reduced after the
end of such period but on or before the date of determination of Available
Cash with respect to such period shall be deemed to have been made,
established, increased or reduced, for purposes of determining Operating
Surplus, within such period if the Managing General Partner so determines..
Notwithstanding the foregoing, "Operating Surplus" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter shall
equal zero.
"Opinion of Counsel" means a written opinion of counsel (who may be regular
counsel to the Partnership or either of the General Partners or any of their
Affiliates) acceptable to the Managing General Partner in its reasonable
discretion.
"Organizational Limited Partner" means Thomas L. Pearson in his capacity as
the organizational limited partner of the Partnership pursuant to this
Agreement.
"Outstanding" means, with respect to Partnership Securities, all
Partnership Securities that are issued by the Partnership and reflected as
outstanding on the Partnership's books and records as of the date of
determination; provided, however, that if at any time any Person or Group (other
than the General Partners or their Affiliates) beneficially owns 20% or more of
any Outstanding Partnership Securities of any class then Outstanding, all
Partnership Securities owned by such Person or Group shall not be voted on any
matter and shall not be considered to be Outstanding when sending notices of a
meeting of Limited Partners to vote on any matter (unless otherwise required by
law), calculating required votes, determining the presence of a quorum or for
other similar purposes under this Agreement, except that Common Units so owned
shall be considered to be Outstanding for purposes of Section 11.1(b)(iv) (such
Common Units shall not, however, be treated as a separate class of Partnership
Securities for purposes of this Agreement); provided, further, that the
foregoing limitation shall not apply (i) to any Person or Group who acquired 20%
or more of any Outstanding
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<PAGE> 16
Partnership Securities of any class then Outstanding directly from the General
Partners or their Affiliates or (ii) to any Person or Group who acquired 20% or
more of any Outstanding Partnership Securities of any class then Outstanding
directly or indirectly from a Person or Group described in clause (i) provided
that the General Partners shall have notified such Person or Group in writing
that such limitation shall not apply.
"Over-Allotment Option" means the over-allotment option granted to the
Underwriters by the Partnership pursuant to the Underwriting Agreement.
"Parity Units" means Common Units and all other Units having rights to
distributions or in liquidation ranking on a parity with the Common Units.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury Regulation
Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all items of loss, deduction
or expenditure (including, without limitation, any expenditure described in
Section 705(a)(2)(B) of the Code) that, in accordance with the principles of
Treasury Regulation Section 1.704-2(i), are attributable to a Partner
Nonrecourse Debt.
"Partners" means the General Partners and the Limited Partners.
"Partnership" means Alliance Resource Partners, L.P., a Delaware limited
partnership, and any successors thereto.
"Partnership Group" means the Partnership, the Intermediate Partnership,
the Operating Subsidiary and any Subsidiary of any such entity, treated as a
single consolidated entity.
"Partnership Interest" means an interest in the Partnership, which shall
include the General Partner Interests and Limited Partner Interests.
"Partnership Minimum Gain" means that amount determined in accordance with
the principles of Treasury Regulation Section 1.704-2(d).
"Partnership Security" means any class or series of equity interest in the
Partnership (but excluding any options, rights, warrants and appreciation rights
relating to an equity interest in the Partnership), including without
limitation, Common Units, Subordinated Units and Incentive Distribution Rights.
"Percentage Interest" means as of any date of determination (a) as to the
Managing General Partner (in its capacity as Managing General Partner without
reference to any Limited Partner Interests held by it), .99%, (b) as to the
Special General Partner (in its capacity as Special General Partner without
reference to any Limited Partner Interests held by it), .01%, (c) as to any
Unitholder or Assignee holding Units, the product obtained by multiplying (i)
99% less the percentage applicable to paragraph (d) by (ii) the quotient
obtained by dividing (A) the number of Units held by such Unitholder or Assignee
by (B) the total number of all Outstanding Units, and (d) as to the holders of
additional Partnership Securities issued by the Partnership in accordance with
Section 5.6, the percentage established as a part of such issuance. The
Percentage Interest with respect to an Incentive Distribution Right shall at all
times be zero.
"Person" means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.
"Per Unit Capital Amount" means, as of any date of determination, the
Capital Account, stated on a per Unit basis, underlying any Unit held by a
Person other than the General Partners or any Affiliate of either General
Partner who holds Units.
"Pro Rata" means (a) when modifying Units or any class thereof, apportioned
equally among all designated Units in accordance with their relative Percentage
Interests, (b) when modifying General Partners, apportioned among all
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General Partners in accordance with their relative Percentage Interests, (c)
when modifying Partners and Assignees, apportioned among all Partners and
Assignees in accordance with their relative Percentage Interests and (d) when
modifying holders of Incentive Distribution Rights, apportioned equally among
all holders of Incentive Distribution Rights in accordance with the relative
number of Incentive Distribution Rights held by each such holder.
"Purchase Date" means the date determined by the Managing General Partner
as the date for purchase of all Outstanding Units of a certain class (other than
Units owned by the General Partners and their Affiliates) pursuant to Article
XV.
"Quarter" means, unless the context requires otherwise, a fiscal quarter of
the Partnership.
"Recapture Income" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Section 734 or Section 743 of the
Code) upon the disposition of any property or asset of the Partnership, which
gain is characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Record Date" means the date established by the Managing General Partner
for determining (a) the identity of the Record Holders entitled to notice of, or
to vote at, any meeting of Limited Partners or entitled to vote by ballot or
give approval of Partnership action in writing without a meeting or entitled to
exercise rights in respect of any lawful action of Limited Partners or (b) the
identity of Record Holders entitled to receive any report or distribution or to
participate in any offer.
"Record Holder" means the Person in whose name a Common Unit is registered
on the books of the Transfer Agent as of the opening of business on a particular
Business Day, or with respect to other Partnership Securities, the Person in
whose name any such other Partnership Security is registered on the books which
the Managing General Partner has caused to be kept as of the opening of business
on such Business Day.
"Redeemable Interests" means any Partnership Interests for which a
redemption notice has been given, and has not been withdrawn, pursuant to
Section 4.10.
"Registration Statement" means the Registration Statement on Form S-1
(Registration No. 333-78845) as it has been or as it may be amended or
supplemented from time to time, filed by the Partnership with the Commission
under the Securities Act to register the offering and sale of the Common Units
in the Initial Offering.
"Remaining Net Positive Adjustments" means as of the end of any taxable
period, (i) with respect to the Unitholders holding Common Units or Subordinated
Units, the excess of (a) the Net Positive Adjustments of the Unitholders holding
Common Units or Subordinated Units as of the end of such period over (b) the sum
of those Partners' Share of Additional Book Basis Derivative Items for each
prior taxable period, (ii) with respect to the General Partners (as holders of
the General Partner Interests), the excess of (a) the Net Positive Adjustments
of the General Partners as of the end of such period over (b) the sum of the
General Partners' Share of Additional Book Basis Derivative Items with respect
to the General Partner Interests for each prior taxable period, and (iii) with
respect to the holders of Incentive Distribution Rights, the excess of (a) the
Net Positive Adjustments of the holders of Incentive Distribution Rights as of
the end of such period over (b) the sum of the Share of Additional Book Basis
Derivative Items of the holders of the Incentive Distribution Rights for each
prior taxable period.
"Required Allocations" means (a) any limitation imposed on any allocation
of Net Losses or Net Termination Losses under Section 6.1(b) or 6.1(c)(ii) and
(b) any allocation of an item of income, gain, loss or deduction pursuant to
Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv), 6.1(d)(vii) or 6.1(d)(ix).
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.
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"Restricted Business" has the meaning assigned to such term in the Omnibus
Agreement.
"Second Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(E).
"Second Target Distribution" means $.625 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on September 30,
1999, it means the product of $.625 multiplied by a fraction of which the
numerator is equal to the number of days in such period and of which the
denominator is 92), subject to adjustment in accordance with Sections 6.6 and
6.9.
"Securities Act" means the Securities Act of 1933, as amended, supplemented
or restated from time to time and any successor to such statute.
"Share of Additional Book Basis Derivative Items" means in connection with
any allocation of Additional Book Basis Derivative Items for any taxable period,
(i) with respect to the Unitholders holding Common Units or Subordinated Units,
the amount that bears the same ratio to such Additional Book Basis Derivative
Items as the Unitholders' Remaining Net Positive Adjustments as of the end of
such period bears to the Aggregate Remaining Net Positive Adjustments as of that
time, (ii) with respect to the General Partners (as holder(s) of the General
Partner Interests), the amount that bears the same ratio to such additional Book
Basis Derivative Items as the General Partners' Remaining Net Positive
Adjustments as of the end of such period bears to the Aggregate Remaining Net
Positive Adjustment as of that time, and (iii) with respect to the Partners
holding Incentive Distribution Rights, the amount that bears the same ratio to
such Additional Book Basis Derivative Items as the Remaining Net Positive
Adjustments of the Partners holding the Incentive Distribution Rights as of the
end of such period bears to the Aggregate Remaining Net Positive Adjustments as
of that time.
"Special Approval" means approval by a majority of the members of the
Conflicts Committee.
"Special General Partner" means Alliance Resource GP, LLC and its
successors and permitted assigns as special general partner of the Partnership.
"Subordinated Unit" means a Unit representing a fractional part of the
Partnership Interests of all Limited Partners and Assignees (other than of
holders of the Incentive Distribution Rights) and having the rights and
obligations specified with respect to Subordinated Units in this Agreement. The
term "Subordinated Unit" as used herein does not include a Common Unit.
"Subordination Period" means the period commencing on the Closing Date and
ending on the first to occur of the following dates:
(a) the first day of any Quarter beginning after September 30, 2004 in
respect of which (i) (A) distributions of Available Cash from Operating
Surplus on each of the Outstanding Common Units and Subordinated Units with
respect to each of the three consecutive, non-overlapping four- Quarter
periods immediately preceding such date equaled or exceeded the sum of the
Minimum Quarterly Distribution on all Outstanding Common Units and
Subordinated Units during such periods and (B) the Adjusted Operating
Surplus generated during each of the three consecutive, non-overlapping
four-Quarter periods immediately preceding such date equaled or exceeded
the sum of the Minimum Quarterly Distribution on all of the Common Units
and Subordinated Units that were Outstanding during such periods on a fully
diluted basis (i.e., taking into account for purposes of such determination
all Outstanding Common Units, all Outstanding Subordinated Units, all
Common Units and Subordinated Units issuable upon exercise of employee
options that have, as of the date of determination, already vested or are
scheduled to vest prior to the end of the Quarter immediately following the
Quarter with respect to which such determination is made, and all Common
Units and Subordinated Units that have as of the date of determination,
been earned by but not yet issued to management of the Partnership in
respect of incentive compensation), plus the related distribution on the
General Partner Interests in the Partnership and on the general partner
interests in the Intermediate Partnership and on the managing member
interest in the Operating Subsidiary, during such periods and (ii) there
are no Cumulative Common Unit Arrearages; and
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(b) the date on which the Managing General Partner is removed as
general partner of the Partnership upon the requisite vote by holders of
Outstanding Units under circumstances where Cause does not exist and Units
held by the Managing General Partner and its Affiliates are not voted in
favor of such removal.
For purposes of determining whether the test in subclause (a)(i)(B)
above has been satisfied, Adjusted Operating Surplus will be adjusted
upwards or downwards if the Conflicts Committee determines in good faith
that the amount of Estimated Maintenance Capital Expenditures used in the
determination of Adjusted Operating Surplus in subclause (a)(i)(B) was
materially incorrect, based on circumstances prevailing at the time of
original determination of Estimated Maintenance Capital Expenditures, for
any one or more of the preceding three four- quarter periods.
"Subsidiary" means, with respect to any Person, (a) a corporation of which
more than 50% of the voting power of shares entitled (without regard to the
occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
partnership interests of such partnership (considering all of the partnership
interests of the partnership as a single class) is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (c) any other Person
(other than a corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or indirectly,
at the date of determination, has (i) at least a majority ownership interest or
(ii) the power to elect or direct the election of a majority of the directors or
other governing body of such Person.
"Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 10.2 in place of and with all the
rights of a Limited Partner and who is shown as a Limited Partner on the books
and records of the Partnership.
"Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).
"Third Target Distribution" means $.75 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on September 30,
1999, it means the product of $.75 multiplied by a fraction of which the
numerator is equal to the number of days in such period and of which the
denominator is 92), subject to adjustment in accordance with Sections 6.6 and
6.9.
"Trading Day" has the meaning assigned to such term in Section 15.1(a).
"Transfer" has the meaning assigned to such term in Section 4.4(a).
"Transfer Agent" means such bank, trust company or other Person (including
the Managing General Partner or one of its Affiliates) as shall be appointed
from time to time by the Partnership to act as registrar and transfer agent for
the Common Units; provided that if no Transfer Agent is specifically designated
for any other Partnership Securities, the Managing General Partner shall act in
such capacity.
"Transfer Application" means an application and agreement for transfer of
Units in the form set forth on the back of a Certificate or in a form
substantially to the same effect in a separate instrument.
"Underwriter" means each Person named as an underwriter in Schedule I to
the Underwriting Agreement who purchases Common Units pursuant thereto.
"Underwriting Agreement" means the Underwriting Agreement dated August 16,
1999 among the Underwriters, the Partnership and certain other parties,
providing for the purchase of Common Units by such Underwriters.
"Unit" means a Partnership Security that is designated as a "Unit" and
shall include Common Units and Subordinated Units but shall not include (i) a
General Partner Interest or (ii) Incentive Distribution Rights.
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"Unitholders" means the holders of Common Units and Subordinated Units.
"Unit Majority" means, during the Subordination Period, at least a majority
of the Outstanding Common Units voting as a class and at least a majority of the
Outstanding Subordinated Units voting as a class, and thereafter, at least a
majority of the Outstanding Common Units.
"Unpaid MQD" has the meaning assigned to such term in Section 6.1(c)(i)(B).
"Unrealized Gain" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the fair market
value of such property as of such date (as determined under Section 5.5(d)) over
(b) the Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.5(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the Carrying Value
of such property as of such date (prior to any adjustment to be made pursuant to
Section 5.5(d) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 5.5(d)).
"Unrecovered Capital" means at any time, with respect to a Unit, the
Initial Unit Price less the sum of all distributions constituting Capital
Surplus theretofore made in respect of an Initial Common Unit and any
distributions of cash (or the Net Agreed Value of any distributions in kind) in
connection with the dissolution and liquidation of the Partnership theretofore
made in respect of an Initial Common Unit, adjusted as the Managing General
Partner determines to be appropriate to give effect to any distribution,
subdivision or combination of such Units.
"U.S. GAAP" means United States Generally Accepted Accounting Principles
consistently applied.
"Withdrawal Opinion of Counsel" has the meaning assigned to such term in
Section 11.1(b).
"Working Capital Borrowings" means borrowings used solely for working
capital purposes or to pay distributions to partners made pursuant to a credit
facility or other arrangement requiring all such borrowings thereunder to be
reduced to a relatively small amount each year for an economically meaningful
period of time.
SECTION 1.2 Construction.
Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) the term "include" or "includes" means
includes, without limitation, and "including" means including, without
limitation.
ARTICLE II
ORGANIZATION
SECTION 2.1 Formation.
The Special General Partner and the Organizational Limited Partner have
previously formed the Partnership as a limited partnership pursuant to the
provisions of the Delaware Act and, together with the Managing General Partner,
hereby amend and restate the original Agreement of Limited Partnership of
Alliance Resource Partners, L.P. in its entirety. This amendment and restatement
shall become effective on the date of this Agreement. Except as expressly
provided to the contrary in this Agreement, the rights, duties (including
fiduciary duties), liabilities and obligations of the Partners and the
administration, dissolution and termination of the Partnership shall be governed
by the Delaware Act. All Partnership Interests shall constitute personal
property of the owner thereof for all purposes and a Partner has no interest in
specific Partnership property.
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SECTION 2.2 Name.
The name of the Partnership shall be "Alliance Resource Partners, L.P." The
Partnership's business may be conducted under any other name or names deemed
necessary or appropriate by the Managing General Partner in its sole discretion,
including the name of the Managing General Partner. The words "Limited
Partnership," "L.P.," "Ltd." or similar words or letters shall be included in
the Partnership's name where necessary for the purpose of complying with the
laws of any jurisdiction that so requires. The Managing General Partner in its
discretion may change the name of the Partnership at any time and from time to
time and shall notify the Limited Partners of such change in the next regular
communication to the Limited Partners.
SECTION 2.3 Registered Office; Registered Agent; Principal Office; Other
Offices.
Unless and until changed by the Managing General Partner, the registered
office of the Partnership in the State of Delaware shall be located at 1013
Center Road, Wilmington, Delaware 19805-1297, and the registered agent for
service of process on the Partnership in the State of Delaware at such
registered office shall be Corporation Service Company. The principal office of
the Partnership shall be located at 1717 South Boulder Avenue, Tulsa, Oklahoma
74119 or such other place as the Managing General Partner may from time to time
designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware as
the Managing General Partner deems necessary or appropriate. The address of the
Managing General Partner shall be 1717 South Boulder Avenue, Tulsa, Oklahoma
74119 or such other place as the Managing General Partner may from time to time
designate by notice to the Limited Partners.
SECTION 2.4 Purpose and Business.
The purpose and nature of the business to be conducted by the Partnership
shall be to (a) serve as a partner of the Intermediate Partnership and, in
connection therewith, to exercise all the rights and powers conferred upon the
Partnership as a partner of the Intermediate Partnership pursuant to the
Intermediate Partnership Agreement or otherwise, (b) engage directly in, or
enter into or form any corporation, partnership, joint venture, limited
liability company or other arrangement to engage indirectly in, any business
activity that the Intermediate Partnership is permitted to engage in by the
Intermediate Partnership Agreement and any business activity that the Operating
Subsidiary are permitted to engage in by the Operating Subsidiary Agreement,
and, in connection therewith, to exercise all of the rights and powers conferred
upon the Partnership pursuant to the agreements relating to such business
activity, (c) engage directly in, or enter into or form any corporation,
partnership, joint venture, limited liability company or other arrangement to
engage indirectly in, any business activity that is approved by the Managing
General Partner and which lawfully may be conducted by a limited partnership
organized pursuant to the Delaware Act and, in connection therewith, to exercise
all of the rights and powers conferred upon the Partnership pursuant to the
agreements relating to such business activity; provided, however, that the
Managing General Partner reasonably determines, as of the date of the
acquisition or commencement of such activity, that such activity (i) generates
"qualifying income" (as such term is defined pursuant to Section 7704 of the
Code) or (ii) enhances the operations of an activity of the Intermediate
Partnership or the Operating Subsidiary or a Partnership activity that generates
qualifying income, and (d) do anything necessary or appropriate to the
foregoing, including the making of capital contributions or loans to a Group
Member. The Managing General Partner has no obligation or duty to the
Partnership, the Limited Partners, the Special General Partner or the Assignees
to propose or approve, and in its discretion may decline to propose or approve,
the conduct by the Partnership of any business.
SECTION 2.5 Powers.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in Section
2.4 and for the protection and benefit of the Partnership.
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SECTION 2.6 Power of Attorney.
(a) Each Limited Partner and each Assignee hereby constitutes and appoints
the Managing General Partner and, if a Liquidator shall have been selected
pursuant to Section 12.3, the Liquidator, (and any successor to the Liquidator
by merger, transfer, assignment, election or otherwise) and each of their
authorized officers and attorneys-in-fact, as the case may be, with full power
of substitution, as his true and lawful agent and attorney-in-fact, with full
power and authority in his name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and other
instruments (including this Agreement and the Certificate of Limited
Partnership and all amendments or restatements hereof or thereof) that the
Managing General Partner or the Liquidator deems necessary or appropriate
to form, qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in which the limited
partners have limited liability) in the State of Delaware and in all other
jurisdictions in which the Partnership may conduct business or own
property; (B) all certificates, documents and other instruments that the
Managing General Partner or the Liquidator deems necessary or appropriate
to reflect, in accordance with its terms, any amendment, change,
modification or restatement of this Agreement; (C) all certificates,
documents and other instruments (including conveyances and a certificate of
cancellation) that the Managing General Partner or the Liquidator deems
necessary or appropriate to reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement; (D) all certificates,
documents and other instruments relating to the admission, withdrawal,
removal or substitution of any Partner pursuant to, or other events
described in, Article IV, X, XI or XII; (E) all certificates, documents and
other instruments relating to the determination of the rights, preferences
and privileges of any class or series of Partnership Securities issued
pursuant to Section 5.6; and (F) all certificates, documents and other
instruments (including agreements and a certificate of merger) relating to
a merger or consolidation of the Partnership pursuant to Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments necessary or appropriate, in the discretion of the Managing
General Partner or the Liquidator, to make, evidence, give, confirm or
ratify any vote, consent, approval, agreement or other action that is made
or given by the Partners hereunder or is consistent with the terms of this
Agreement or is necessary or appropriate, in the discretion of the Managing
General Partner or the Liquidator, to effectuate the terms or intent of
this Agreement; provided, that when required by Section 13.3 or any other
provision of this Agreement that establishes a percentage of the Limited
Partners or of the Limited Partners of any class or series required to take
any action, the Managing General Partner and the Liquidator may exercise
the power of attorney made in this Section 2.6(a)(ii) only after the
necessary vote, consent or approval of the Limited Partners or of the
Limited Partners of such class or series, as applicable.
Nothing contained in this Section 2.6(a) shall be construed as authorizing
the Managing General Partner to amend this Agreement except in accordance with
Article XIII or as may be otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and it shall survive and, to the maximum
extent permitted by law, not be affected by the subsequent death, incompetency,
disability, incapacity, dissolution, bankruptcy or termination of any Limited
Partner or Assignee and the transfer of all or any portion of such Limited
Partner's or Assignee's Partnership Interest and shall extend to such Limited
Partner's or Assignee's heirs, successors, assigns and personal representatives.
Each such Limited Partner or Assignee hereby agrees to be bound by any
representation made by the Managing General Partner or the Liquidator acting in
good faith pursuant to such power of attorney; and each such Limited Partner or
Assignee, to the maximum extent permitted by law, hereby waives any and all
defenses that may be available to contest, negate or disaffirm the action of the
Managing General Partner or the Liquidator taken in good faith under such power
of attorney. Each Limited Partner or Assignee shall execute and deliver to the
Managing General Partner or the Liquidator, within 15 days after receipt of the
request therefor, such further designation, powers of attorney and other
instruments as the Managing General Partner or the Liquidator deems necessary to
effectuate this Agreement and the purposes of the Partnership.
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SECTION 2.7 Term.
The term of the Partnership commenced upon the filing of the Certificate of
Limited Partnership in accordance with the Delaware Act and shall continue in
existence until the close of Partnership business on December 31, 2098 or until
the earlier dissolution of the Partnership in accordance with the provisions of
Article XII. The existence of the Partnership as a separate legal entity shall
continue until the cancellation of the Certificate of Limited Partnership as
provided in the Delaware Act.
SECTION 2.8 Title to Partnership Assets.
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner or Assignee, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the Managing General Partner, one or more of its Affiliates or one or more
nominees, as the Managing General Partner may determine. The Managing General
Partner hereby declares and warrants that any Partnership assets for which
record title is held in the name of the Managing General Partner or one or more
of its Affiliates or one or more nominees shall be held by the Managing General
Partner or such Affiliate or nominee for the use and benefit of the Partnership
in accordance with the provisions of this Agreement; provided, however, that the
Managing General Partner shall use reasonable efforts to cause record title to
such assets (other than those assets in respect of which the Managing General
Partner determines that the expense and difficulty of conveyancing makes
transfer of record title to the Partnership impracticable) to be vested in the
Partnership as soon as reasonably practicable; provided, further, that, prior to
the withdrawal or removal of the Managing General Partner or as soon thereafter
as practicable, the Managing General Partner shall use reasonable efforts to
effect the transfer of record title to the Partnership and, prior to any such
transfer, will provide for the use of such assets in a manner satisfactory to
the Managing General Partner. All Partnership assets shall be recorded as the
property of the Partnership in its books and records, irrespective of the name
in which record title to such Partnership assets is held.
ARTICLE III
RIGHTS OF LIMITED PARTNERS
SECTION 3.1 Limitation of Liability.
The Limited Partners and the Assignees shall have no liability under this
Agreement except as expressly provided in this Agreement or the Delaware Act.
SECTION 3.2 Management of Business.
No Limited Partner or Assignee, in its capacity as such, shall participate
in the operation, management or control (within the meaning of the Delaware Act)
of the Partnership's business, transact any business in the Partnership's name
or have the power to sign documents for or otherwise bind the Partnership. Any
action taken by any Affiliate of a General Partner or any officer, director,
employee, member, general partner, agent or trustee of a General Partner or any
of its Affiliates, or any officer, director, employee, member, general partner,
agent or trustee of a Group Member, in its capacity as such, shall not be deemed
to be participation in the control of the business of the Partnership by a
limited partner of the Partnership (within the meaning of Section 17-303(a) of
the Delaware Act) and shall not affect, impair or eliminate the limitations on
the liability of the Limited Partners or Assignees under this Agreement.
SECTION 3.3 Outside Activities of the Limited Partners.
Subject to the provisions of Section 7.5 and the Omnibus Agreement, which
shall continue to be applicable to the Persons referred to therein, regardless
of whether such Persons shall also be Limited Partners or Assignees, any Limited
Partner or Assignee shall be entitled to and may have business interests and
engage in business activities in addition to those relating to the Partnership,
including business interests and activities in direct competition with the
Partnership Group. Neither the Partnership nor any of the other Partners or
Assignees shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee.
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SECTION 3.4 Rights of Limited Partners.
(a) In addition to other rights provided by this Agreement or by applicable
law, and except as limited by Section 3.4(b), each Limited Partner shall have
the right, for a purpose reasonably related to such Limited Partner's interest
as a limited partner in the Partnership, upon reasonable written demand and at
such Limited Partner's own expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local income tax returns for each year;
(iii) to have furnished to him a current list of the name and last
known business, residence or mailing address of each Partner;
(iv) to have furnished to him a copy of this Agreement and the
Certificate of Limited Partnership and all amendments thereto, together
with a copy of the executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
(v) to obtain true and full information regarding the amount of cash
and a description and statement of the Net Agreed Value of any other
Capital Contribution by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
(b) The Managing General Partner may keep confidential from the Limited
Partners and Assignees, for such period of time as the Managing General Partner
deems reasonable, (i) any information that the Managing General Partner
reasonably believes to be in the nature of trade secrets or (ii) other
information the disclosure of which the Managing General Partner in good faith
believes (A) is not in the best interests of the Partnership Group, (B) could
damage the Partnership Group or (C) that any Group Member is required by law or
by agreement with any third party to keep confidential (other than agreements
with Affiliates of the Partnership the primary purpose of which is to circumvent
the obligations set forth in this Section 3.4).
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS
SECTION 4.1 Certificates.
Upon the Partnership's issuance of Common Units or Subordinated Units to
any Person, the Partnership shall issue one or more Certificates in the name of
such Person evidencing the number of such Units being so issued. In addition,
(a) upon a General Partner's request, the Partnership shall issue to it one or
more Certificates in the name of the General Partner evidencing its interests in
the Partnership and (b) upon the request of any Person owning Incentive
Distribution Rights or any other Partnership Securities other than Common Units
or Subordinated Units, the Partnership shall issue to such Person one or more
certificates evidencing such Incentive Distribution Rights or other Partnership
Securities other than Common Units or Subordinated Units. Certificates shall be
executed on behalf of the Partnership by the Chairman of the Board, President or
any Executive Vice President or Vice President and the Secretary or any
Assistant Secretary of the Managing General Partner. No Common Unit Certificate
shall be valid for any purpose until it has been countersigned by the Transfer
Agent; provided, however, that if the Managing General Partner elects to issue
Common Units in global form, the Common Unit Certificates shall be valid upon
receipt of a certificate from the Transfer Agent certifying that the Common
Units have been duly registered in accordance with the directions of the
Partnership and the Underwriters. Subject to the requirements of Section 6.7(b),
the Partners holding Certificates evidencing
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Subordinated Units may exchange such Certificates for Certificates evidencing
Common Units on or after the date on which such Subordinated Units are converted
into Common Units pursuant to the terms of Section 5.8.
SECTION 4.2 Mutilated, Destroyed, Lost or Stolen Certificates.
(a) If any mutilated Certificate is surrendered to the Transfer Agent, the
appropriate officers of the Managing General Partner on behalf of the
Partnership shall execute, and the Transfer Agent shall countersign and deliver
in exchange therefor, a new Certificate evidencing the same number and type of
Partnership Securities as the Certificate so surrendered.
(b) The appropriate officers of the Managing General Partner on behalf of
the Partnership shall execute and deliver, and the Transfer Agent shall
countersign a new Certificate in place of any Certificate previously issued if
the Record Holder of the Certificate:
(i) makes proof by affidavit, in form and substance satisfactory to the
Partnership, that a previously issued Certificate has been lost, destroyed
or stolen;
(ii) requests the issuance of a new Certificate before the Partnership
has notice that the Certificate has been acquired by a purchaser for value
in good faith and without notice of an adverse claim;
(iii) if requested by the Partnership, delivers to the Partnership a
bond, in form and substance satisfactory to the Partnership, with surety or
sureties and with fixed or open penalty as the Partnership may reasonably
direct, in its sole discretion, to indemnify the Partnership, the Partners,
the Managing General Partner and the Transfer Agent against any claim that
may be made on account of the alleged loss, destruction or theft of the
Certificate; and
(iv) satisfies any other reasonable requirements imposed by the
Partnership.
If a Limited Partner or Assignee fails to notify the Partnership within a
reasonable time after he has notice of the loss, destruction or theft of a
Certificate, and a transfer of the Limited Partner Interests represented by the
Certificate is registered before the Partnership, the Managing General Partner
or the Transfer Agent receives such notification, the Limited Partner or
Assignee shall be precluded from making any claim against the Partnership, the
Managing General Partner or the Transfer Agent for such transfer or for a new
Certificate.
(c) As a condition to the issuance of any new Certificate under this
Section 4.2, the Partnership may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Transfer
Agent) reasonably connected therewith.
SECTION 4.3 Record Holders.
The Partnership shall be entitled to recognize the Record Holder as the
Partner or Assignee with respect to any Partnership Interest and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such Partnership Interest on the part of any other Person, regardless of whether
the Partnership shall have actual or other notice thereof, except as otherwise
provided by law or any applicable rule, regulation, guideline or requirement of
any National Securities Exchange on which such Partnership Interests are listed
for trading. Without limiting the foregoing, when a Person (such as a broker,
dealer, bank, trust company or clearing corporation or an agent of any of the
foregoing) is acting as nominee, agent or in some other representative capacity
for another Person in acquiring and/or holding Partnership Interests, as between
the Partnership on the one hand, and such other Persons on the other, such
representative Person (a) shall be the Partner or Assignee (as the case may be)
of record and beneficially, (b) must execute and deliver a Transfer Application
and (c) shall be bound by this Agreement and shall have the rights and
obligations of a Partner or Assignee (as the case may be) hereunder and as, and
to the extent, provided for herein.
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SECTION 4.4 Transfer Generally.
(a) The term "transfer," when used in this Agreement with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which a
General Partner assigns its General Partner Interest to another Person who
becomes a General Partner, by which the holder of a Limited Partner Interest
assigns such Limited Partner Interest to another Person who is or becomes a
Limited Partner or an Assignee, and includes a sale, assignment, gift, pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise.
(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article IV.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article IV shall be null and void.
(c) Nothing contained in this Agreement shall be construed to prevent a
disposition by any stockholder of a General Partner of any or all of the issued
and outstanding stock of such General Partner.
SECTION 4.5 Registration and Transfer of Limited Partner Interests.
(a) The Partnership shall keep or cause to be kept on behalf of the
Partnership a register in which, subject to such reasonable regulations as it
may prescribe and subject to the provisions of Section 4.5(b), the Partnership
will provide for the registration and transfer of Limited Partner Interests. The
Transfer Agent is hereby appointed registrar and transfer agent for the purpose
of registering Common Units and transfers of such Common Units as herein
provided. The Partnership shall not recognize transfers of Certificates
evidencing Limited Partner Interests unless such transfers are effected in the
manner described in this Section 4.5. Upon surrender of a Certificate for
registration of transfer of any Limited Partner Interests evidenced by a
Certificate, and subject to the provisions of Section 4.5(b), the appropriate
officers of the Managing General Partner on behalf of the Partnership shall
execute and deliver, and in the case of Common Units, the Transfer Agent shall
countersign and deliver, in the name of the holder or the designated transferee
or transferees, as required pursuant to the holder's instructions, one or more
new Certificates evidencing the same aggregate number and type of Limited
Partner Interests as was evidenced by the Certificate so surrendered.
(b) Except as otherwise provided in Section 4.9, the Partnership shall not
recognize any transfer of Limited Partner Interests until the Certificates
evidencing such Limited Partner Interests are surrendered for registration of
transfer and such Certificates are accompanied by a Transfer Application duly
executed by the transferee (or the transferee's attorney- in-fact duly
authorized in writing). No charge shall be imposed by the Partnership for such
transfer; provided, that as a condition to the issuance of any new Certificate
under this Section 4.5, the Partnership may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
with respect thereto.
(c) Limited Partner Interests may be transferred only in the manner
described in this Section 4.5. The transfer of any Limited Partner Interests and
the admission of any new Limited Partner shall not constitute an amendment to
this Agreement.
(d) Until admitted as a Substituted Limited Partner pursuant to Section
10.2, the Record Holder of a Limited Partner Interest shall be an Assignee in
respect of such Limited Partner Interest. Limited Partners may include
custodians, nominees or any other individual or entity in its own or any
representative capacity.
(e) A transferee of a Limited Partner Interest who has completed and
delivered a Transfer Application shall be deemed to have (i) requested admission
as a Substituted Limited Partner, (ii) agreed to comply with and be bound by and
to have executed this Agreement, (iii) represented and warranted that such
transferee has the right, power and authority and, if an individual, the
capacity to enter into this Agreement, (iv) granted the powers of attorney set
forth in this Agreement and (v) given the consents and approvals and made the
waivers contained in this Agreement.
(f) The General Partners and their Affiliates shall have the right at any
time to transfer their Subordinated Units and Common Units (whether issued upon
conversion of the Subordinated Units or otherwise) to one or more Persons.
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SECTION 4.6 Transfer of the General Partners' General Partner Interests.
(a) Subject to Section 4.6(c) below, prior to September 30, 2009, a General
Partner shall not transfer all or any part of its General Partner Interest to a
Person unless such transfer (i) has been approved by the prior written consent
or vote of the holders of at least a majority of the Outstanding Common Units
(excluding Common Units held by the General Partners and their Affiliates) or
(ii) is of all, but not less than all, of its General Partner Interest to (A) an
Affiliate of such General Partner or (B) another Person in connection with the
merger or consolidation of such General Partner with or into another Person or
the transfer by such General Partner of all or substantially all of its assets
to another Person.
(b) Subject to Section 4.6(c) below, on or after September 30, 2009, a
General Partner may transfer all or any of its General Partner Interest without
Unitholder approval.
(c) Notwithstanding anything herein to the contrary, no transfer by a
General Partner of all or any part of its General Partner Interest to another
Person shall be permitted unless (i) the transferee agrees to assume the rights
and duties of such General Partner under this Agreement and the Intermediate
Partnership Agreement and, in the case of the Managing General Partner, the
managing member under the Operating Subsidiary Agreement and to be bound by the
provisions of this Agreement, the Intermediate Partnership Agreement and, in the
case of the Managing General Partner, the Operating Subsidiary Agreement, (ii)
the Partnership receives an Opinion of Counsel that such transfer would not
result in the loss of limited liability of any Limited Partner or of any limited
partner of the Intermediate Partnership or of any member of the Operating
Subsidiary or cause the Partnership, the Intermediate Partnership or the
Operating Subsidiary to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes (to the
extent not already so treated or taxed), (iii) in the case of a transfer of the
Managing Partner's General Partner Interest, such transferee also agrees to
purchase all (or the appropriate portion thereof, if applicable) of the
partnership interest of the Managing General Partner as the general partner or
managing member of each other Group Member and (iv) in the case of a transfer of
the Special General Partner's General Partner Interest (x) such transferee also
agrees to purchase all (or the appropriate portion thereof, if applicable) of
the partnership interest of the Special General Partner as the general partner
of the Intermediate Partnership and (y) the Managing General Partner consents to
such transfer. In the case of a transfer pursuant to and in compliance with this
Section 4.6, the transferee or successor (as the case may be) shall, subject to
compliance with the terms of Section 10.3, be admitted to the Partnership as a
General Partner immediately prior to the transfer of the Partnership Interest,
and the business of the Partnership shall continue without dissolution.
SECTION 4.7 Transfer of Incentive Distribution Rights.
Prior to September 30, 2009, a holder of Incentive Distribution Rights may
transfer any or all of the Incentive Distribution Rights held by such holder
without any consent of the Unitholders (a) to an Affiliate or (b) to another
Person in connection with (i) the merger or consolidation of such holder of
Incentive Distribution Rights with or into such other Person or (ii) the
transfer by such holder of all or substantially all of its assets to such other
Person. Any other transfer of the Incentive Distribution Rights prior to
September 30, 2009, shall require the prior approval of holders of at least a
majority of the Outstanding Common Units (excluding Common Units held by the
General Partners and their Affiliates). On or after September 30, 2009, the
Managing General Partner or any other holder of Incentive Distribution Rights
may transfer any or all of its Incentive Distribution Rights without Unitholder
approval. Notwithstanding anything herein to the contrary, no transfer of
Incentive Distribution Rights to another Person shall be permitted unless the
transferee agrees to be bound by the provisions of this Agreement. The Managing
General Partner shall have the authority (but shall not be required) to adopt
such reasonable restrictions on the transfer of Incentive Distribution Rights
and requirements for registering the transfer of Incentive Distribution Rights
as the Managing General Partner, in its sole discretion, shall determine are
necessary or appropriate.
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SECTION 4.8 Restrictions on Transfers.
(a) Except as provided in Section 4.8(d) below, but notwithstanding the
other provisions of this Article IV, no transfer of any Partnership Interests
shall be made if such transfer would (i) violate the then applicable federal or
state securities laws or rules and regulations of the Commission, any state
securities commission or any other governmental authority with jurisdiction over
such transfer, (ii) terminate the existence or qualification of the Partnership,
the Intermediate Partnership or the Operating Subsidiary under the laws of the
jurisdiction of its formation, or (iii) cause the Partnership, the Intermediate
Partnership or the Operating Subsidiary to be treated as an association taxable
as a corporation or otherwise to be taxed as an entity for federal income tax
purposes (to the extent not already so treated or taxed).
(b) The Managing General Partner may impose restrictions on the transfer of
Partnership Interests if a subsequent Opinion of Counsel determines that such
restrictions are necessary to avoid a significant risk of the Partnership, the
Intermediate Partnership or the Operating Subsidiary becoming taxable as a
corporation or otherwise to be taxed as an entity for federal income tax
purposes. The restrictions may be imposed by making such amendments to this
Agreement as the Managing General Partner may determine to be necessary or
appropriate to impose such restrictions; provided, however, that any amendment
that the Managing General Partner believes, in the exercise of its reasonable
discretion, could result in the delisting or suspension of trading of any class
of Limited Partner Interests on the principal National Securities Exchange on
which such class of Limited Partner Interests is then traded must be approved,
prior to such amendment being effected, by the holders of at least a majority of
the Outstanding Limited Partner Interests of such class.
(c) The transfer of a Subordinated Unit that has converted into a Common
Unit shall be subject to the restrictions imposed by Section 6.7(b).
(d) Nothing contained in this Article IV, or elsewhere in this Agreement,
shall preclude the settlement of any transactions involving Partnership
Interests entered into through the facilities of any National Securities
Exchange on which such Partnership Interests are listed for trading.
SECTION 4.9 Citizenship Certificates; Non-citizen Assignees.
(a) If any Group Member is or becomes subject to any federal, state or
local law or regulation that, in the reasonable determination of the Managing
General Partner, creates a substantial risk of cancellation or forfeiture of any
property in which the Group Member has an interest based on the nationality,
citizenship or other related status of a Limited Partner or Assignee, the
Managing General Partner may request any Limited Partner or Assignee to furnish
to the Managing General Partner, within 30 days after receipt of such request,
an executed Citizenship Certification or such other information concerning his
nationality, citizenship or other related status (or, if the Limited Partner or
Assignee is a nominee holding for the account of another Person, the
nationality, citizenship or other related status of such Person) as the Managing
General Partner may request. If a Limited Partner or Assignee fails to furnish
to the Managing General Partner within the aforementioned 30-day period such
Citizenship Certification or other requested information or if upon receipt of
such Citizenship Certification or other requested information the Managing
General Partner determines, with the advice of counsel, that a Limited Partner
or Assignee is not an Eligible Citizen, the Partnership Interests owned by such
Limited Partner or Assignee shall be subject to redemption in accordance with
the provisions of Section 4.10. In addition, the Managing General Partner may
require that the status of any such Partner or Assignee be changed to that of a
Non-citizen Assignee and, thereupon, the Managing General Partner shall be
substituted for such Non-citizen Assignee as the Limited Partner in respect of
his Limited Partner Interests.
(b) The Managing General Partner shall, in exercising voting rights in
respect of Limited Partner Interests held by it on behalf of Non-citizen
Assignees, distribute the votes in the same ratios as the votes of Partners
(including without limitation the General Partners) in respect of Limited
Partner Interests other than those of Non-citizen Assignees are cast, either
for, against or abstaining as to the matter.
(c) Upon dissolution of the Partnership, a Non-citizen Assignee shall have
no right to receive a distribution in kind pursuant to Section 12.4 but shall be
entitled to the cash equivalent thereof, and the Partnership shall provide cash
in
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exchange for an assignment of the Non-citizen Assignee's share of the
distribution in kind. Such payment and assignment shall be treated for
Partnership purposes as a purchase by the Partnership from the Non-citizen
Assignee of his Limited Partner Interest (representing his right to receive his
share of such distribution in kind).
(d) At any time after he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to the Managing
General Partner, request admission as a Substituted Limited Partner with respect
to any Limited Partner Interests of such Non-citizen Assignee not redeemed
pursuant to Section 4.10, and upon his admission pursuant to Section 10.2, the
Managing General Partner shall cease to be deemed to be the Limited Partner in
respect of the Non-citizen Assignee's Limited Partner Interests.
SECTION 4.10 Redemption of Partnership Interests of Non-citizen Assignees.
(a) If at any time a Limited Partner or Assignee fails to furnish a
Citizenship Certification or other information requested within the 30-day
period specified in Section 4.9(a), or if upon receipt of such Citizenship
Certification or other information the Managing General Partner determines, with
the advice of counsel, that a Limited Partner or Assignee is not an Eligible
Citizen, the Partnership may, unless the Limited Partner or Assignee establishes
to the satisfaction of the Managing General Partner that such Limited Partner or
Assignee is an Eligible Citizen or has transferred his Partnership Interests to
a Person who is an Eligible Citizen and who furnishes a Citizenship
Certification to the Managing General Partner prior to the date fixed for
redemption as provided below, redeem the Partnership Interest of such Limited
Partner or Assignee as follows:
(i) The Managing General Partner shall, not later than the 30th day
before the date fixed for redemption, give notice of redemption to the
Limited Partner or Assignee, at his last address designated on the records
of the Partnership or the Transfer Agent, by registered or certified mail,
postage prepaid. The notice shall be deemed to have been given when so
mailed. The notice shall specify the Redeemable Interests, the date fixed
for redemption, the place of payment, that payment of the redemption price
will be made upon surrender of the Certificate evidencing the Redeemable
Interests and that on and after the date fixed for redemption no further
allocations or distributions to which the Limited Partner or Assignee would
otherwise be entitled in respect of the Redeemable Interests will accrue or
be made.
(ii) The aggregate redemption price for Redeemable Interests shall be
an amount equal to the Current Market Price (the date of determination of
which shall be the date fixed for redemption) of Limited Partner Interests
of the class to be so redeemed multiplied by the number of Limited Partner
Interests of each such class included among the Redeemable Interests. The
redemption price shall be paid, in the discretion of the Managing General
Partner, in cash or by delivery of a promissory note of the Partnership in
the principal amount of the redemption price, bearing interest at the rate
of 10% annually and payable in three equal annual installments of principal
together with accrued interest, commencing one year after the redemption
date.
(iii) Upon surrender by or on behalf of the Limited Partner or
Assignee, at the place specified in the notice of redemption, of the
Certificate evidencing the Redeemable Interests, duly endorsed in blank or
accompanied by an assignment duly executed in blank, the Limited Partner or
Assignee or his duly authorized representative shall be entitled to receive
the payment therefor.
(iv) After the redemption date, Redeemable Interests shall no longer
constitute issued and Outstanding Limited Partner Interests.
(b) The provisions of this Section 4.10 shall also be applicable to Limited
Partner Interests held by a Limited Partner or Assignee as nominee of a Person
determined to be other than an Eligible Citizen.
(c) Nothing in this Section 4.10 shall prevent the recipient of a notice of
redemption from transferring his Limited Partner Interest before the redemption
date if such transfer is otherwise permitted under this Agreement. Upon receipt
of notice of such a transfer, the Managing General Partner shall withdraw the
notice of redemption, provided the transferee of such Limited Partner Interest
certifies to the satisfaction of the Managing General Partner in a Citizenship
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Certification delivered in connection with the Transfer Application that he is
an Eligible Citizen. If the transferee fails to make such certification, such
redemption shall be effected from the transferee on the original redemption
date.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
SECTION 5.1 Organizational Contributions.
In connection with the formation of the Partnership under the Delaware Act,
the Special General Partner made an initial Capital Contribution to the
Partnership in the amount of $10.00, for a certain interest in the Partnership
and has been admitted as a General Partner and as a Limited Partner of the
Partnership, and the Organizational Limited Partner made an initial Capital
Contribution to the Partnership in the amount of $990.00 for an interest in the
Partnership and has been admitted as a Limited Partner of the Partnership. As of
the Closing Date, the interest of the Organizational Limited Partner shall be
redeemed as provided in the Contribution Agreement; the initial Capital
Contributions of each Partner shall thereupon be refunded; and the
Organizational Limited Partner shall cease to be a Limited Partner of the
Partnership. One percent of any interest or other profit that may have resulted
from the investment or other use of such initial Capital Contributions shall be
allocated and distributed to the Organizational Limited Partner, and the balance
thereof shall be allocated and distributed to the Special General Partner.
SECTION 5.2 Contributions by the General Partners and their Affiliates.
(a) On the Closing Date and pursuant to the Contribution Agreement (i) the
Managing General Partner shall contribute $2,926,983 in cash to the Partnership
in exchange for a .99% managing general partner interest in the Partnership and
the Incentive Distribution Rights, (ii) the Managing General Partner shall
contribute $2,987,016 million in cash to the Intermediate Partnership in
exchange for a 1.0001% managing general partner interest in the Intermediate
Partnership, (iii) the Managing General Partner shall contribute $2,987 to the
Operating Subsidiary in exchange for a .001% managing member interest in the
Operating Subsidiary, (iv) the Special General Partner shall contribute a 100%
interest in the operating subsidiary to the Intermediate Partnership in exchange
for (A) a .01% special general partner interest in the Intermediate Partnership,
(B) a limited partner interest in the Intermediate Partnership and (C) the
Intermediate Partnership's assumption of the Special General Partner's
obligations under $180 million of senior notes and a $100 million credit
facility and (v) the Special General Partner shall contribute its limited
partner interest in the Intermediate Partnership to the Partnership in exchange
for (A) a .01% special general partner interest in the Partnership, (B)
6,422,531 Subordinated Units and (C) 1,232,780 Common Units.
(b) Upon the issuance of any additional Limited Partner Interests by the
Partnership (other than the issuance of the Common Units issued in the Initial
Offering and other than the issuance of the Common Units issued pursuant to the
Over-Allotment Option), the Managing General Partner and the Special General
Partner shall be required to make additional Capital Contributions equal to its
percentage interest of 1/99th of any amount contributed to the Partnership by
the Limited Partners in exchange for such additional Limited Partner Interests.
Except as set forth in the immediately preceding sentence and Article XII, the
General Partners shall not be obligated to make any additional Capital
Contributions to the Partnership.
SECTION 5.3 Contributions by Initial Limited Partners and Reimbursement of the
Special General Partner.
(a) On the Closing Date and pursuant to the Underwriting Agreement, each
Underwriter shall contribute to the Partnership cash in an amount equal to the
Issue Price per Initial Common Unit, multiplied by the number of Common Units
specified in the Underwriting Agreement to be purchased by such Underwriter at
the Closing Date. In exchange for such Capital Contributions by the
Underwriters, the Partnership shall issue Common Units to each Underwriter on
whose behalf such Capital Contribution is made in an amount equal to the
quotient obtained by dividing (i) the cash contribution to the Partnership by or
on behalf of such Underwriter by (ii) the Issue Price per Initial Common Unit.
(b) Notwithstanding anything else herein contained, $64,750,000 of the
proceeds received by the Partnership from the issuance of Common Units pursuant
to Section 5.3(a) will be distributed to the Special General Partner. Such
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distribution shall be a reimbursement for certain capital expenditures incurred
within two years preceding the Closing Date with respect to assets contributed
to the Partnership Group.
(c) Upon the exercise of the Over-Allotment Option, each Underwriter shall
contribute to the Partnership cash in an amount equal to the Issue Price per
Initial Common Unit, multiplied by the number of Common Units specified in the
Underwriting Agreement to be purchased by such Underwriter at the Option Closing
Date. In exchange for such Capital Contributions by the Underwriters, the
Partnership shall issue Common Units to each Underwriter on whose behalf such
Capital Contribution is made in an amount equal to the quotient obtained by
dividing (i) the cash contributions to the Partnership by or on behalf of such
Underwriter by (ii) the Issue Price per Initial Common Unit. Upon receipt by the
Partnership of the Capital Contributions from the Underwriters as provided in
this Section 5.3(c), the Partnership shall use such cash to redeem from the
Special General Partner or its Affiliates that number of Common Units held by
the Special General Partner or its Affiliates equal to the number of Common
Units (rounded down to the nearest whole number) issued to the Underwriters as
provided in this Section 5.3(c).
(d) No Limited Partner Interests will be issued or issuable as of or at the
Closing Date other than (i) the Common Units issuable pursuant to subparagraph
(a) hereof in aggregate number equal to 7,750,000, (ii) the "Additional Units"
as such term is used in the Underwriting Agreement in an aggregate number up to
1,162,500 issuable upon exercise of the Over-Allotment Option pursuant to
subparagraph (c) hereof, (iii) the 6,422,531 Subordinated Units issuable to the
Special General Partner or its Affiliates pursuant to Section 5.2 hereof, (iv)
the 1,232,780 Common Units issuable to the Special General Partner or its
Affiliates pursuant to Section 5.2 hereof, and (v) the Incentive Distribution
Rights.
SECTION 5.4 Interest and Withdrawal.
No interest shall be paid by the Partnership on Capital Contributions. No
Partner or Assignee shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent, if any, that distributions made pursuant to
this Agreement or upon termination of the Partnership may be considered as such
by law and then only to the extent provided for in this Agreement. Except to the
extent expressly provided in this Agreement, no Partner or Assignee shall have
priority over any other Partner or Assignee either as to the return of Capital
Contributions or as to profits, losses or distributions. Any such return shall
be a compromise to which all Partners and Assignees agree within the meaning of
17-502(b) of the Delaware Act.
SECTION 5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a beneficial owner
of Partnership Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the Managing
General Partner in its sole discretion) owning a Partnership Interest a separate
Capital Account with respect to such Partnership Interest in accordance with the
rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account
shall be increased by (i) the amount of all Capital Contributions made to the
Partnership with respect to such Partnership Interest pursuant to this Agreement
and (ii) all items of Partnership income and gain (including, without
limitation, income and gain exempt from tax) computed in accordance with Section
5.5(b) and allocated with respect to such Partnership Interest pursuant to
Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all
actual and deemed distributions of cash or property made with respect to such
Partnership Interest pursuant to this Agreement and (y) all items of Partnership
deduction and loss computed in accordance with Section 5.5(b) and allocated with
respect to such Partnership Interest pursuant to Section 6.1.
(b) For purposes of computing the amount of any item of income, gain, loss
or deduction which is to be allocated pursuant to Article VI and is to be
reflected in the Partners' Capital Accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes (including,
without limitation, any method of depreciation, cost recovery or amortization
used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Partnership shall be
treated as owning directly its proportionate share (as determined by the
Managing General Partner based upon the provisions of the Intermediate
Partnership
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Agreement and the Operating Subsidiary Agreement) of all property owned by
the Intermediate Partnership, the Operating Subsidiary or any other
Subsidiary that is classified as a partnership for federal income tax
purposes.
(ii) All fees and other expenses incurred by the Partnership to promote
the sale of (or to sell) a Partnership Interest that can neither be
deducted nor amortized under Section 709 of the Code, if any, shall, for
purposes of Capital Account maintenance, be treated as an item of deduction
at the time such fees and other expenses are incurred and shall be
allocated among the Partners pursuant to Section 6.1.
(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss
and deduction shall be made without regard to any election under Section
754 of the Code which may be made by the Partnership and, as to those items
described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without
regard to the fact that such items are not includable in gross income or
are neither currently deductible nor capitalized for federal income tax
purposes. To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Section 734(b) or 743(b) of the Code is
required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to
be taken into account in determining Capital Accounts, the amount of such
adjustment in the Capital Accounts shall be treated as an item of gain or
loss.
(iv) Any income, gain or loss attributable to the taxable disposition
of any Partnership property shall be determined as if the adjusted basis of
such property as of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as of such date.
(v) In accordance with the requirements of Section 704(b) of the Code,
any deductions for depreciation, cost recovery or amortization attributable
to any Contributed Property shall be determined as if the adjusted basis of
such property on the date it was acquired by the Partnership were equal to
the Agreed Value of such property. Upon an adjustment pursuant to Section
5.5(d) to the Carrying Value of any Partnership property subject to
depreciation, cost recovery or amortization, any further deductions for
such depreciation, cost recovery or amortization attributable to such
property shall be determined (A) as if the adjusted basis of such property
were equal to the Carrying Value of such property immediately following
such adjustment and (B) using a rate of depreciation, cost recovery or
amortization derived from the same method and useful life (or, if
applicable, the remaining useful life) as is applied for federal income tax
purposes; provided, however, that, if the asset has a zero adjusted basis
for federal income tax purposes, depreciation, cost recovery or
amortization deductions shall be determined using any reasonable method
that the Managing General Partner may adopt.
(vi) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant to
Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is placed
in service and shall be allocated among the Partners pursuant to Section
6.1. Any restoration of such basis pursuant to Section 48(q)(2) of the Code
shall, to the extent possible, be allocated in the same manner to the
Partners to whom such deemed deduction was allocated.
(c) (i) A transferee of a Partnership Interest shall succeed to a pro
rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.
(ii) Immediately prior to the transfer of a Subordinated Unit or of a
Subordinated Unit that has converted into a Common Unit pursuant to Section
5.8 by a holder thereof (other than a transfer to an Affiliate unless the
Special General Partner elects to have this subparagraph 5.5(c)(ii) apply),
the Capital Account maintained for such Person with respect to its
Subordinated Units or converted Subordinated Units will (A) first, be
allocated to the Subordinated Units or converted Subordinated Units to be
transferred in an amount equal to the product of (x) the number of such
Subordinated Units or converted Subordinated Units to be transferred and
(y) the Per Unit Capital Amount for a Common Unit, and (B) second, any
remaining balance in such Capital Account will be retained by the
transferor, regardless of whether it has retained any Subordinated Units or
converted Subordinated Units. Following any such allocation, the
transferor's Capital Account, if any, maintained with respect to the
retained Subordinated Units or converted Subordinated Units, if any, will
have a balance equal to the amount allocated under clause (B) hereinabove,
and the transferee's Capital Account established with respect to the
transferred Subordinated
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Units or converted Subordinated Units will have a balance equal to the
amount allocated under clause (A) hereinabove.
(d) (i) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests
for cash or Contributed Property or the conversion of a General Partner's
Combined Interest to Common Units pursuant to Section 11.3(b), the Capital
Account of all Partners and the Carrying Value of each Partnership property
immediately prior to such issuance shall be adjusted upward or downward to
reflect any Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as if such Unrealized Gain or Unrealized Loss had
been recognized on an actual sale of each such property immediately prior
to such issuance and had been allocated to the Partners at such time
pursuant to Section 6.1 in the same manner as any item of gain or loss
actually recognized during such period would have been allocated. In
determining such Unrealized Gain or Unrealized Loss, the aggregate cash
amount and fair market value of all Partnership assets (including, without
limitation, cash or cash equivalents) immediately prior to the issuance of
additional Partnership Interests shall be determined by the Managing
General Partner using such reasonable method of valuation as it may adopt;
provided, however, that the Managing General Partner, in arriving at such
valuation, must take fully into account the fair market value of the
Partnership Interests of all Partners at such time. The Managing General
Partner shall allocate such aggregate value among the assets of the
Partnership (in such manner as it determines in its discretion to be
reasonable) to arrive at a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Partner of any Partnership property (other than a
distribution of cash that is not in redemption or retirement of a
Partnership Interest), the Capital Accounts of all Partners and the
Carrying Value of all Partnership property shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable to
such Partnership property, as if such Unrealized Gain or Unrealized Loss
had been recognized in a sale of such property immediately prior to such
distribution for an amount equal to its fair market value, and had been
allocated to the Partners, at such time, pursuant to Section 6.1 in the
same manner as any item of gain or loss actually recognized during such
period would have been allocated. In determining such Unrealized Gain or
Unrealized Loss the aggregate cash amount and fair market value of all
Partnership assets (including, without limitation, cash or cash
equivalents) immediately prior to a distribution shall (A) in the case of
an actual distribution which is not made pursuant to Section 12.4 or in the
case of a deemed distribution, be determined and allocated in the same
manner as that provided in Section 5.5(d)(i) or (B) in the case of a
liquidating distribution pursuant to Section 12.4, be determined and
allocated by the Liquidator using such reasonable method of valuation as it
may adopt.
SECTION 5.6 Issuances of Additional Partnership Securities.
(a) Subject to Section 5.7, the Partnership may issue additional
Partnership Securities and options, rights, warrants and appreciation rights
relating to the Partnership Securities for any Partnership purpose at any time
and from time to time to such Persons for such consideration and on such terms
and conditions as shall be established by the Managing General Partner in its
sole discretion, all without the approval of any Limited Partners.
(b) Each additional Partnership Security authorized to be issued by the
Partnership pursuant to Section 5.6(a) may be issued in one or more classes, or
one or more series of any such classes, with such designations, preferences,
rights, powers and duties (which may be senior to existing classes and series of
Partnership Securities), as shall be fixed by the Managing General Partner in
the exercise of its sole discretion, including (i) the right to share
Partnership profits and losses or items thereof; (ii) the right to share in
Partnership distributions; (iii) the rights upon dissolution and liquidation of
the Partnership; (iv) whether, and the terms and conditions upon which, the
Partnership may redeem the Partnership Security; (v) whether such Partnership
Security is issued with the privilege of conversion or exchange and, if so, the
terms and conditions of such conversion or exchange; (vi) the terms and
conditions upon which each Partnership Security will be issued, evidenced by
certificates and assigned or transferred; and (vii) the right, if any, of each
such Partnership Security to vote on Partnership matters, including matters
relating to the relative rights, preferences and privileges of such Partnership
Security.
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(c) The Managing General Partner is hereby authorized and directed to take
all actions that it deems necessary or appropriate in connection with (i) each
issuance of Partnership Securities and options, rights, warrants and
appreciation rights relating to Partnership Securities pursuant to this Section
5.6, (ii) the conversion of any General Partner Interest or Incentive
Distribution Rights into Units pursuant to the terms of this Agreement, (iii)
the admission of Additional Limited Partners and (iv) all additional issuances
of Partnership Securities. The Managing General Partner is further authorized
and directed to specify the relative rights, powers and duties of the holders of
the Units or other Partnership Securities being so issued. The Managing General
Partner shall do all things necessary to comply with the Delaware Act and is
authorized and directed to do all things it deems to be necessary or advisable
in connection with any future issuance of Partnership Securities or in
connection with the conversion of any General Partner Interest or Incentive
Distribution Rights into Units pursuant to the terms of this Agreement,
including compliance with any statute, rule, regulation or guideline of any
federal, state or other governmental agency or any National Securities Exchange
on which the Units or other Partnership Securities are listed for trading.
SECTION 5.7 Limitations on Issuance of Additional Partnership Securities.
The issuance of Partnership Securities pursuant to Section 5.6 shall be
subject to the following restrictions and limitations:
(a) During Subordination Period, the Partnership shall not issue (and shall
not issue any options, rights, warrants or appreciation rights relating to) an
aggregate of more than 4,491,390 additional Parity Units without the prior
approval of the holders of a Unit Majority. In applying this limitation, there
shall be excluded Common Units and other Parity Units issued (A) in connection
with the exercise of the Over-Allotment Option, (B) in accordance with Sections
5.7(b) and 5.7(c), (C) upon conversion of Subordinated Units pursuant to Section
5.8, (D) upon conversion of any General Partner Interest or Incentive
Distribution Rights pursuant to Section 11.3(b), (D) pursuant to the employee
benefit plans of the Managing General Partner, the Partnership or any other
Group Member and (E) in the event of a combination or subdivision of Common
Units.
(b) The Partnership may also issue an unlimited number of Parity Units,
prior to the end of the Subordination Period and without the prior approval of
the Unitholders, if such issuance occurs (i) in connection with an Acquisition
or a Capital Improvement or (ii) within 365 days of, and the net proceeds from
such issuance are used to repay debt incurred in connection with, an Acquisition
or a Capital Improvement, in each case where such Acquisition or Capital
Improvement involves assets that, if acquired by the Partnership as of the date
that is one year prior to the first day of the Quarter in which such Acquisition
is to be consummated or such Capital Improvement is to be completed, would have
resulted, on a pro forma basis, in an increase in:
(A) the amount of Adjusted Operating Surplus generated by the
Partnership on a per-Unit basis (for all Outstanding Units) with respect to
each of the four most recently completed Quarters (on a pro forma basis as
described below) as compared to
(B) the actual amount of Adjusted Operating Surplus generated by the
Partnership on a per-Unit basis (for all Outstanding Units) (excluding
Adjusted Operating Surplus attributable to the Acquisition or Capital
Improvement) with respect to each of such four most recently completed
Quarters.
If the issuance of Parity Units with respect to an Acquisition or Capital
Improvement occurs within the first four full Quarters after the Closing Date,
then Adjusted Operating Surplus as used in clauses (A) (subject to the
succeeding sentence) and (B) above shall be calculated (i) for each Quarter, if
any, that commenced after the Closing Date for which actual results of
operations are available, based on the actual Adjusted Operating Surplus of the
Partnership generated with respect to such Quarter, and (ii) for each other
Quarter, on a pro forma basis consistent with the procedures, as applicable, set
forth in Appendix D to the Registration Statement. Furthermore, the amount in
clause (A) shall be determined on a pro forma basis assuming that (1) all of the
Parity Units to be issued in connection with or within 365 days of such
Acquisition or Capital Improvement had been issued and outstanding, (2) all
indebtedness for borrowed money to be incurred or assumed in connection with
such Acquisition or Capital Improvement (other than any such indebtedness that
is to be repaid with the proceeds of such issuance of Parity Units) had been
incurred or assumed, in each case as of the commencement of such four-Quarter
period, (3) the personnel expenses that would have been
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incurred by the Partnership in the operation of the acquired assets are the
personnel expenses for employees to be retained by the Partnership in the
operation of the acquired assets, and (4) the non-personnel costs and expenses
are computed on the same basis as those incurred by the Partnership in the
operation of the Partnership's business at similarly situated Partnership
facilities.
(c) The Partnership may also issue an unlimited number of Parity Units,
prior to the end of the Subordination Period and without the approval of the
Unitholders, if the proceeds from such issuance are used exclusively to repay up
to $40 million of indebtedness of a Group Member where the aggregate amount of
distributions that would have been paid with respect to such newly issued Units
or Partnership Securities, plus the related distributions on the General Partner
Interests in the Partnership, the general partner interest in the Intermediate
Partnership and the member interest in the Operating Subsidiary in respect of
the four-Quarter period ending prior to the first day of the Quarter in which
the issuance is to be consummated (assuming such additional Units or Partnership
Securities had been Outstanding throughout such period and that distributions
equal to the distributions that were actually paid on the Outstanding Units
during the period were paid on such additional Units or Partnership Securities)
did not exceed the interest costs actually incurred during such period on the
indebtedness that is to be repaid (or, if such indebtedness was not outstanding
throughout the entire period, would have been incurred had such indebtedness
been outstanding for the entire period). In the event that the Partnership is
required to pay a prepayment penalty in connection with the repayment of such
indebtedness, for purposes of the foregoing test the number of Parity Units
issued to repay such indebtedness shall be deemed increased by the number of
Parity Units that would need to be issued to pay such penalty.
(d) During the Subordination Period, the Partnership shall not issue (and
shall not issue any options, rights, warrants or appreciation rights relating
to) additional Partnership Securities having rights to distributions or in
liquidation ranking prior or senior to the Common Units, without the prior
approval of the holders of a Unit Majority.
(e) No fractional Units shall be issued by the Partnership.
SECTION 5.8 Conversion of Subordinated Units.
(a) A total of one-half of the Outstanding Subordinated Units (determined
as of the Closing Date) will convert into Common Units on a one-for-one basis on
the first day after the Record Date for distribution in respect of any Quarter
ending on or after September 30, 2003, in respect of which:
(i) distributions under Section 6.4 in respect of all Outstanding
Common Units and Subordinated Units with respect to each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of the Minimum Quarterly Distribution
on all of the Outstanding Common Units and Subordinated Units during such
periods;
(ii) the Adjusted Operating Surplus generated during each of the two
consecutive, non-overlapping four- Quarter periods immediately preceding
such date equaled or exceeded 110% of the sum of the Minimum Quarterly
Distribution on all of the Common Units and Subordinated Units that were
Outstanding during such periods on a fully-diluted basis (i.e. taking into
account for purposes of such determination all Outstanding Common Units,
all Outstanding Subordinated Units, all Common Units and Subordinated Units
issuable upon exercise of employee options that have, as of the date of
determination, already vested or are scheduled to vest prior to the end of
the Quarter immediately following the Quarter with respect to which such
determination is made, and all Common Units and Subordinated Units that
have, as of the date of determination, been earned by but not yet issued to
management of the Partnership in respect of incentive compensation), plus
the related distribution on the General Partner Interests in the
Partnership, the general partner interest in the Intermediate Partnership
and the member interest in the Operating Subsidiary, during such periods;
and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units
is zero.
(b) In the event that less than all of the Outstanding Subordinated Units
shall convert into Common Units pursuant to Section 5.8(a) at a time when there
shall be more than one holder of Subordinated Units, then, unless all of the
holders of Subordinated Units shall agree to a different allocation, the
Subordinated Units that are to be converted into Common
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Units shall be allocated among the holders of Subordinated Units pro rata based
on the number of Subordinated Units held by each such holder.
(c) Any Subordinated Units that are not converted into Common Units
pursuant to Section 5.8(a) shall convert into Common Units on a one-for-one
basis on the first day following the Record Date for distributions in respect of
the final Quarter of the Subordination Period.
(d) Notwithstanding any other provision of this Agreement, all the then
Outstanding Subordinated Units will automatically convert into Common Units on a
one-for-one basis as set forth in, and pursuant to the terms of, Section 11.4.
(e) A Subordinated Unit that has converted into a Common Unit shall be
subject to the provisions of Section 6.7(b).
(f) For purposes of determining whether the test in Section 5.8(a)(ii)
above has been satisfied, Adjusted Operating Surplus will be adjusted upwards or
downwards if the Conflicts Committee determines in good faith that the amount of
Estimated Maintenance Capital Expenditures used in the determination of Adjusted
Operating Surplus in Section 5.8(a)(ii) was materially incorrect, based on
circumstances prevailing at the time of original determination of Estimated
Maintenance Capital Expenditures, for any one or more of the preceding two
four-quarter periods.
SECTION 5.9 Limited Preemptive Right.
Except as provided in this Section 5.9 and in Section 5.2, no Person shall
have any preemptive, preferential or other similar right with respect to the
issuance of any Partnership Security, whether unissued, held in the treasury or
hereafter created. The General Partners shall have the right, which they may
from time to time assign in whole or in part to any of their Affiliates, to
purchase Partnership Securities from the Partnership whenever, and on the same
terms that, the Partnership issues Partnership Securities to Persons other than
the General Partners and their Affiliates, to the extent necessary to maintain
the Percentage Interests of the General Partners and their Affiliates equal to
that which existed immediately prior to the issuance of such Partnership
Securities.
SECTION 5.10 Splits and Combinations.
(a) Subject to Sections 5.10(d), 6.6 and 6.9 (dealing with adjustments of
distribution levels), the Partnership may make a Pro Rata distribution of
Partnership Securities to all Record Holders or may effect a subdivision or
combination of Partnership Securities so long as, after any such event, each
Partner shall have the same Percentage Interest in the Partnership as before
such event, and any amounts calculated on a per Unit basis (including any Common
Unit Arrearage or Cumulative Common Unit Arrearage) or stated as a number of
Units (including the number of Subordinated Units that may convert prior to the
end of the Subordination Period and the number of additional Parity Units that
may be issued pursuant to Section 5.7 without a Unitholder vote) are
proportionately adjusted retroactive to the beginning of the Partnership.
(b) Whenever such a distribution, subdivision or combination of Partnership
Securities is declared, the Managing General Partner shall select a Record Date
as of which the distribution, subdivision or combination shall be effective and
shall send notice thereof at least 20 days prior to such Record Date to each
Record Holder as of a date not less than 10 days prior to the date of such
notice. The Managing General Partner also may cause a firm of independent public
accountants selected by it to calculate the number of Partnership Securities to
be held by each Record Holder after giving effect to such distribution,
subdivision or combination. The Managing General Partner shall be entitled to
rely on any certificate provided by such firm as conclusive evidence of the
accuracy of such calculation.
(c) Promptly following any such distribution, subdivision or combination,
the Partnership may issue Certificates to the Record Holders of Partnership
Securities as of the applicable Record Date representing the new number of
Partnership Securities held by such Record Holders, or the Managing General
Partner may adopt such other procedures as it may deem appropriate to reflect
such changes. If any such combination results in a smaller total number of
Partnership Securities Outstanding, the Partnership shall require, as a
condition to the delivery to a Record Holder of
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such new Certificate, the surrender of any Certificate held by such Record
Holder immediately prior to such Record Date.
(d) The Partnership shall not issue fractional Units upon any distribution,
subdivision or combination of Units. If a distribution, subdivision or
combination of Units would result in the issuance of fractional Units but for
the provisions of Section 5.7(e) and this Section 5.10(d), each fractional Unit
shall be rounded to the nearest whole Unit (and a 0.5 Unit shall be rounded to
the next higher Unit).
SECTION 5.11 Fully Paid and Non-Assessable Nature of Limited Partner Interests.
All Limited Partner Interests issued pursuant to, and in accordance with
the requirements of, this Article V shall be fully paid and non-assessable
Limited Partner Interests in the Partnership, except as such non-assessability
may be affected by Section 17-607 of the Delaware Act.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
SECTION 6.1 Allocations for Capital Account Purposes.
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
(a) Net Income. After giving effect to the special allocations set forth in
Section 6.1(d), Net Income for each taxable year and all items of income, gain,
loss and deduction taken into account in computing Net Income for such taxable
year shall be allocated as follows:
(i) First, 100% to the General Partners, Pro Rata, in an amount equal
to the aggregate Net Losses allocated to the General Partners pursuant to
Section 6.1(b)(iii) for all previous taxable years until the aggregate Net
Income allocated to the General Partners pursuant to this Section 6.1(a)(i)
for the current taxable year and all previous taxable years is equal to the
aggregate Net Losses allocated to the General Partners pursuant to Section
6.1(b)(iii) for all previous taxable years;
(ii) Second, 1% to the General Partners, Pro Rata, in an amount equal
to the aggregate Net Losses allocated to the General Partners pursuant to
Section 6.1(b)(ii) for all previous taxable years and 99% to the
Unitholders, in accordance with their respective Percentage Interests,
until the aggregate Net Income allocated to such Partners pursuant to this
Section 6.1(a)(ii) for the current taxable year and all previous taxable
years is equal to the aggregate Net Losses allocated to such Partners
pursuant to Section 6.1(b)(ii) for all previous taxable years; and
(iii) Third, 1% to the General Partners, Pro Rata, and 99% to the
Unitholders, Pro Rata.
(b) Net Losses. After giving effect to the special allocations set forth in
Section 6.1(d), Net Losses for each taxable period and all items of income,
gain, loss and deduction taken into account in computing Net Losses for such
taxable period shall be allocated as follows:
(i) First, 1% to the General Partners, Pro Rata, and 99% to the
Unitholders, Pro Rata, until the aggregate Net Losses allocated pursuant to
this Section 6.1(b)(i) for the current taxable year and all previous
taxable years is equal to the aggregate Net Income allocated to such
Partners pursuant to Section 6.1(a)(iii) for all previous taxable years,
provided that the Net Losses shall not be allocated pursuant to this
Section 6.1(b)(i) to the extent that such allocation would cause any
Unitholder to have a deficit balance in its Adjusted Capital Account at the
end of such taxable year (or increase any existing deficit balance in its
Adjusted Capital Account);
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(ii) Second, 1% to the General Partners, Pro Rata, and 99% to the
Unitholders, Pro Rata; provided, that Net Losses shall not be allocated
pursuant to this Section 6.1(b)(ii) to the extent that such allocation
would cause any Unitholder to have a deficit balance in its Adjusted
Capital Account at the end of such taxable year (or increase any existing
deficit balance in its Adjusted Capital Account);
(iii) Third, the balance, if any, 100% to the General Partners, Pro
Rata.
(c) Net Termination Gains and Losses. After giving effect to the special
allocations set forth in Section 6.1(d), all items of income, gain, loss and
deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder. All
allocations under this Section 6.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
6.1 and after all distributions of Available Cash provided under Sections 6.4
and 6.5 have been made; provided, however, that solely for purposes of this
Section 6.1(c), Capital Accounts shall not be adjusted for distributions made
pursuant to Section 12.4.
(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Gain shall be allocated
among the Partners in the following manner (and the Capital Accounts of the
Partners shall be increased by the amount so allocated in each of the
following subclauses, in the order listed, before an allocation is made
pursuant to the next succeeding subclause):
(A) First, to each Partner having a deficit balance in its Capital
Account, in the proportion that such deficit balance bears to the total
deficit balances in the Capital Accounts of all Partners, until each
such Partner has been allocated Net Termination Gain equal to any such
deficit balance in its Capital Account;
(B) Second, 99% to all Unitholders holding Common Units, Pro Rata,
and 1% to the General Partners, Pro Rata, until the Capital Account in
respect of each Common Unit then Outstanding is equal to the sum of (1)
its Unrecovered Capital plus (2) the Minimum Quarterly Distribution for
the Quarter during which the Liquidation Date occurs, reduced by any
distribution pursuant to Section 6.4(a)(i) or (b)(i) with respect to
such Common Unit for such Quarter (the amount determined pursuant to
this clause (2) is hereinafter defined as the "Unpaid MQD") plus (3)
any then existing Cumulative Common Unit Arrearage;
(C) Third, if such Net Termination Gain is recognized (or is
deemed to be recognized) prior to the expiration of the Subordination
Period, 99% to all Unitholders holding Subordinated Units, Pro Rata,
and 1% to the General Partners, Pro Rata, until the Capital Account in
respect of each Subordinated Unit then Outstanding equals the sum of
(1) its Unrecovered Capital, determined for the taxable year (or
portion thereof) to which this allocation of gain relates, plus (2) the
Minimum Quarterly Distribution for the Quarter during which the
Liquidation Date occurs, reduced by any distribution pursuant to
Section 6.4(a)(iii) with respect to such Subordinated Unit for such
Quarter;
(D) Fourth, 99% to all Unitholders, Pro Rata, and 1% to the
General Partners, Pro Rata, until the Capital Account in respect of
each Common Unit then Outstanding is equal to the sum of (1) its
Unrecovered Capital, plus (2) the Unpaid MQD, plus (3) any then
existing Cumulative Common Unit Arrearage, plus (4) the excess of (aa)
the First Target Distribution less the Minimum Quarterly Distribution
for each Quarter of the Partnership's existence over (bb) the
cumulative per Unit amount of any distributions of Operating Surplus
that was distributed pursuant to Sections 6.4(a)(iv) and 6.4(b)(ii)
(the sum of (1) plus (2) plus (3) plus (4) is hereinafter defined as
the "First Liquidation Target Amount");
(E) Fifth, 85.8673% to all Unitholders, Pro Rata, 13.1327% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partners, Pro Rata, until the Capital Account in respect of
each Common Unit then Outstanding is equal to the sum of (1) the First
Liquidation Target Amount, plus (2) the excess of (aa) the Second
Target Distribution less the First Target Distribution for each Quarter
of the Partnership's existence over (bb) the cumulative per Unit amount
of any distributions of Operating Surplus that was distributed pursuant
to Sections 6.4(a)(v) and 6.4(b)(iii) (the sum of (1) plus (2) is
hereinafter defined as the "Second Liquidation Target Amount");
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(F) Sixth, 75.7653% to all Unitholders, Pro Rata, 23.2347% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partners, Pro Rata, until the Capital Account in respect of
each Common Unit then Outstanding is equal to the sum of (1) the Second
Liquidation Target Amount, plus (2) the excess of (aa) the Third Target
Distribution less the Second Target Distribution for each Quarter of
the Partnership's existence over (bb) the cumulative per Unit amount of
any distributions of Operating Surplus that was distributed pursuant to
Sections 6.4(a)(vi)and 6.4(b)(iv); and
(G) Finally, any remaining amount 50.5102% to all Unitholders, Pro
Rata, 48.4898% to the holders of the Incentive Distribution Rights, Pro
Rata, and 1% to the General Partners, Pro Rata.
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Loss shall be allocated
among the Partners in the following manner:
(A) First, if such Net Termination Loss is recognized (or is
deemed to be recognized) prior to the conversion of the last
Outstanding Subordinated Unit, 99% to the Unitholders holding
Subordinated Units, Pro Rata, and 1% to the General Partners, Pro Rata,
until the Capital Account in respect of each Subordinated Unit then
Outstanding has been reduced to zero;
(B) Second, 99% to all Unitholders holding Common Units, Pro Rata,
and 1% to the General Partners, Pro Rata, until the Capital Account in
respect of each Common Unit then Outstanding has been reduced to zero;
and
(C) Third, the balance, if any, 100% to the General Partners, Pro
Rata.
(d) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 6.1, if there is a net decrease in Partnership
Minimum Gain during any Partnership taxable period, each Partner shall be
allocated items of Partnership income and gain for such period (and, if
necessary, subsequent periods) in the manner and amounts provided in
Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i), or any successor provision. For purposes of this Section
6.1(d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section 6.1(d) with respect to such taxable period (other than an
allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii)). This Section
6.1(d)(i) is intended to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall
be interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 6.1 (other than
Section 6.1(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Partnership taxable period, any Partner with a
share of Partner Nonrecourse Debt Minimum Gain at the beginning of such
taxable period shall be allocated items of Partnership income and gain for
such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and
1.704-2(j)(2)(ii), or any successor provisions. For purposes of this
Section 6.1(d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section 6.1(d), other than Section 6.1(d)(i) and other than an
allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii), with respect to
such taxable period. This Section 6.1(d)(ii) is intended to comply with the
chargeback of items of income and gain requirement in Treasury Regulation
Section 1.704-2(i)(4) and shall be interpreted consistently therewith.
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(iii) Priority Allocations.
(A) If the amount of cash or the Net Agreed Value of any property
distributed (except cash or property distributed pursuant to Section
12.4) to any Unitholder with respect to its Units for a taxable year is
greater (on a per Unit basis) than the amount of cash or the Net Agreed
Value of property distributed to the other Unitholders with respect to
their Units (on a per Unit basis), then (1) each Unitholder receiving
such greater cash or property distribution shall be allocated gross
income in an amount equal to the product of (aa) the amount by which
the distribution (on a per Unit basis) to such Unitholder exceeds the
distribution (on a per Unit basis) to the Unitholders receiving the
smallest distribution and (bb) the number of Units owned by the
Unitholder receiving the greater distribution; and (2) the General
Partners shall be allocated gross income, in proportion to their
respective Percentage Interests, in an aggregate amount equal to 1/99th
of the sum of the amounts allocated in clause (1) above.
(B) After the application of Section 6.1(d)(iii)(A), all or any
portion of the remaining items of Partnership gross income or gain for
the taxable period, if any, shall be allocated 100% to the holders of
Incentive Distribution Rights, Pro Rata, until the aggregate amount of
such items allocated to the holders of Incentive Distribution Rights
pursuant to this paragraph 6.1(d)(iii)(B) for the current taxable year
and all previous taxable years is equal to the cumulative amount of all
Incentive Distributions made to the holders of Incentive Distribution
Rights from the Closing Date to a date 45 days after the end of the
current taxable year.
(iv) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership
income and gain shall be specially allocated to such Partner in an amount
and manner sufficient to eliminate, to the extent required by the Treasury
Regulations promulgated under Section 704(b) of the Code, the deficit
balance, if any, in its Adjusted Capital Account created by such
adjustments, allocations or distributions as quickly as possible unless
such deficit balance is otherwise eliminated pursuant to Section 6.1(d)(i)
or (ii).
(v) Gross Income Allocations. In the event any Partner has a deficit
balance in its Capital Account at the end of any Partnership taxable period
in excess of the sum of (A) the amount such Partner is required to restore
pursuant to the provisions of this Agreement and (B) the amount such
Partner is deemed obligated to restore pursuant to Treasury Regulation
Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be specially
allocated items of Partnership gross income and gain in the amount of such
excess as quickly as possible; provided, that an allocation pursuant to
this Section 6.1(d)(v) shall be made only if and to the extent that such
Partner would have a deficit balance in its Capital Account as adjusted
after all other allocations provided for in this Section 6.1 have been
tentatively made as if this Section 6.1(d)(v) were not in this Agreement.
(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the Managing General Partner determines
in its good faith discretion that the Partnership's Nonrecourse Deductions
must be allocated in a different ratio to satisfy the safe harbor
requirements of the Treasury Regulations promulgated under Section 704(b)
of the Code, the Managing General Partner is authorized, upon notice to the
other Partners, to revise the prescribed ratio to the numerically closest
ratio that does satisfy such requirements.
(vii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
for any taxable period shall be allocated 100% to the Partner that bears
the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance
with Treasury Regulation Section 1.704-2(i). If more than one Partner bears
the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such
Partner Nonrecourse Deductions attributable thereto shall be allocated
between or among such Partners in accordance with the ratios in which they
share such Economic Risk of Loss.
(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of
the Partnership in excess of the sum of (A) the amount of Partnership
Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall be
allocated among the Partners in accordance with their respective Percentage
Interests.
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(ix) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or
743(c) of the Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such item of
gain or loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required to
be adjusted pursuant to such Section of the Treasury Regulations.
(x) Economic Uniformity. At the election of the Managing General
Partner with respect to any taxable period ending upon, or after, the
termination of the Subordination Period, all or a portion of the remaining
items of Partnership gross income or gain for such taxable period, after
taking into account allocations pursuant to Section 6.1(d)(iii), shall be
allocated 100% to each Partner holding Subordinated Units that are
Outstanding as of the termination of the Subordination Period ("Final
Subordinated Units") in the proportion of the number of Final Subordinated
Units held by such Partner to the total number of Final Subordinated Units
then Outstanding, until each such Partner has been allocated an amount of
gross income or gain which increases the Capital Account maintained with
respect to such Final Subordinated Units to an amount equal to the product
of (A) the number of Final Subordinated Units held by such Partner and (B)
the Per Unit Capital Amount for a Common Unit. The purpose of this
allocation is to establish uniformity between the Capital Accounts
underlying Final Subordinated Units and the Capital Accounts underlying
Common Units held by Persons other than the General Partners and their
Affiliates immediately prior to the conversion of such Final Subordinated
Units into Common Units. This allocation method for establishing such
economic uniformity will only be available to the Managing General Partner
if the method for allocating the Capital Account maintained with respect to
the Subordinated Units between the transferred and retained Subordinated
Units pursuant to Section 5.5(c)(ii) does not otherwise provide such
economic uniformity to the Final Subordinated Units.
(xi) Curative Allocation.
(A) Notwithstanding any other provision of this Section 6.1, other
than the Required Allocations, the Required Allocations shall be taken
into account in making the Agreed Allocations so that, to the extent
possible, the net amount of items of income, gain, loss and deduction
allocated to each Partner pursuant to the Required Allocations and the
Agreed Allocations, together, shall be equal to the net amount of such
items that would have been allocated to each such Partner under the
Agreed Allocations had the Required Allocations and the related
Curative Allocation not otherwise been provided in this Section 6.1.
Notwithstanding the preceding sentence, Required Allocations relating
to (1) Nonrecourse Deductions shall not be taken into account except to
the extent that there has been a decrease in Partnership Minimum Gain
and (2) Partner Nonrecourse Deductions shall not be taken into account
except to the extent that there has been a decrease in Partner
Nonrecourse Debt Minimum Gain. Allocations pursuant to this Section
6.1(d)(xi)(A) shall only be made with respect to Required Allocations
to the extent the Managing General Partner reasonably determines that
such allocations will otherwise be inconsistent with the economic
agreement among the Partners. Further, allocations pursuant to this
Section 6.1(d)(xi)(A) shall be deferred with respect to allocations
pursuant to clauses (1) and (2) hereof to the extent the Managing
General Partner reasonably determines that such allocations are likely
to be offset by subsequent Required Allocations.
(B) The Managing General Partner shall have reasonable discretion,
with respect to each taxable period, to (1) apply the provisions of
Section 6.1(d)(xi)(A) in whatever order is most likely to minimize the
economic distortions that might otherwise result from the Required
Allocations, and (2) divide all allocations pursuant to Section
6.1(d)(xi)(A) among the Partners in a manner that is likely to minimize
such economic distortions.
(xii) Corrective Allocations. In the event of any allocation of
Additional Book Basis Derivative Items or any Book-Down Event or any
recognition of a Net Termination Loss, the following rules shall apply:
(A) In the case of any allocation of Additional Book Basis
Derivative Items (other than an allocation of Unrealized Gain or
Unrealized Loss under Section 5.5(d) hereof), the Managing General
Partner shall allocate additional items of gross income and gain away
from the holders of Incentive Distribution Rights to the
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Unitholders and the General Partners, or additional items of deduction
and loss away from the Unitholders and the General Partners to the
holders of Incentive Distribution Rights, to the extent that the
Additional Book Basis Derivative Items allocated to the Unitholders or
the General Partners exceed their Share of Additional Book Basis
Derivative Items. For this purpose, the Unitholders and the General
Partners shall be treated as being allocated Additional Book Basis
Derivative Items to the extent that such Additional Book Basis
Derivative Items have reduced the amount of income that would otherwise
have been allocated to the Unitholders or the General Partners under
the Partnership Agreement (e.g., Additional Book Basis Derivative Items
taken into account in computing cost of goods sold would reduce the
amount of book income otherwise available for allocation among the
Partners). Any allocation made pursuant to this Section 6.1(d)(xii)(A)
shall be made after all of the other Agreed Allocations have been made
as if this Section 6.1(d)(xii) were not in this Agreement and, to the
extent necessary, shall require the reallocation of items that have
been allocated pursuant to such other Agreed Allocations.
(B) In the case of any negative adjustments to the Capital
Accounts of the Partners resulting from a Book- Down Event or from the
recognition of a Net Termination Loss, such negative adjustment (1)
shall first be allocated, to the extent of the Aggregate Remaining Net
Positive Adjustments, in such a manner, as reasonably determined by the
Managing General Partner, that to the extent possible the aggregate
Capital Accounts of the Partners will equal the amount which would have
been the Capital Account balance of the Partners if no prior Book-Up
Events had occurred, and (2) any negative adjustment in excess of the
Aggregate Remaining Net Positive Adjustments shall be allocated
pursuant to Section 6.1(c) hereof.
(C) In making the allocations required under this Section
6.1(d)(xii), the Managing General Partner, in its sole discretion, may
apply whatever conventions or other methodology it deems reasonable to
satisfy the purpose of this Section 6.1(d)(xii).
SECTION 6.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax purposes,
each item of income, gain, loss and deduction shall be allocated among the
Partners in the same manner as its correlative item of "book" income, gain, loss
or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners in the manner provided under
Section 704(c) of the Code that takes into account the variation between
the Agreed Value of such property and its adjusted basis at the time of
contribution; and (B) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or loss
is allocated pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Partners in a manner consistent with the
principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to such property and the
allocations thereof pursuant to Section 5.5(d)(i) or 5.5(d)(ii), and (2)
second, in the event such property was originally a Contributed Property,
be allocated among the Partners in a manner consistent with Section
6.2(b)(i)(A); and (B) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the Partners
in the same manner as its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1.
(iii) The Managing General Partner shall apply the principles of
Treasury Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Limited Partner Interests (or any class or
classes thereof), the Managing General Partner shall have sole discretion to (i)
adopt such
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conventions as it deems appropriate in determining the amount of depreciation,
amortization and cost recovery deductions; (ii) make special allocations for
federal income tax purposes of income (including, without limitation, gross
income) or deductions; and (iii) amend the provisions of this Agreement as
appropriate (x) to reflect the proposal or promulgation of Treasury Regulations
under Section 704(b) or Section 704(c) of the Code or (y) otherwise to preserve
or achieve uniformity of the Limited Partner Interests (or any class or classes
thereof). The Managing General Partner may adopt such conventions, make such
allocations and make such amendments to this Agreement as provided in this
Section 6.2(c) only if such conventions, allocations or amendments would not
have a material adverse effect on the Partners, the holders of any class or
classes of Limited Partner Interests issued and Outstanding or the Partnership,
and if such allocations are consistent with the principles of Section 704 of the
Code.
(d) The Managing General Partner in its discretion may determine to
depreciate or amortize the portion of an adjustment under Section 743(b) of the
Code attributable to unrealized appreciation in any Adjusted Property (to the
extent of the unamortized Book-Tax Disparity) using a predetermined rate derived
from the depreciation or amortization method and useful life applied to the
Partnership's common basis of such property, despite any inconsistency of such
approach with Treasury Regulation Section 1.167(c)-l(a)(6), Proposed Treasury
Regulation 1.197-2(g)(3), or any successor regulations thereto. If the Managing
General Partner determines that such reporting position cannot reasonably be
taken, the Managing General Partner may adopt depreciation and amortization
conventions under which all purchasers acquiring Limited Partner Interests in
the same month would receive depreciation and amortization deductions, based
upon the same applicable rate as if they had purchased a direct interest in the
Partnership's property. If the Managing General Partner chooses not to utilize
such aggregate method, the Managing General Partner may use any other reasonable
depreciation and amortization conventions to preserve the uniformity of the
intrinsic tax characteristics of any Limited Partner Interests that would not
have a material adverse effect on the Limited Partners or the Record Holders of
any class or classes of Limited Partner Interests.
(e) Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 6.2, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized by the
Partnership for federal income tax purposes and allocated to the Partners in
accordance with the provisions hereof shall be determined without regard to any
election under Section 754 of the Code which may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.
(g) Each item of Partnership income, gain, loss and deduction attributable
to a transferred Partnership Interest, shall for federal income tax purposes, be
determined on an annual basis and prorated on a monthly basis and shall be
allocated to the Partners as of the opening of the New York Stock Exchange on
the first Business Day of each month; provided, however, that (i) such items for
the period beginning on the Closing Date and ending on the last day of the month
in which the Option Closing Date or the expiration of the Over-allotment Option
occurs shall be allocated to the Partners as of the opening of the New York
Stock Exchange on the first Business Day of the next succeeding month; and
provided, further, that gain or loss on a sale or other disposition of any
assets of the Partnership other than in the ordinary course of business shall be
allocated to the Partners as of the opening of the New York Stock Exchange on
the first Business Day of the month in which such gain or loss is recognized for
federal income tax purposes. The Managing General Partner may revise, alter or
otherwise modify such methods of allocation as it determines necessary, to the
extent permitted or required by Section 706 of the Code and the regulations or
rulings promulgated thereunder.
(h) Allocations that would otherwise be made to a Limited Partner under the
provisions of this Article VI shall instead be made to the beneficial owner of
Limited Partner Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the Managing
General Partner in its sole discretion.
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SECTION 6.3 Requirement and Characterization of Distributions; Distributions to
Record Holders.
(a) Within 45 days following the end of each Quarter commencing with the
Quarter ending on September 30, 1999, an amount equal to 100% of Available Cash
with respect to such Quarter shall, subject to Section 17-607 of the Delaware
Act, be distributed in accordance with this Article VI by the Partnership to the
Partners as of the Record Date selected by the Managing General Partner in its
reasonable discretion. All amounts of Available Cash distributed by the
Partnership on any date from any source shall be deemed to be Operating Surplus
until the sum of all amounts of Available Cash theretofore distributed by the
Partnership to the Partners pursuant to Section 6.4 equals the Operating Surplus
from the Closing Date through the close of the immediately preceding Quarter.
Any remaining amounts of Available Cash distributed by the Partnership on such
date shall, except as otherwise provided in Section 6.5, be deemed to be
"Capital Surplus." All distributions required to be made under this Agreement
shall be made subject to Section 17-607 of the Delaware Act.
(b) Notwithstanding Section 6.3(a), in the event of the dissolution and
liquidation of the Partnership, all receipts received during or after the
Quarter in which the Liquidation Date occurs, other than from borrowings
described in (a)(ii) of the definition of Available Cash, shall be applied and
distributed solely in accordance with, and subject to the terms and conditions
of, Section 12.4.
(c) The Managing General Partner shall have the discretion to treat taxes
paid by the Partnership on behalf of, or amounts withheld with respect to, all
or less than all of the Partners, as a distribution of Available Cash to such
Partners.
(d) Each distribution in respect of a Partnership Interest shall be paid by
the Partnership, directly or through the Transfer Agent or through any other
Person or agent, only to the Record Holder of such Partnership Interest as of
the Record Date set for such distribution. Such payment shall constitute full
payment and satisfaction of the Partnership's liability in respect of such
payment, regardless of any claim of any Person who may have an interest in such
payment by reason of an assignment or otherwise.
SECTION 6.4 Distributions of Available Cash from Operating Surplus.
(a) During Subordination Period. Available Cash with respect to any Quarter
within the Subordination Period that is deemed to be Operating Surplus pursuant
to the provisions of Section 6.3 or 6.5 shall, subject to Section 17-607 of the
Delaware Act, be distributed as follows, except as otherwise required by Section
5.6(b) in respect of additional Partnership Securities issued pursuant thereto:
(i) First, 99% to the Unitholders holding Common Units, Pro Rata, and
1% to the General Partners, Pro Rata, until there has been distributed in
respect of each Common Unit then Outstanding an amount equal to the Minimum
Quarterly Distribution for such Quarter;
(ii) Second, 99% to the Unitholders holding Common Units, Pro Rata, and
1% to the General Partners, Pro Rata, until there has been distributed in
respect of each Common Unit then Outstanding an amount equal to the
Cumulative Common Unit Arrearage existing with respect to such Quarter;
(iii) Third, 99% to the Unitholders holding Subordinated Units, Pro
Rata, and 1% to the General Partners, Pro Rata, until there has been
distributed in respect of each Subordinated Unit then Outstanding an amount
equal to the Minimum Quarterly Distribution for such Quarter;
(iv) Fourth, 99% to all Unitholders, Pro Rata, and 1% to the General
Partners, Pro Rata, until there has been distributed in respect of each
Unit then Outstanding an amount equal to the excess of the First Target
Distribution over the Minimum Quarterly Distribution for such Quarter;
(v) Fifth, 85.8673% to all Unitholders, Pro Rata, 13.1327% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partners, Pro Rata, until there has been distributed in respect of
each Unit then Outstanding an amount equal to the excess of the Second
Target Distribution over the First Target Distribution for such Quarter;
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(vi) Sixth, 75.7653% to all Unitholders, Pro Rata, 23.2347% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partners, Pro Rata, until there has been distributed in respect of
each Unit then Outstanding an amount equal to the excess of the Third
Target Distribution over the Second Target Distribution for such Quarter;
and
(vii) Thereafter, 50.5102% to all Unitholders, Pro Rata, 48.4898% to
the holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partners, Pro Rata;
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6(a), the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with Section
6.4(a)(vii).
(b) After Subordination Period. Available Cash with respect to any Quarter
after the Subordination Period that is deemed to be Operating Surplus pursuant
to the provisions of Section 6.3 or 6.5, subject to Section 17-607 of the
Delaware Act, shall be distributed as follows, except as otherwise required by
Section 5.6(b) in respect of additional Partnership Securities issued pursuant
thereto:
(i) First, 99% to all Unitholders, Pro Rata, and 1% to the General
Partners, Pro Rata, until there has been distributed in respect of each
Unit then Outstanding an amount equal to the Minimum Quarterly Distribution
for such Quarter;
(ii) Second, 99% to all Unitholders, Pro Rata, and 1% to the General
Partners, Pro Rata, until there has been distributed in respect of each
Unit then Outstanding an amount equal to the excess of the First Target
Distribution over the Minimum Quarterly Distribution for such Quarter;
(iii) Third, 85.8673% to all Unitholders, Pro Rata, and 13.1327% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partners, Pro Rata, until there has been distributed in respect of
each Unit then Outstanding an amount equal to the excess of the Second
Target Distribution over the First Target Distribution for such Quarter;
(iv) Fourth, 75.7653% to all Unitholders Pro Rata, and 23.2347% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partners, Pro Rata, until there has been distributed in respect of
each Unit then Outstanding an amount equal to the excess of the Third
Target Distribution over the Second Target Distribution for such Quarter;
and
(v) Thereafter, 50.5102% to all Unitholders, Pro Rata, and 48.4898% to
the holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partners, Pro Rata;
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6(a), the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with Section 6.4(b)(v).
SECTION 6.5 Distributions of Available Cash from Capital Surplus.
Available Cash that is deemed to be Capital Surplus pursuant to the
provisions of Section 6.3(a) shall, subject to Section 17-607 of the Delaware
Act, be distributed, unless the provisions of Section 6.3 require otherwise, 99%
to all Unitholders, Pro Rata, and 1% to the General Partners, Pro Rata, until a
hypothetical holder of a Common Unit acquired on the Closing Date has received
with respect to such Common Unit, during the period since the Closing Date
through such date, distributions of Available Cash that are deemed to be Capital
Surplus in an aggregate amount equal to the Initial Unit Price. Available Cash
that is deemed to be Capital Surplus shall then be distributed 99% to all
Unitholders holding Common Units, Pro Rata, and 1% to the General Partners, Pro
Rata, until there has been distributed in respect of each Common Unit then
Outstanding an amount equal to the Cumulative Common Unit Arrearage. Thereafter,
all
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Available Cash shall be distributed as if it were Operating Surplus and shall be
distributed in accordance with Section 6.4.
SECTION 6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution
Levels.
(a) The Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution, Third Target Distribution, Common Unit Arrearages and
Cumulative Common Unit Arrearages shall be proportionately adjusted in the event
of any distribution, combination or subdivision (whether effected by a
distribution payable in Units or otherwise) of Units or other Partnership
Securities in accordance with Section 5.10. In the event of a distribution of
Available Cash that is deemed to be from Capital Surplus, the then applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution, shall be adjusted proportionately
downward to equal the product obtained by multiplying the otherwise applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution, as the case may be, by a fraction of
which the numerator is the Unrecovered Capital of the Common Units immediately
after giving effect to such distribution and of which the denominator is the
Unrecovered Capital of the Common Units immediately prior to giving effect to
such distribution.
(b) The Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution and Third Target Distribution, shall also be subject to
adjustment pursuant to Section 6.9.
SECTION 6.7 Special Provisions Relating to the Holders of Subordinated Units.
(a) Except with respect to the right to vote on or approve matters
requiring the vote or approval of a percentage of the holders of Outstanding
Common Units and the right to participate in allocations of income, gain, loss
and deduction and distributions made with respect to Common Units, the holder of
a Subordinated Unit shall have all of the rights and obligations of a Unitholder
holding Common Units hereunder; provided, however, that immediately upon the
conversion of Subordinated Units into Common Units pursuant to Section 5.8, the
Unitholder holding a Subordinated Unit shall possess all of the rights and
obligations of a Unitholder holding Common Units hereunder, including the right
to vote as a Common Unitholder and the right to participate in allocations of
income, gain, loss and deduction and distributions made with respect to Common
Units; provided, however, that such converted Subordinated Units shall remain
subject to the provisions of Sections 5.5(c)(ii), 6.1(d)(x) and 6.7(b).
(b) The Unitholder holding a Subordinated Unit which has converted into a
Common Unit pursuant to Section 5.8 shall not be issued a Common Unit
Certificate pursuant to Section 4.1, and shall not be permitted to transfer its
converted Subordinated Units to a Person which is not an Affiliate of the holder
until such time as the Managing General Partner determines, based on advice of
counsel, that a converted Subordinated Unit should have, as a substantive
matter, like intrinsic economic and federal income tax characteristics, in all
material respects, to the intrinsic economic and federal income tax
characteristics of an Initial Common Unit. In connection with the condition
imposed by this Section 6.7(b), the Managing General Partner may take whatever
reasonable steps are required to provide economic uniformity to the converted
Subordinated Units in preparation for a transfer of such converted Subordinated
Units, including the application of Sections 5.5(c)(ii) and 6.1(d)(x); provided,
however, that no such steps may be taken that would have a material adverse
effect on the Unitholders holding Common Units represented by Common Unit
Certificates.
SECTION 6.8 Special Provisions Relating to the Holders of Incentive Distribution
Rights.
Notwithstanding anything to the contrary set forth in this Agreement, the
holders of the Incentive Distribution Rights (a) shall (i) possess the rights
and obligations provided in this Agreement with respect to a Limited Partner
pursuant to Articles III and VII and (ii) have a Capital Account as a Partner
pursuant to Section 5.5 and all other provisions related thereto and (b) shall
not (i) be entitled to vote on any matters requiring the approval or vote of the
holders of Outstanding Units, (ii) be entitled to any distributions other than
as provided in Sections 6.4(a)(v), (vi) and (vii), 6.4(b)(iii), (iv) and (v),
and 12.4 or (iii) be allocated items of income, gain, loss or deduction other
than as specified in this Article VI.
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SECTION 6.9 Entity-Level Taxation.
If legislation is enacted or the interpretation of existing language is
modified by the relevant governmental authority which causes the Partnership,
the Intermediate Partnership or the Operating Subsidiary to be treated as an
association taxable as a corporation or otherwise subjects the Partnership, the
Intermediate Partnership or the Operating Subsidiary to entity-level taxation
for federal, state or local income tax purposes, the then applicable Minimum
Quarterly Distribution, First Target Distribution, Second Target Distribution
and Third Target Distribution, shall be adjusted to equal the product obtained
by multiplying (a) the amount thereof by (b) one minus the sum of (i) the
highest marginal federal corporate (or other entity, as applicable) income tax
rate of the Partnership, the Intermediate Partnership or the Operating
Subsidiary for the taxable year of the Partnership, the Intermediate Partnership
or the Operating Subsidiary in which such Quarter occurs (expressed as a
percentage) plus (ii) the effective overall state and local income tax rate
(expressed as a percentage) applicable to the Partnership, the Intermediate
Partnership or the Operating Subsidiary for the calendar year next preceding the
calendar year in which such Quarter occurs (after taking into account the
benefit of any deduction allowable for federal income tax purposes with respect
to the payment of state and local income taxes), but only to the extent of the
increase in such rates resulting from such legislation or interpretation. Such
effective overall state and local income tax rate shall be determined for the
taxable year next preceding the first taxable year during which the Partnership,
the Intermediate Partnership or the Operating Subsidiary is taxable for federal
income tax purposes as an association taxable as a corporation or is otherwise
subject to entity-level taxation by determining such rate as if the Partnership,
the Intermediate Partnership or the Operating Subsidiary had been subject to
such state and local taxes during such preceding taxable year.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
SECTION 7.1 Management.
(a) The Managing General Partner shall conduct, direct and manage all
activities of the Partnership. Except as otherwise expressly provided in this
Agreement, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the Managing General Partner, and
neither the Special General Partner nor any Limited Partner or Assignee shall
have any management power over the business and affairs of the Partnership. In
addition to the powers now or hereafter granted a general partner of a limited
partnership under applicable law or which are granted to the Managing General
Partner under any other provision of this Agreement, the Managing General
Partner, subject to Section 7.3, shall have full power and authority to do all
things and on such terms as it, in its sole discretion, may deem necessary or
appropriate to conduct the business of the Partnership, to exercise all powers
set forth in Section 2.5 and to effectuate the purposes set forth in Section
2.4, including the following:
(i) the making of any expenditures, the lending or borrowing of money,
the assumption or guarantee of, or other contracting for, indebtedness and
other liabilities, the issuance of evidences of indebtedness, including
indebtedness that is convertible into Partnership Securities, and the
incurring of any other obligations;
(ii) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the Partnership or
the merger or other combination of the Partnership with or into another
Person (the matters described in this clause (iii) being subject, however,
to any prior approval that may be required by Section 7.3);
(iv) the use of the assets of the Partnership (including cash on hand)
for any purpose consistent with the terms of this Agreement, including the
financing of the conduct of the operations of the Partnership Group;
subject to Section 7.6(a), the lending of funds to other Persons (including
the Intermediate Partnership or the Operating Subsidiary); the repayment of
obligations of the Partnership Group and the making of capital
contributions to any member of the Partnership Group;
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(v) the negotiation, execution and performance of any contracts,
conveyances or other instruments (including instruments that limit the
liability of the Partnership under contractual arrangements to all or
particular assets of the Partnership, with the other party to the contract
to have no recourse against the General Partners or their assets other than
their interest in the Partnership, even if same results in the terms of the
transaction being less favorable to the Partnership than would otherwise be
the case);
(vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees (including employees
having titles such as "president," "vice president," "secretary" and
"treasurer") and agents, outside attorneys, accountants, consultants and
contractors and the determination of their compensation and other terms of
employment or hiring;
(viii) the maintenance of such insurance for the benefit of the
Partnership Group and the Partners as it deems necessary or appropriate;
(ix) the formation of, or acquisition of an interest in, and the
contribution of property and the making of loans to, any further limited or
general partnerships, joint ventures, corporations, limited liability
companies or other relationships (including the acquisition of interests
in, and the contributions of property to, the Intermediate Partnership or
the Operating Subsidiary from time to time) subject to the restrictions set
forth in Section 2.4;
(x) the control of any matters affecting the rights and obligations of
the Partnership, including the bringing and defending of actions at law or
in equity and otherwise engaging in the conduct of litigation and the
incurring of legal expense and the settlement of claims and litigation;
(xi) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(xii) the entering into of listing agreements with any National
Securities Exchange and the delisting of some or all of the Limited Partner
Interests from, or requesting that trading be suspended on, any such
exchange (subject to any prior approval that may be required under Section
4.8);
(xiii) unless restricted or prohibited by Section 5.7, the purchase,
sale or other acquisition or disposition of Partnership Securities, or the
issuance of additional options, rights, warrants and appreciation rights
relating to Partnership Securities; and
(xiv) the undertaking of any action in connection with the
Partnership's participation in the Operating Subsidiary as a member.
(b) Notwithstanding any other provision of this Agreement, the
Intermediate Partnership Agreement, the Operating Subsidiary Agreement, the
Delaware Act or any applicable law, rule or regulation, each of the Partners and
the Assignees and each other Person who may acquire an interest in Partnership
Securities hereby (i) approves, ratifies and confirms the execution, delivery
and performance by the parties thereto of the Operating Subsidiary Agreement,
the Intermediate Partnership Agreement, the Underwriting Agreement, the Omnibus
Agreement, the Contribution Agreement, and the other agreements described in or
filed as exhibits to the Registration Statement that are related to the
transactions contemplated by the Registration Statement; (ii) agrees that the
Managing General Partner (on its own or through any officer of the Partnership)
is authorized to execute, deliver and perform the agreements referred to in
clause (i) of this sentence and the other agreements, acts, transactions and
matters described in or contemplated by the Registration Statement on behalf of
the Partnership without any further act, approval or vote of the Partners or the
Assignees or the other Persons who may acquire an interest in Partnership
Securities; and (iii) agrees that the execution, delivery or performance by the
General Partners, any Group Member or any Affiliate of any of them, of this
Agreement or any agreement authorized or permitted under this Agreement
(including the exercise by the Managing General Partner or any Affiliate of the
Managing General Partner of the rights accorded pursuant to Article XV), shall
not constitute a breach by the General Partners of any duty that the General
Partners may owe the Partnership or the Limited Partners or any other Persons
under this Agreement (or any other agreements) or of any duty stated or implied
by law or equity.
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SECTION 7.2 Certificate of Limited Partnership.
The Special General Partner has caused the Certificate of Limited
Partnership to be filed with the Secretary of State of the State of Delaware as
required by the Delaware Act. The Managing General Partner shall use all
reasonable efforts to cause to be filed such other certificates or documents as
may be determined by the Managing General Partner in its sole discretion to be
reasonable and necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership (or a partnership in which
the limited partners have limited liability) in the State of Delaware or any
other state in which the Partnership may elect to do business or own property.
To the extent that such action is determined by the Managing General Partner in
its sole discretion to be reasonable and necessary or appropriate, the Managing
General Partner shall file amendments to and restatements of the Certificate of
Limited Partnership and do all things to maintain the Partnership as a limited
partnership (or a partnership or other entity in which the limited partners have
limited liability) under the laws of the State of Delaware or of any other state
in which the Partnership may elect to do business or own property. Subject to
the terms of Section 3.4(a), neither the Special General Partner nor the
Managing General Partner shall be required, before or after filing, to deliver
or mail a copy of the Certificate of Limited Partnership, any qualification
document or any amendment thereto to any Limited Partner.
SECTION 7.3 Restrictions on General Partners' Authority.
(a) The General Partners may not, without written approval of the specific
act by holders of all of the Outstanding Limited Partner Interests or by other
written instrument executed and delivered by holders of all of the Outstanding
Limited Partner Interests subsequent to the date of this Agreement, take any
action in contravention of this Agreement, including, except as otherwise
provided in this Agreement, (i) committing any act that would make it impossible
to carry on the ordinary business of the Partnership; (ii) possessing
Partnership property, or assigning any rights in specific Partnership property,
for other than a Partnership purpose; (iii) admitting a Person as a Partner;
(iv) amending this Agreement in any manner; or (v) transferring its interest as
a general partner of the Partnership.
(b) Except as provided in Articles XII and XIV, no General Partner may
sell, exchange or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related transactions
(including by way of merger, consolidation or other combination) or approve on
behalf of the Partnership the sale, exchange or other disposition of all or
substantially all of the assets of the Intermediate Partnership and the
Operating Subsidiary, taken as a whole, without the approval of holders of a
Unit Majority; provided however that this provision shall not preclude or limit
the General Partners' ability to mortgage, pledge, hypothecate or grant a
security interest in all or substantially all of the assets of the Partnership,
the Intermediate Partnership or the Operating Subsidiary and shall not apply to
any forced sale of any or all of the assets of the Partnership, the Intermediate
Partnership or the Operating Subsidiary pursuant to the foreclosure of, or other
realization upon, any such encumbrance. Without the approval of holders of a
Unit Majority, the General Partners shall not, on behalf of the Partnership, (i)
consent to any amendment to the Intermediate Partnership Agreement or the
Operating Subsidiary Agreement or, except as expressly permitted by Section
7.9(d), take any action permitted to be taken by a partner of the Intermediate
Partnership or a member of the Operating Subsidiary, in either case, that would
have a material adverse effect on the Partnership as partner of the Intermediate
Partnership or a member of the Operating Subsidiary or (ii) except as permitted
under Sections 4.6, 11.1 and 11.2, elect or cause the Partnership to elect a
successor general partner of the Partnership or a successor general partner of
the Intermediate Partnership or a successor managing member of the Operating
Subsidiary.
SECTION 7.4 Reimbursement of the General Partners.
(a) Except as provided in this Section 7.4 and elsewhere in this Agreement,
the Intermediate Partnership Agreement or in the Operating Subsidiary Agreement,
the General Partners shall not be compensated for their services as general
partners or managing members of any Group Member.
(b) Each of the General Partners shall be reimbursed on a monthly basis, or
such other reasonable basis as the Managing General Partner may determine in its
sole discretion, for (i) all direct and indirect expenses it incurs or payments
it makes on behalf of the Partnership (including salary, bonus, incentive
compensation and other amounts paid to any Person including Affiliates of such
General Partner to perform services for the Partnership or for such General
Partner in the discharge of its duties to the Partnership), and (ii) all other
necessary or appropriate expenses allocable to the Partnership or otherwise
reasonably incurred by such General Partner in connection with operating the
Partnership's business (including expenses allocated to such General Partner by
its Affiliates). The Managing General Partner shall determine the expenses that
are allocable
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to the Partnership in any reasonable manner determined by the Managing General
Partner in its sole discretion. Reimbursements pursuant to this Section 7.4
shall be in addition to any reimbursement to the General Partners as a result of
indemnification pursuant to Section 7.7.
(c) Subject to Section 5.7, the Managing General Partner, in its sole
discretion and without the approval of the Limited Partners (who shall have no
right to vote in respect thereof), may propose and adopt on behalf of the
Partnership employee benefit plans, employee programs and employee practices
(including plans, programs and practices involving the issuance of Partnership
Securities or options to purchase Partnership Securities), or cause the
Partnership to issue Partnership Securities in connection with, or pursuant to,
any employee benefit plan, employee program or employee practice maintained or
sponsored by either of the General Partners or one of its Affiliates, in each
case for the benefit of employees of either of the General Partners, any Group
Member or any Affiliate, or any of them, in respect of services performed,
directly or indirectly, for the benefit of the Partnership Group. The
Partnership agrees to issue and sell to the General Partners or any of their
Affiliates any Partnership Securities that the General Partners or such
Affiliates are obligated to provide to any employees pursuant to any such
employee benefit plans, employee programs or employee practices. Expenses
incurred by the General Partners in connection with any such plans, programs and
practices (including the net cost to the General Partners or such Affiliates of
Partnership Securities purchased by the General Partners or such Affiliates from
the Partnership to fulfill options or awards under such plans, programs and
practices) shall be reimbursed in accordance with Section 7.4(b). Any and all
obligations of the General Partners under any employee benefit plans, employee
programs or employee practices adopted by the Managing General Partner as
permitted by this Section 7.4(c) shall constitute obligations of the General
Partners hereunder and shall be assumed by any successor General Partner
approved pursuant to Section 11.1, 11.2 or 11.4 or the transferee of or
successor to all of the Managing General Partner's General Partner Interest or
the Special General Partner's General Partner Interest pursuant to Section 4.6.
SECTION 7.5 Outside Activities.
(a) After the Closing Date, the Managing General Partner, for so long as it
is a General Partner of the Partnership (i) agrees that its sole business will
be to act as a general partner or managing member, as the case may be, of the
Partnership, the Intermediate Partnership, the Operating Subsidiary, and any
other partnership or limited liability company of which the Partnership, the
Intermediate Partnership or the Operating Subsidiary is, directly or indirectly,
a partner and to undertake activities that are ancillary or related thereto
(including being a limited partner in the Partnership), (ii) shall not engage in
any business or activity or incur any debts or liabilities except in connection
with or incidental to (A) its performance as general partner of one or more
Group Members or as described in or contemplated by the Registration Statement
or (B) the acquiring, owning or disposing of debt or equity securities in any
Group Member and (iii) except to the extent permitted in the Omnibus Agreement,
shall not, and shall cause its Affiliates not to, engage in any Restricted
Business.
(b) Alliance Resource Holdings, Inc. has entered into the Omnibus Agreement
with the Partnership, the Intermediate Partnership and the Operating Subsidiary,
which agreement sets forth certain restrictions on the ability of Alliance
Resource Holdings, Inc. and its Affiliates to engage in Restricted Businesses.
(c) Except as specifically restricted by Section 7.5(a) and the Omnibus
Agreement, each Indemnitee (other than the Managing General Partner) shall have
the right to engage in businesses of every type and description and other
activities for profit and to engage in and possess an interest in other business
ventures of any and every type or description, whether in businesses engaged in
or anticipated to be engaged in by any Group Member, independently or with
others, including business interests and activities in direct competition with
the business and activities of any Group Member, and none of the same shall
constitute a breach of this Agreement or any duty express or implied by law to
any Group Member or any Partner or Assignee. Neither any Group Member, any
Limited Partner nor any other Person shall have any rights by virtue of this
Agreement, the Operating Subsidiary Agreement or the partnership relationship
established hereby or thereby in any business ventures of any Indemnitee.
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(d) Subject to the terms of Section 7.5(a), Section 7.5(b), Section 7.5(c)
and the Omnibus Agreement, but otherwise notwithstanding anything to the
contrary in this Agreement, (i) the engaging in competitive activities by any
Indemnitees (other than the Managing General Partner) in accordance with the
provisions of this Section 7.5 is hereby approved by the Partnership and all
Partners, (ii) it shall be deemed not to be a breach of the General Partners'
fiduciary duties or any other obligation of any type whatsoever of the General
Partners for the Indemnitees (other than the Managing General Partner) to engage
in such business interests and activities in preference to or to the exclusion
of the Partnership and (iii) except as set forth in the Omnibus Agreement, the
General Partners and the Indemnitees shall have no obligation to present
business opportunities to the Partnership.
(e) The General Partners and any of their Affiliates may acquire Units or
other Partnership Securities in addition to those acquired on the Closing Date
and, except as otherwise provided in this Agreement, shall be entitled to
exercise all rights of a General Partner or Limited Partner, as applicable,
relating to such Units or Partnership Securities.
(f) The term "Affiliates" when used in Section 7.5(a) and Section 7.5(e)
with respect to the General Partners shall not include any Group Member or any
Subsidiary of the Group Member.
(g) Anything in this Agreement to the contrary notwithstanding, to the
extent that provisions of Sections 7.7, 7.8, 7.9, 7.10 or other Sections of this
Agreement purport or are interpreted to have the effect of restricting the
fiduciary duties that might otherwise, as a result of Delaware or other
applicable law, be owed by the General Partners to the Partnership and its
Limited Partners, or to constitute a waiver or consent by the Limited Partners
to any such restriction, such provisions shall be inapplicable and have no
effect in determining whether the General Partners have complied with their
fiduciary duties in connection with determinations made by them under this
Section 7.5.
SECTION 7.6 Loans from the General Partners; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on the
General Partners.
(a) Each of the General Partners or any of their Affiliates may lend to any
Group Member, and any Group Member may borrow from a General Partner or any of
its Affiliates, funds needed or desired by the Group Member for such periods of
time and in such amounts as the Managing General Partner may determine;
provided, however, that in any such case the lending party may not charge the
borrowing party interest at a rate greater than the rate that would be charged
the borrowing party or impose terms less favorable to the borrowing party than
would be charged or imposed on the borrowing party by unrelated lenders on
comparable loans made on an arm's-length basis (without reference to the lending
party's financial abilities or guarantees). The borrowing party shall reimburse
the lending party for any costs (other than any additional interest costs)
incurred by the lending party in connection with the borrowing of such funds.
For purposes of this Section 7.6(a) and Section 7.6(b), the term "Group Member"
shall include any Affiliate of a Group Member that is controlled by the Group
Member. No Group Member may lend funds to a General Partner or any of its
Affiliates (other than another Group Member).
(b) The Partnership may lend or contribute to any Group Member, and any
Group Member may borrow from the Partnership, funds on terms and conditions
established in the sole discretion of the Managing General Partner; provided,
however, that the Partnership may not charge the Group Member interest at a rate
less than the rate that would be charged to the Group Member (without reference
to the Managing General Partner's financial abilities or guarantees) by
unrelated lenders on comparable loans. The foregoing authority shall be
exercised by the Managing General Partner in its sole discretion and shall not
create any right or benefit in favor of any Group Member or any other Person.
(c) The General Partners may, or may enter into an agreement with any of
their Affiliates to, render services to a Group Member or to the General
Partners in the discharge of their duties as general partners of the
Partnership. Any services rendered to a Group Member by the General Partners or
any of their Affiliates shall be on terms that are fair and reasonable to the
Partnership; provided, however, that the requirements of this Section 7.6(c)
shall be deemed satisfied as to (i) any transaction approved by Special
Approval, (ii) any transaction, the terms of which are no less favorable to the
Partnership Group than those generally being provided to or available from
unrelated third parties or (iii) any transaction that, taking into account the
totality of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to the
Partnership Group), is equitable to the Partnership Group. The provisions of
Section 7.4 shall apply to the rendering of services described in this Section
7.6(c).
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(d) The Partnership Group may transfer assets to joint ventures, other
partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.
(e) Neither of the General Partners nor any of their Affiliates shall sell,
transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 7.6(e) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to Sections 5.2 and 5.3, the Contribution
Agreement and any other transactions described in or contemplated by the
Registration Statement, (ii) any transaction approved by Special Approval, (iii)
any transaction, the terms of which are no less favorable to the Partnership
than those generally being provided to or available from unrelated third
parties, or (iv) any transaction that, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Partnership), is equitable
to the Partnership. With respect to any contribution of assets to the
Partnership in exchange for Partnership Securities, the Conflicts Committee, in
determining whether the appropriate number of Partnership Securities are being
issued, may take into account, among other things, the fair market value of the
assets, the liquidated and contingent liabilities assumed, the tax basis in the
assets, the extent to which tax-only allocations to the transferor will protect
the existing partners of the Partnership against a low tax basis, and such other
factors as the Conflicts Committee deems relevant under the circumstances.
(f) The General Partners and their Affiliates will have no obligation to
permit any Group Member to use any facilities or assets of the General Partners
and their Affiliates, except as may be provided in contracts entered into from
time to time specifically dealing with such use, nor shall there be any
obligation on the part of the General Partners or their Affiliates to enter into
such contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement are hereby
approved by all Partners.
SECTION 7.7 Indemnification.
(a) To the fullest extent permitted by law but subject to the limitations
expressly provided in this Agreement, all Indemnitees shall be indemnified and
held harmless by the Partnership from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including legal fees and
expenses), judgments, fines, penalties, interest, settlements or other amounts
arising from any and all claims, demands, actions, suits or proceedings, whether
civil, criminal, administrative or investigative, in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, by reason of
its status as an Indemnitee; provided, that in each case the Indemnitee acted in
good faith and in a manner that such Indemnitee reasonably believed to be in, or
(in the case of a Person other than the General Partners) not opposed to, the
best interests of the Partnership and, with respect to any criminal proceeding,
had no reasonable cause to believe its conduct was unlawful; provided, further,
no indemnification pursuant to this Section 7.7 shall be available to the
General Partners with respect to their obligations incurred pursuant to the
Underwriting Agreement or the Contribution Agreement (other than obligations
incurred by the General Partners on behalf of the Partnership, the Intermediate
Partnership or the Operating Subsidiary). The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that the
Indemnitee acted in a manner contrary to that specified above. Any
indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, it being agreed that the General Partners shall not
be personally liable for such indemnification and shall have no obligation to
contribute or loan any monies or property to the Partnership to enable it to
effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including legal fees
and expenses) incurred by an Indemnitee who is indemnified pursuant to Section
7.7(a) in defending any claim, demand, action, suit or proceeding shall, from
time to time, be advanced by the Partnership prior to the final disposition of
such claim, demand, action, suit or proceeding upon receipt by the Partnership
of any undertaking by or on behalf of the Indemnitee to repay such amount if it
shall be determined that the Indemnitee is not entitled to be indemnified as
authorized in this Section 7.7.
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(c) The indemnification provided by this Section 7.7 shall be in addition
to any other rights to which an Indemnitee may be entitled under any agreement,
pursuant to any vote of the holders of Outstanding Limited Partner Interests, as
a matter of law or otherwise, both as to actions in the Indemnitee's capacity as
an Indemnitee and as to actions in any other capacity (including any capacity
under the Underwriting Agreement), and shall continue as to an Indemnitee who
has ceased to serve in such capacity and shall inure to the benefit of the
heirs, successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the General
Partners or their Affiliates for the cost of) insurance, on behalf of the
General Partners, their Affiliates and such other Persons as the Managing
General Partner shall determine, against any liability that may be asserted
against or expense that may be incurred by such Person in connection with the
Partnership's activities or such Person's activities on behalf of the
Partnership, regardless of whether the Partnership would have the power to
indemnify such Person against such liability under the provisions of this
Agreement.
(e) For purposes of this Section 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute "fines"
within the meaning of Section 7.7(a); and action taken or omitted by it with
respect to any employee benefit plan in the performance of its duties for a
purpose reasonably believed by it to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is in, or
not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.7 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Partnership, nor
the obligations of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 7.7 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
SECTION 7.8 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this Agreement,
no Indemnitee shall be liable for monetary damages to the Partnership, the
Limited Partners, the Assignees or any other Persons who have acquired interests
in the Partnership Securities, for losses sustained or liabilities incurred as a
result of any act or omission if such Indemnitee acted in good faith.
(b) Subject to its obligations and duties as Managing General Partner set
forth in Section 7.1(a), the Managing General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its agents, and the Managing
General Partner shall not be responsible for any misconduct or negligence on the
part of any such agent appointed by the Managing General Partner in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has duties
(including fiduciary duties) and liabilities relating thereto to the Partnership
or to the Partners, the General Partners and any other Indemnitee acting in
connection
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with the Partnership's business or affairs shall not be liable to the
Partnership or to any Partner for its good faith reliance on the provisions of
this Agreement. The provisions of this Agreement, to the extent that they
restrict or otherwise modify the duties and liabilities of an Indemnitee
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Indemnitee.
(d) Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership, the Limited Partners, the
General Partners, and the Partnership's and General Partners' directors,
officers and employees under this Section 7.8 as in effect immediately prior to
such amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
SECTION 7.9 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this Agreement, the Intermediate
Partnership Agreement or the Operating Subsidiary Agreement, whenever a
potential conflict of interest exists or arises between a General Partner or any
of its Affiliates, on the one hand, and the Partnership, the Intermediate
Partnership, the Operating Subsidiary, any Partner or any Assignee, on the
other, any resolution or course of action by a General Partner or its Affiliates
in respect of such conflict of interest shall be permitted and deemed approved
by all Partners, and shall not constitute a breach of this Agreement, of the
Intermediate Partnership Agreement, of the Operating Subsidiary Agreement, of
any agreement contemplated herein or therein, or of any duty stated or implied
by law or equity, if the resolution or course of action is, or by operation of
this Agreement is deemed to be, fair and reasonable to the Partnership. The
Managing General Partner shall be authorized but not required in connection with
its resolution of such conflict of interest to seek Special Approval of such
resolution. Any conflict of interest and any resolution of such conflict of
interest shall be conclusively deemed fair and reasonable to the Partnership if
such conflict of interest or resolution is (i) approved by Special Approval (as
long as the material facts known to the Managing General Partner or any of its
Affiliates regarding any proposed transaction were disclosed to the Conflicts
Committee at the time it gave its approval), (ii) on terms no less favorable to
the Partnership than those generally being provided to or available from
unrelated third parties or (iii) fair to the Partnership, taking into account
the totality of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to the
Partnership). The Managing General Partner may also adopt a resolution or course
of action that has not received Special Approval. The Managing General Partner
(including the Conflicts Committee in connection with Special Approval) shall be
authorized in connection with its determination of what is "fair and reasonable"
to the Partnership and in connection with its resolution of any conflict of
interest to consider (A) the relative interests of any party to such conflict,
agreement, transaction or situation and the benefits and burdens relating to
such interest; (B) any customary or accepted industry practices and any
customary or historical dealings with a particular Person; (C) any applicable
generally accepted accounting practices or principles; and (D) such additional
factors as the Managing General Partner (including the Conflicts Committee)
determines in its sole discretion to be relevant, reasonable or appropriate
under the circumstances. Nothing contained in this Agreement, however, is
intended to nor shall it be construed to require the Managing General Partner
(including the Conflicts Committee) to consider the interests of any Person
other than the Partnership. In the absence of bad faith by the Managing General
Partner, the resolution, action or terms so made, taken or provided by the
Managing General Partner with respect to such matter shall not constitute a
breach of this Agreement or any other agreement contemplated herein or a breach
of any standard of care or duty imposed herein or therein or, to the extent
permitted by law, under the Delaware Act or any other law, rule or regulation.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that the Managing General Partner or any of its Affiliates is permitted
or required to make a decision (i) in its "sole discretion" or "discretion,"
that it deems "necessary or appropriate" or "necessary or advisable" or under a
grant of similar authority or latitude, except as otherwise provided herein, the
Managing General Partner or such Affiliate shall be entitled to consider only
such interests and factors as it desires and shall have no duty or obligation to
give any consideration to any interest of, or factors affecting, the
Partnership, the Intermediate Partnership, the Operating Subsidiary, any Limited
Partner or any Assignee, (ii) it may make such decision in its sole discretion
(regardless of whether there is a reference to "sole discretion" or
"discretion") unless another express standard is provided for, or (iii) in "good
faith" or under another express standard, the Managing General Partner or such
Affiliate shall act under such express standard and shall not be
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subject to any other or different standards imposed by this Agreement, the
Intermediate Partnership Agreement, the Operating Subsidiary Agreement, any
other agreement contemplated hereby or under the Delaware Act or any other law,
rule or regulation. In addition, any actions taken by the Managing General
Partner or such Affiliate consistent with the standards of "reasonable
discretion" set forth in the definitions of Available Cash or Operating Surplus
shall not constitute a breach of any duty of the Managing General Partner to the
Partnership or the Limited Partners. The Managing General Partner shall have no
duty, express or implied, to sell or otherwise dispose of any asset of the
Partnership Group other than in the ordinary course of business. No borrowing by
any Group Member or the approval thereof by the Managing General Partner shall
be deemed to constitute a breach of any duty of the Managing General Partner to
the Partnership or the Limited Partners by reason of the fact that the purpose
or effect of such borrowing is directly or indirectly to (A) enable
distributions to the General Partners or their Affiliates (including in their
capacities as Limited Partners) to exceed 1% of the total amount distributed to
all partners or (B) hasten the expiration of the Subordination Period or the
conversion of any Subordinated Units into Common Units.
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
(d) The Unitholders hereby authorize the Managing General Partner, on
behalf of the Partnership as a partner of a Group Member, to approve of actions
by the general partner of such Group Member similar to those actions permitted
to be taken by the Managing General Partner pursuant to this Section 7.9.
SECTION 7.10 Other Matters Concerning the General Partners.
(a) A General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(b) A General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion (including an Opinion of Counsel) of such Persons as to matters
that such General Partner reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.
(c) A General Partner shall have the right, in respect of any of its powers
or obligations hereunder, to act through any of its duly authorized officers, a
duly appointed attorney or attorneys-in-fact or the duly authorized officers of
the Partnership.
(d) Any standard of care and duty imposed by this Agreement or under the
Delaware Act or any applicable law, rule or regulation shall be modified, waived
or limited, to the extent permitted by law, as required to permit the General
Partners to act under this Agreement or any other agreement contemplated by this
Agreement and to make any decision pursuant to the authority prescribed in this
Agreement, so long as such action is reasonably believed by the Managing General
Partner to be in, or not inconsistent with, the best interests of the
Partnership.
SECTION 7.11 Purchase or Sale of Partnership Securities.
The Managing General Partner may cause the Partnership to purchase or
otherwise acquire Partnership Securities; provided that, except as permitted
pursuant to Section 4.10, the Managing General Partner may not cause any Group
Member to purchase Subordinated Units during the Subordination Period. As long
as Partnership Securities are held by any Group Member, such Partnership
Securities shall not be considered Outstanding for any purpose, except as
otherwise provided herein. The General Partners or any of their Affiliates may
also purchase or otherwise acquire and sell or otherwise dispose of Partnership
Securities for their own account, subject to the provisions of Articles IV and
X.
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SECTION 7.12 Registration Rights of the General Partners and their Affiliates.
(a) If (i) either of the General Partners or any Affiliate of either of the
General Partners (including for purposes of this Section 7.12, any Person that
is an Affiliate of either of the General Partners at the date hereof
notwithstanding that it may later cease to be an Affiliate of either of the
General Partners) holds Partnership Securities that it desires to sell and (ii)
Rule 144 of the Securities Act (or any successor rule or regulation to Rule 144)
or another exemption from registration is not available to enable such holder of
Partnership Securities (the "Holder") to dispose of the number of Partnership
Securities it desires to sell at the time it desires to do so without
registration under the Securities Act, then upon the request of such General
Partner or any of its Affiliates, the Partnership shall file with the Commission
as promptly as practicable after receiving such request, and use all reasonable
efforts to cause to become effective and remain effective for a period of not
less than six months following its effective date or such shorter period as
shall terminate when all Partnership Securities covered by such registration
statement have been sold, a registration statement under the Securities Act
registering the offering and sale of the number of Partnership Securities
specified by the Holder; provided, however, that the Partnership shall not be
required to effect more than three registrations pursuant to this Section
7.12(a); and provided further, however, that if the Conflicts Committee
determines in its good faith judgment that a postponement of the requested
registration for up to six months would be in the best interests of the
Partnership and its Partners due to a pending transaction, investigation or
other event, the filing of such registration statement or the effectiveness
thereof may be deferred for up to six months, but not thereafter. In connection
with any registration pursuant to the immediately preceding sentence, the
Partnership shall promptly prepare and file (x) such documents as may be
necessary to register or qualify the securities subject to such registration
under the securities laws of such states as the Holder shall reasonably request;
provided, however, that no such qualification shall be required in any
jurisdiction where, as a result thereof, the Partnership would become subject to
general service of process or to taxation or qualification to do business as a
foreign corporation or partnership doing business in such jurisdiction solely as
a result of such registration, and (y) such documents as may be necessary to
apply for listing or to list the Partnership Securities subject to such
registration on such National Securities Exchange as the Holder shall reasonably
request, and do any and all other acts and things that may reasonably be
necessary or advisable to enable the Holder to consummate a public sale of such
Partnership Securities in such states. Except as set forth in Section 7.12(c),
all costs and expenses of any such registration and offering (other than the
underwriting discounts and commissions) shall be paid by the Partnership,
without reimbursement by the Holder.
(b) If the Partnership shall at any time propose to file a registration
statement under the Securities Act for an offering of equity securities of the
Partnership for cash (other than an offering relating solely to an employee
benefit plan), the Partnership shall use all reasonable efforts to include such
number or amount of securities held by the Holder in such registration statement
as the Holder shall request. If the proposed offering pursuant to this Section
7.12(b) shall be an underwritten offering, then, in the event that the managing
underwriter or managing underwriters of such offering advise the Partnership and
the Holder in writing that in their opinion the inclusion of all or some of the
Holder's Partnership Securities would adversely and materially affect the
success of the offering, the Partnership shall include in such offering only
that number or amount, if any, of securities held by the Holder which, in the
opinion of the managing underwriter or managing underwriters, will not so
adversely and materially affect the offering. Except as set forth in Section
7.12(c), all costs and expenses of any such registration and offering (other
than the underwriting discounts and commissions) shall be paid by the
Partnership, without reimbursement by the Holder.
(c) If underwriters are engaged in connection with any registration
referred to in this Section 7.12, the Partnership shall provide indemnification,
representations, covenants, opinions and other assurance to the underwriters in
form and substance reasonably satisfactory to such underwriters. Further, in
addition to and not in limitation of the Partnership's obligation under Section
7.7, the Partnership shall, to the fullest extent permitted by law, indemnify
and hold harmless the Holder, its officers, directors and each Person who
controls the Holder (within the meaning of the Securities Act) and any agent
thereof (collectively, "Indemnified Persons") against any losses, claims,
demands, actions, causes of action, assessments, damages, liabilities (joint or
several), costs and expenses (including interest, penalties and reasonable
attorneys' fees and disbursements), resulting to, imposed upon, or incurred by
the Indemnified Persons, directly or indirectly, under the Securities Act or
otherwise (hereinafter referred to in this Section 7.12(c) as a "claim" and in
the plural as "claims") based upon, arising out of or resulting from any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which any Partnership Securities were registered
under the Securities Act or any state securities or Blue Sky laws, in any
preliminary prospectus (if used prior to the effective date of such registration
statement), or in any summary or final prospectus or in any amendment or
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supplement thereto (if used during the period the Partnership is required to
keep the registration statement current), or arising out of, based upon or
resulting from the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements made therein
not misleading; provided, however, that the Partnership shall not be liable to
any Indemnified Person to the extent that any such claim arises out of, is based
upon or results from an untrue statement or alleged untrue statement or omission
or alleged omission made in such registration statement, such preliminary,
summary or final prospectus or such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Partnership by or on
behalf of such Indemnified Person specifically for use in the preparation
thereof.
(d) The provisions of Section 7.12(a) and 7.12(b) shall continue to be
applicable with respect to the General Partners (and any of the General
Partners' Affiliates) after they cease to be Partners of the Partnership, during
a period of two years subsequent to the effective date of such cessation and for
so long thereafter as is required for the Holder to sell all of the Partnership
Securities with respect to which it has requested during such two-year period
inclusion in a registration statement otherwise filed or that a registration
statement be filed; provided, however, that the Partnership shall not be
required to file successive registration statements covering the same
Partnership Securities for which registration was demanded during such two-year
period. The provisions of Section 7.12(c) shall continue in effect thereafter.
(e) Any request to register Partnership Securities pursuant to this Section
7.12 shall (i) specify the Partnership Securities intended to be offered and
sold by the Person making the request, (ii) express such Person's present intent
to offer such shares for distribution, (iii) describe the nature or method of
the proposed offer and sale of Partnership Securities, and (iv) contain the
undertaking of such Person to provide all such information and materials and
take all action as may be required in order to permit the Partnership to comply
with all applicable requirements in connection with the registration of such
Partnership Securities.
SECTION 7.13 Reliance by Third Parties.
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the Managing
General Partner and any officer of the Managing General Partner authorized by
the Managing General Partner to act on behalf of and in the name of the
Partnership has full power and authority to encumber, sell or otherwise use in
any manner any and all assets of the Partnership and to enter into any
authorized contracts on behalf of the Partnership, and such Person shall be
entitled to deal with the Managing General Partner or any such officer as if it
were the Partnership's sole party in interest, both legally and beneficially.
Each Limited Partner hereby waives any and all defenses or other remedies that
may be available against such Person to contest, negate or disaffirm any action
of the Managing General Partner or any such officer in connection with any such
dealing. In no event shall any Person dealing with the Managing General Partner
or any such officer or its representatives be obligated to ascertain that the
terms of the Agreement have been complied with or to inquire into the necessity
or expedience of any act or action of the Managing General Partner or any such
officer or its representatives. Each and every certificate, document or other
instrument executed on behalf of the Partnership by the Managing General Partner
or its representatives shall be conclusive evidence in favor of any and every
Person relying thereon or claiming thereunder that (a) at the time of the
execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect, (b) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Partnership and (c) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.
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ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 8.1 Records and Accounting.
The Managing General Partner shall keep or cause to be kept at the
principal office of the Partnership appropriate books and records with respect
to the Partnership's business, including all books and records necessary to
provide to the Limited Partners any information required to be provided pursuant
to Section 3.4(a). Any books and records maintained by or on behalf of the
Partnership in the regular course of its business, including the record of the
Record Holders and Assignees of Units or other Partnership Securities, books of
account and records of Partnership proceedings, may be kept on, or be in the
form of, computer disks, hard drives, punch cards, magnetic tape, photographs,
micrographics or any other information storage device; provided, that the books
and records so maintained are convertible into clearly legible written form
within a reasonable period of time. The books of the Partnership shall be
maintained, for financial reporting purposes, on an accrual basis in accordance
with U.S. GAAP.
SECTION 8.2 Fiscal Year.
The fiscal year of the Partnership shall be a fiscal year ending December
31.
SECTION 8.3 Reports.
(a) As soon as practicable, but in no event later than 120 days after the
close of each fiscal year of the Partnership, the Managing General Partner shall
cause to be mailed or made available to each Record Holder of a Unit as of a
date selected by the Managing General Partner in its discretion, an annual
report containing financial statements of the Partnership for such fiscal year
of the Partnership, presented in accordance with U.S. GAAP, including a balance
sheet and statements of operations, Partnership equity and cash flows, such
statements to be audited by a firm of independent public accountants selected by
the Managing General Partner.
(b) As soon as practicable, but in no event later than 90 days after the
close of each Quarter except the last Quarter of each fiscal year, the Managing
General Partner shall cause to be mailed or made available to each Record Holder
of a Unit, as of a date selected by the Managing General Partner in its
discretion, a report containing unaudited financial statements of the
Partnership and such other information as may be required by applicable law,
regulation or rule of any National Securities Exchange on which the Units are
listed for trading, or as the Managing General Partner determines to be
necessary or appropriate.
ARTICLE IX
TAX MATTERS
SECTION 9.1 Tax Returns and Information.
The Partnership shall timely file all returns of the Partnership that are
required for federal, state and local income tax purposes on the basis of the
accrual method and a taxable year ending on December 31. The tax information
reasonably required by Record Holders for federal and state income tax reporting
purposes with respect to a taxable year shall be furnished to them within 90
days of the close of the calendar year in which the Partnership's taxable year
ends. The classification, realization and recognition of income, gain, losses
and deductions and other items shall be on the accrual method of accounting for
federal income tax purposes.
SECTION 9.2 Tax Elections.
(a) The Partnership shall make the election under Section 754 of the Code
in accordance with applicable regulations thereunder, subject to the reservation
of the right to seek to revoke any such election upon the Managing General
Partner's determination that such revocation is in the best interests of the
Limited Partners. Notwithstanding any other
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provision herein contained, for the purposes of computing the adjustments under
Section 743(b) of the Code, the Managing General Partner shall be authorized
(but not required) to adopt a convention whereby the price paid by a transferee
of a Limited Partner Interest will be deemed to be the lowest quoted closing
price of the Limited Partner Interests on any National Securities Exchange on
which such Limited Partner Interests are traded during the calendar month in
which such transfer is deemed to occur pursuant to Section 6.2(g) without regard
to the actual price paid by such transferee.
(b) The Partnership shall elect to deduct expenses incurred in organizing
the Partnership ratably over a sixty-month period as provided in Section 709 of
the Code.
(c) Except as otherwise provided herein, the Managing General Partner shall
determine whether the Partnership should make any other elections permitted by
the Code.
SECTION 9.3 Tax Controversies.
Subject to the provisions hereof, the Managing General Partner is
designated as the Tax Matters Partner (as defined in the Code) and is authorized
and required to represent the Partnership (at the Partnership's expense) in
connection with all examinations of the Partnership's affairs by tax
authorities, including resulting administrative and judicial proceedings, and to
expend Partnership funds for professional services and costs associated
therewith. Each Partner agrees to cooperate with the Managing General Partner
and to do or refrain from doing any or all things reasonably required by the
Managing General Partner to conduct such proceedings.
SECTION 9.4 Withholding.
Notwithstanding any other provision of this Agreement, the Managing General
Partner is authorized to take any action that it determines in its discretion to
be necessary or appropriate to cause the Partnership, the Intermediate
Partnership and the Operating Subsidiary to comply with any withholding
requirements established under the Code or any other federal, state or local law
including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of
the Code. To the extent that the Partnership is required or elects to withhold
and pay over to any taxing authority any amount resulting from the allocation or
distribution of income to any Partner or Assignee (including, without
limitation, by reason of Section 1446 of the Code), the amount withheld may at
the discretion of the Managing General Partner be treated by the Partnership as
a distribution of cash pursuant to Section 6.3 in the amount of such withholding
from such Partner.
ARTICLE X
ADMISSION OF PARTNERS
SECTION 10.1 Admission of Initial Limited Partners.
Upon the issuance by the Partnership of Common Units, Subordinated Units
and Incentive Distribution Rights to the General Partners as described in
Section 5.2, each General Partner shall be deemed to have been admitted to the
Partnership as a Limited Partner in respect of the Common Units, Subordinated
Units or Incentive Distribution Rights issued to it. Upon the issuance by the
Partnership of Common Units to the Underwriters as described in Section 5.3 in
connection with the Initial Offering and the execution by each Underwriter of a
Transfer Application, the Managing General Partner shall admit the Underwriters
to the Partnership as Initial Limited Partners in respect of the Common Units
purchased by them.
SECTION 10.2 Admission of Substituted Limited Partner.
By transfer of a Limited Partner Interest in accordance with Article IV,
the transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Limited Partner subject to the conditions of, and in
the manner permitted under, this Agreement. A transferor of a Certificate
representing a Limited Partner Interest shall, however, only have the authority
to convey to a purchaser or other transferee who does not execute and deliver a
Transfer
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Application (a) the right to negotiate such Certificate to a purchaser or other
transferee and (b) the right to transfer the right to request admission as a
Substituted Limited Partner to such purchaser or other transferee in respect of
the transferred Limited Partner Interests. Each transferee of a Limited Partner
Interest (including any nominee holder or an agent acquiring such Limited
Partner Interest for the account of another Person) who executes and delivers a
Transfer Application shall, by virtue of such execution and delivery, be an
Assignee and be deemed to have applied to become a Substituted Limited Partner
with respect to the Limited Partner Interests so transferred to such Person.
Such Assignee shall become a Substituted Limited Partner (x) at such time as the
Managing General Partner consents thereto, which consent may be given or
withheld in the Managing General Partner's discretion, and (y) when any such
admission is shown on the books and records of the Partnership. If such consent
is withheld, such transferee shall be an Assignee. An Assignee shall have an
interest in the Partnership equivalent to that of a Limited Partner with respect
to allocations and distributions, including liquidating distributions, of the
Partnership. With respect to voting rights attributable to Limited Partner
Interests that are held by Assignees, the Managing General Partner shall be
deemed to be the Limited Partner with respect thereto and shall, in exercising
the voting rights in respect of such Limited Partner Interests on any matter,
vote such Limited Partner Interests at the written direction of the Assignee who
is the Record Holder of such Limited Partner Interests. If no such written
direction is received, such Limited Partner Interests will not be voted. An
Assignee shall have no other rights of a Limited Partner.
SECTION 10.3 Admission of Successor General Partners.
A successor General Partner approved pursuant to Section 11.1, 11.2 or 11.4
or the transferee of or successor to all of such General Partner Interest
pursuant to Section 4.6 who is proposed to be admitted as a successor General
Partner shall be admitted to the Partnership as the Managing General Partner, or
the Special General Partner, as the case may be, effective immediately prior to
the withdrawal or removal of the predecessor or transferring Managing General
Partner or Special General Partner, as the case may be, pursuant to Section
11.1, 11.2 or 11.4 or the transfer of such General Partner's General Partner
Interest pursuant to Section 4.6, provided, however, that no such successor
shall be admitted to the Partnership until compliance with the terms of Section
4.6 has occurred and such successor has executed and delivered such other
documents or instruments as may be required to effect such admission. Any such
successor shall, subject to the terms hereof, carry on the business of the
members of the Partnership Group without dissolution.
SECTION 10.4 Admission of Additional Limited Partners.
(a) A Person (other than a General Partner, an Initial Limited Partner or a
Substituted Limited Partner) who makes a Capital Contribution to the Partnership
in accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the Managing General Partner
(i) evidence of acceptance in form satisfactory to the Managing General Partner
of all of the terms and conditions of this Agreement, including the power of
attorney granted in Section 2.6, and (ii) such other documents or instruments as
may be required in the discretion of the Managing General Partner to effect such
Person's admission as an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 10.4, no
Person shall be admitted as an Additional Limited Partner without the consent of
the Managing General Partner, which consent may be given or withheld in the
Managing General Partner's discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded as such in the books and records of the
Partnership, following the consent of the Managing General Partner to such
admission.
SECTION 10.5 Amendment of Agreement and Certificate of Limited Partnership.
To effect the admission to the Partnership of any Partner, the Managing
General Partner shall take all steps necessary and appropriate under the
Delaware Act to amend the records of the Partnership to reflect such admission
and, if necessary, to prepare as soon as practicable an amendment to this
Agreement and, if required by law, the Managing General Partner shall prepare
and file an amendment to the Certificate of Limited Partnership, and the
Managing General Partner may for this purpose, among others, exercise the power
of attorney granted pursuant to Section 2.6.
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ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
SECTION 11.1 Withdrawal of the Managing General Partner.
(a) The Managing General Partner shall be deemed to have withdrawn from the
Partnership upon the occurrence of any one of the following events (each such
event herein referred to as an "Event of Withdrawal");
(i) The Managing General Partner voluntarily withdraws from the
Partnership by giving written notice to the other Partners (and it shall be
deemed that the Managing General Partner has withdrawn pursuant to this
Section 11.1(a)(i) if the Managing General Partner voluntarily withdraws
(A) as general partner of the Intermediate Partnership or (B) as managing
member of the Operating Subsidiary);
(ii) The Managing General Partner transfers all of its rights as
Managing General Partner pursuant to Section 4.6;
(iii) The Managing General Partner is removed pursuant to Section 11.2;
(iv) The Managing General Partner (A) makes a general assignment for
the benefit of creditors; (B) files a voluntary bankruptcy petition for
relief under Chapter 7 of the United States Bankruptcy Code; (C) files a
petition or answer seeking for itself a liquidation, dissolution or similar
relief (but not a reorganization) under any law; (D) files an answer or
other pleading admitting or failing to contest the material allegations of
a petition filed against the Managing General Partner in a proceeding of
the type described in clauses (A)-(C) of this Section 11.1(a)(iv); or (E)
seeks, consents to or acquiesces in the appointment of a trustee (but not a
debtor-in-possession), receiver or liquidator of the Managing General
Partner or of all or any substantial part of its properties;
(v) A final and non-appealable order of relief under Chapter 7 of the
United States Bankruptcy Code is entered by a court with appropriate
jurisdiction pursuant to a voluntary or involuntary petition by or against
the Managing General Partner; or
(vi) (A) in the event the Managing General Partner is a corporation, a
certificate of dissolution or its equivalent is filed for the Managing
General Partner, or 90 days expire after the date of notice to the Managing
General Partner of revocation of its charter without a reinstatement of its
charter, under the laws of its state of incorporation; (B) in the event the
Managing General Partner is a partnership or a limited liability company,
the dissolution and commencement of winding up of the Managing General
Partner; (C) in the event the Managing General Partner is acting in such
capacity by virtue of being a trustee of a trust, the termination of the
trust; (D) in the event the Managing General Partner is a natural person,
his death or adjudication of incompetency; and (E) otherwise in the event
of the termination of the Managing General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv), (v) or (vi)(A),
(B), (C) or (E) occurs, the withdrawing Managing General Partner shall give
notice to the Limited Partners within 30 days after such occurrence. The
Partners hereby agree that only the Events of Withdrawal described in this
Section 11.1 shall result in the withdrawal of the Managing General Partner from
the Partnership.
(b) Withdrawal of the Managing General Partner from the Partnership upon
the occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances: (i) at any time during the period
beginning on the Closing Date and ending at 12:00 midnight, Eastern Standard
Time, on September 30, 2009, the Managing General Partner voluntarily withdraws
by giving at least 90 days' advance notice of its intention to withdraw to the
Limited Partners; provided that prior to the effective date of such withdrawal,
the withdrawal is approved by Unitholders holding at least a majority of the
Outstanding Common Units (excluding Common Units held by the General Partners
and their Affiliates) and the Managing General Partner delivers to the
Partnership an Opinion of Counsel ("Withdrawal Opinion of Counsel") that such
withdrawal (following the selection of the successor Managing General Partner)
would not result in the loss of the limited liability of any Limited Partner or
of a limited partner of the Intermediate Partnership or of a member of the
Operating Subsidiary or cause the Partnership or the Intermediate Partnership or
the Operating Subsidiary to be treated as an association taxable as a
corporation or otherwise to be taxed
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as an entity for federal income tax purposes (to the extent not previously
treated as such); (ii) at any time after 12:00 midnight, Eastern Standard Time,
on September 30, 2009, the Managing General Partner voluntarily withdraws by
giving at least 90 days' advance notice to the Unitholders, such withdrawal to
take effect on the date specified in such notice; (iii) at any time that the
Managing General Partner ceases to be the Managing General Partner pursuant to
Section 11.1(a)(ii) or is removed pursuant to Section 11.2; or (iv)
notwithstanding clause (i) of this sentence, at any time that the Managing
General Partner voluntarily withdraws by giving at least 90 days' advance notice
of its intention to withdraw to the Limited Partners, such withdrawal to take
effect on the date specified in the notice, if at the time such notice is given
one Person and its Affiliates (other than the General Partners and their
Affiliates) own beneficially or of record or control at least 50% of the
Outstanding Units. The withdrawal of the Managing General Partner from the
Partnership upon the occurrence of an Event of Withdrawal shall also constitute
the withdrawal of the Managing General Partner as general partner or managing
member, as the case may be, of the other Group Members. If the Managing General
Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i), the holders
of a Unit Majority, may, prior to the effective date of such withdrawal, elect a
successor Managing General Partner. The Person so elected as successor Managing
General Partner shall automatically become the successor general partner or
managing member, as the case may be, of the other Group Members of which the
Managing General Partner is a general partner or a managing member. If, prior to
the effective date of the Managing General Partner's withdrawal, a successor is
not selected by the Unitholders as provided herein or the Partnership does not
receive a Withdrawal Opinion of Counsel, the Partnership shall be dissolved in
accordance with Section 12.1. Any successor Managing General Partner elected in
accordance with the terms of this Section 11.1 shall be subject to the
provisions of Section 10.3.
SECTION 11.2 Removal of the Managing General Partner.
The Managing General Partner may be removed if such removal is approved by
the Unitholders holding at least 66 2/3% of the Outstanding Units (including
Units held by the General Partners and their Affiliates). Any such action by
such holders for removal of the Managing General Partner must also provide for
the election of a successor Managing General Partner by the Unitholders holding
a Unit Majority (including Units held by the General Partners and their
Affiliates). Such removal shall be effective immediately following the admission
of a successor Managing General Partner pursuant to Section 10.3. The removal of
the Managing General Partner shall also automatically constitute the removal of
the Managing General Partner as general partner or managing member, as the case
may be, of the other Group Members of which the Managing General Partner is a
general partner or a managing member. If a Person is elected as a successor
Managing General Partner in accordance with the terms of this Section 11.2, such
Person shall, upon admission pursuant to Section 10.3, automatically become a
successor general partner or managing member, as the case may be, of the other
Group Members of which the Managing General Partner is a general partner or a
managing member. The right of the holders of Outstanding Units to remove the
Managing General Partner shall not exist or be exercised unless the Partnership
has received an opinion opining as to the matters covered by a Withdrawal
Opinion of Counsel. Any successor Managing General Partner elected in accordance
with the terms of this Section 11.2 shall be subject to the provisions of
Section 10.3.
SECTION 11.3 Interest of Departing Partner and Successor General Partners.
(a) In the event of (i) withdrawal of a General Partner under circumstances
where such withdrawal does not violate this Agreement or (ii) removal of the
Managing General Partner by the holders of Outstanding Units under circumstances
where Cause does not exist, if a successor General Partner is elected in
accordance with the terms of Section 11.1, 11.2 or 11.4, the Departing Partner
shall have the option exercisable prior to the effective date of the departure
of such Departing Partner to require its successor to purchase its General
Partner Interest and its managing member interest (or equivalent interest) in
the other Group Members and, in the case of the Managing General Partner, all of
its Incentive Distribution Rights (collectively, the "Combined Interest") in
exchange for an amount in cash equal to the fair market value of such Combined
Interest, such amount to be determined and payable as of the effective date of
its departure. If the Managing General Partner is removed by the Unitholders
under circumstances where Cause exists or if a General Partner withdraws under
circumstances where such withdrawal violates this Agreement, the Intermediate
Partnership Agreement or the Operating Subsidiary Agreement, and if a successor
General Partner is elected in accordance with the terms of Section 11.1, 11.2 or
11.4, such successor shall have the option, exercisable prior to the effective
date of the departure of such Departing Partner, to purchase the Combined
Interest for such fair market value of such Combined Interest of the Departing
Partner. In either event, the Departing Partner shall be entitled to receive
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all reimbursements due such Departing Partner pursuant to Section 7.4, including
any employee-related liabilities (including severance liabilities), incurred in
connection with the termination of any employees employed by the Departing
Partner for the benefit of the Partnership or the other Group Members.
For purposes of this Section 11.3(a), the fair market value of a Departing
Partner's Combined Interest shall be determined by agreement between the
Departing Partner and its successor or, failing agreement within 30 days after
the effective date of such Departing Partner's departure, by an independent
investment banking firm or other independent expert selected by the Departing
Partner and its successor, which, in turn, may rely on other experts, and the
determination of which shall be conclusive as to such matter. If such parties
cannot agree upon one independent investment banking firm or other independent
expert within 45 days after the effective date of such departure, then the
Departing Partner shall designate an independent investment banking firm or
other independent expert, the Departing Partner's successor shall designate an
independent investment banking firm or other independent expert, and such firms
or experts shall mutually select a third independent investment banking firm or
independent expert, which third independent investment banking firm or other
independent expert shall determine the fair market value of the Combined
Interest of the Departing Partner. In making its determination, such third
independent investment banking firm or other independent expert may consider the
then current trading price of Units on any National Securities Exchange on which
Units are then listed, the value of the Partnership's assets, the rights and
obligations of the Departing Partner and other factors it may deem relevant.
(b) If the Combined Interest is not purchased in the manner set forth in
Section 11.3(a), the Departing Partner (or its transferee) shall become a
Limited Partner and its Combined Interest shall be converted into Common Units
pursuant to a valuation made by an investment banking firm or other independent
expert selected pursuant to Section 11.3(a), without reduction in such
Partnership Interest (but subject to proportionate dilution by reason of the
admission of its successor). Any successor General Partner shall indemnify the
Departing Partner (or its transferee) as to all debts and liabilities of the
Partnership arising on or after the date on which the Departing Partner (or its
transferee) becomes a Limited Partner. For purposes of this Agreement,
conversion of the Combined Interest of the Departing Partner to Common Units
will be characterized as if the Departing Partner (or its transferee)
contributed its Combined Interest to the Partnership in exchange for the newly
issued Common Units.
(c) If a successor General Partner is elected in accordance with the terms
of Section 11.1, 11.2 or 11.4 and the option described in Section 11.3(a) is not
exercised by the party entitled to do so, the successor General Partner shall,
at the effective date of its admission to the Partnership, contribute to the
Partnership cash in the amount equal to its Percentage Interest of 1/99th of the
Net Agreed Value of the Partnership's assets on such date. In such event, such
successor General Partner shall, subject to the following sentence, be entitled
to such Percentage Interest of all Partnership allocations and distributions to
which the Departing Partner was entitled. In addition, a successor Managing
General Partner shall cause this Agreement to be amended to reflect that, from
and after the date of such successor Managing General Partner's admission, the
successor Managing General Partner's interest in all Partnership distributions
and allocations shall be .99%.
SECTION 11.4 Withdrawal or Removal of Special General Partner.
(a) The Special General Partner may withdraw from the Partnership in the
capacity of Special General Partner (i) upon 90 days' advance written notice to
the Managing General Partner or (ii) by transferring its General Partner
Interest in the Partnership pursuant to Section 4.6 hereof. Such withdrawal
shall take effect on the date specified in such notice. Upon receiving such
notice, the Managing General Partner shall select a successor Special General
Partner within such 90-day period. Any withdrawal of the Special General Partner
shall not become effective unless the Partnership has received by the end of
such 90-day period a Withdrawal Opinion of Counsel that such withdrawal will not
result in the loss of limited liability of any Limited Partner or of a limited
partner of the Intermediate Partnership or of a member of the Operating
Subsidiary or cause the Partnership or the Intermediate Partnership or the
Operating Subsidiary to be treated as a corporation or as an association taxable
as a corporation for federal income tax purposes. Following any withdrawal of
the Special General Partner, the business and operations of the Partnership
shall be continued by the Managing General Partner.
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(b) In addition to the voluntary withdrawal described above, the Special
General Partner shall be deemed to have withdrawn (i) when and if, the Special
General Partner (A) makes a general assignment for the benefit of creditors, (B)
files a voluntary bankruptcy petition, (C) files a petition or answer seeking
for itself a reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any law, (D) files an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against the Special General Partner in a proceeding of the type
described in clauses (A)-(C) of this subsection, or (E) seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator of the
Special General Partner or of all or any substantial part of its properties; or
(ii), when a final and non-appealable judgment is entered by a court with
appropriate jurisdiction ruling that the Special General Partner is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a court
with appropriate jurisdiction against the Special General Partner, in each case
under any federal or state bankruptcy or insolvency laws as now or hereinafter
in effect; or (iii) (A) in the event the Special General Partner is a
corporation, when a certificate of dissolution or its equivalent is filed for
the Special General Partner, or 90 days expire after the date of notice to the
Special General Partner of revocation of its charter without a reinstatement of
its charter, under the laws of its state of incorporation, (B) in the event the
Special General Partner is a partnership or a limited liability company, the
dissolution and commencement of winding up of the Special General Partner, (C)
in the event the Special General Partner is acting in such capacity by virtue of
being a trustee of a trust, the termination of the trust, (D) in the event the
Special General Partner is a natural person, his death or adjudication of
incompetency, and (E) otherwise in the event of the termination of the Special
General Partner.
(c) The Special General Partner may be removed only if such removal is
approved by the written consent or affirmative vote of Limited Partners holding
at least 66 2/3% of the Outstanding Units (including Units owned by the General
Partners and their Affiliates). Any such action by the Limited Partners for
removal of the Special General Partner must also provide for the approval of a
successor Special General Partner. Such removal shall be effective immediately
following the admission of the successor Special General Partner pursuant to
Section 10.3. The right of the Limited Partners to remove the Special General
Partner shall not exist or be exercised unless the Partnership has received an
Opinion of Counsel that the removal of the Special General Partner and the
selection of a successor Special General Partner will not result in (i) the loss
of limited liability of any Limited Partner or of a limited partner of the
Intermediate Partnership or of a member of the Operating Subsidiary or (ii) the
taxation of the Partnership or the Intermediate Partnership or the Operating
Subsidiary as an association taxable as a corporation for federal income tax
purposes unless already so taxed.
(d) Notwithstanding the other provisions of this Section 11.4, a successor
Special General Partner need not be selected if the Partnership has received an
Opinion of Counsel that the failure to select a successor would not cause the
Partnership or the Intermediate Partnership or the Operating Subsidiary to be
treated as a corporation or as an association taxable as a corporation for
federal income tax purposes.
SECTION 11.5 Termination of Subordination Period, Conversion of Subordinated
Units and Extinguishment of Cumulative Common Unit Arrearages.
Notwithstanding any provision of this Agreement, if the Managing General
Partner is removed as general partner of the Partnership under circumstances
where Cause does not exist and Units held by the General Partners and their
Affiliates are not voted in favor of such removal, (i) the Subordination Period
will end and all Outstanding Subordinated Units will immediately and
automatically convert into Common Units on a one-for-one basis and (ii) all
Cumulative Common Unit Arrearages on the Common Units will be extinguished.
SECTION 11.6 Withdrawal of Limited Partners.
No Limited Partner shall have any right to withdraw from the Partnership;
provided, however, that when a transferee of a Limited Partner's Limited Partner
Interest becomes a Record Holder of the Limited Partner Interest so transferred,
such transferring Limited Partner shall cease to be a Limited Partner with
respect to the Limited Partner Interest so transferred.
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ARTICLE XII
DISSOLUTION AND LIQUIDATION
SECTION 12.1 Dissolution.
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor Managing General Partner or a successor Special General Partner in
accordance with the terms of this Agreement or by the withdrawal of the Special
General Partner pursuant to Section 11.4. Upon the removal or withdrawal of the
Managing General Partner, if a successor Managing General Partner is elected
pursuant to Section 11.1 or 11.2, the Partnership shall not be dissolved and
such successor Managing General Partner shall continue the business of the
Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its
affairs shall be wound up, upon:
(a) the expiration of its term as provided in Section 2.7;
(b) an Event of Withdrawal of the Managing General Partner as provided
in Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is
elected and an Opinion of Counsel is received as provided in Section
11.1(b) or 11.2 and such successor is admitted to the Partnership pursuant
to Section 10.3;
(c) an election to dissolve the Partnership by the Managing General
Partner that is approved by the holders of a Unit Majority;
(d) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or
(e) the sale of all or substantially all of the assets and properties
of the Partnership Group.
SECTION 12.2 Continuation of the Business of the Partnership After Dissolution.
Upon (a) dissolution of the Partnership following an Event of Withdrawal
caused by the withdrawal or removal of the Managing General Partner as provided
in Section 11.1(a)(i) or (iii) and the failure of the Partners to select a
successor to such Departing Partner pursuant to Section 11.1 or 11.2, then
within 90 days thereafter, or (b) dissolution of the Partnership upon an event
constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or
(vi), then, to the maximum extent permitted by law, within 180 days thereafter,
the holders of a Unit Majority may elect to reconstitute the Partnership and
continue its business on the same terms and conditions set forth in this
Agreement by forming a new limited partnership on terms identical to those set
forth in this Agreement and having as the successor managing general partner a
Person approved by the holders of a Unit Majority. Unless such an election is
made within the applicable time period as set forth above, the Partnership shall
conduct only activities necessary to wind up its affairs. If such an election is
so made, then:
(i) the reconstituted Partnership shall continue until the end of the
term set forth in Section 2.7 unless earlier dissolved in accordance with
this Article XII;
(ii) if the successor Managing General Partner is not the former
Managing General Partner, then the interest of the former Managing General
Partner shall be treated in the manner provided in Section 11.3; and
(iii) all necessary steps shall be taken to cancel this Agreement and
the Certificate of Limited Partnership and to enter into and, as necessary,
to file a new partnership agreement and certificate of limited partnership,
and the successor managing general partner may for this purpose exercise
the powers of attorney granted the Managing General Partner pursuant to
Section 2.6; provided, that the right of the holders of a Unit Majority to
approve a successor Managing General Partner and to reconstitute and to
continue the business of the Partnership shall not exist and may not be
exercised unless the Partnership has received an Opinion of Counsel that
(x) the exercise of the right would not result in the loss of limited
liability of any Limited Partner and (y) neither the Partnership, the
reconstituted limited partnership, the Intermediate Partnership nor the
Operating Subsidiary would be treated as
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an association taxable as a corporation or otherwise be taxable as an
entity for federal income tax purposes upon the exercise of such right
to continue.
SECTION 12.3 Liquidator.
Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 12.2, the Managing General Partner shall select one or more Persons to
act as Liquidator. The Liquidator (if other than the Managing General Partner)
shall be entitled to receive such compensation for its services as may be
approved by holders of at least a majority of the Outstanding Common Units and
Subordinated Units voting as a single class. The Liquidator (if other than the
Managing General Partner) shall agree not to resign at any time without 15 days'
prior notice and may be removed at any time, with or without cause, by notice of
removal approved by holders of at least a majority of the Outstanding Common
Units and Subordinated Units voting as a single class. Upon dissolution, removal
or resignation of the Liquidator, a successor and substitute Liquidator (who
shall have and succeed to all rights, powers and duties of the original
Liquidator) shall within 30 days thereafter be approved by holders of at least a
majority of the Outstanding Common Units and Subordinated Units voting as a
single class. The right to approve a successor or substitute Liquidator in the
manner provided herein shall be deemed to refer also to any such successor or
substitute Liquidator approved in the manner herein provided. Except as
expressly provided in this Article XII, the Liquidator approved in the manner
provided herein shall have and may exercise, without further authorization or
consent of any of the parties hereto, all of the powers conferred upon the
Managing General Partner under the terms of this Agreement (but subject to all
of the applicable limitations, contractual and otherwise, upon the exercise of
such powers, other than the limitation on sale set forth in Section 7.3(b)) to
the extent necessary or desirable in the good faith judgment of the Liquidator
to carry out the duties and functions of the Liquidator hereunder for and during
such period of time as shall be reasonably required in the good faith judgment
of the Liquidator to complete the winding up and liquidation of the Partnership
as provided for herein.
SECTION 12.4 Liquidation.
The Liquidator shall proceed to dispose of the assets of the Partnership,
discharge its liabilities, and otherwise wind up its affairs in such manner and
over such period as the Liquidator determines to be in the best interest of the
Partners, subject to Section 17-804 of the Delaware Act and the following:
(a) Disposition of Assets. The assets may be disposed of by public or
private sale or by distribution in kind to one or more Partners on such terms as
the Liquidator and such Partner or Partners may agree. If any property is
distributed in kind, the Partner receiving the property shall be deemed for
purposes of Section 12.4(c) to have received cash equal to its fair market
value; and contemporaneously therewith, appropriate cash distributions must be
made to the other Partners. The Liquidator may, in its absolute discretion,
defer liquidation or distribution of the Partnership's assets for a reasonable
time if it determines that an immediate sale or distribution of all or some of
the Partnership's assets would be impractical or would cause undue loss to the
Partners. The Liquidator may, in its absolute discretion, distribute the
Partnership's assets, in whole or in part, in kind if it determines that a sale
would be impractical or would cause undue loss to the Partners.
(b) Discharge of Liabilities. Liabilities of the Partnership include
amounts owed to Partners otherwise than in respect of their distribution rights
under Article VI. With respect to any liability that is contingent, conditional
or unmatured or is otherwise not yet due and payable, the Liquidator shall
either settle such claim for such amount as it thinks appropriate or establish a
reserve of cash or other assets to provide for its payment. When paid, any
unused portion of the reserve shall be distributed as additional liquidation
proceeds.
(c) Liquidation Distributions. All property and all cash in excess of that
required to discharge liabilities as provided in Section 12.4(b) shall be
distributed to the Partners in accordance with, and to the extent of, the
positive balances in their respective Capital Accounts, as determined after
taking into account all Capital Account adjustments (other than those made by
reason of distributions pursuant to this Section 12.4(c)) for the taxable year
of the Partnership during which the liquidation of the Partnership occurs (with
such date of occurrence being determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such
taxable year (or, if later, within 90 days after said date of such occurrence).
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SECTION 12.5 Cancellation of Certificate of Limited Partnership.
Upon the completion of the distribution of Partnership cash and property as
provided in Section 12.4 in connection with the liquidation of the Partnership,
the Partnership shall be terminated and the Certificate of Limited Partnership
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.
SECTION 12.6 Return of Contributions.
No General Partner shall be personally liable for, and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate, the return of the Capital Contributions of the Limited
Partners or Unitholders, or any portion thereof, it being expressly understood
that any such return shall be made solely from Partnership assets.
SECTION 12.7 Waiver of Partition.
To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.
SECTION 12.8 Capital Account Restoration.
No Limited Partner shall have any obligation to restore any negative
balance in its Capital Account upon liquidation of the Partnership. Each General
Partner shall be obligated to restore any negative balance in its Capital
Account upon liquidation of its interest in the Partnership by the end of the
taxable year of the Partnership during which such liquidation occurs, or, if
later, within 90 days after the date of such liquidation.
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
SECTION 13.1 Amendment to be Adopted Solely by the Managing General Partner.
Each Partner agrees that the Managing General Partner, without the approval
of any Partner or Assignee, may amend any provision of this Agreement and
execute, swear to, acknowledge, deliver, file and record whatever documents may
be required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the principal
place of business of the Partnership, the registered agent of the Partnership or
the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the Managing General Partner,
is necessary or advisable to qualify or continue the qualification of the
Partnership as a limited partnership or a partnership in which the Limited
Partners have limited liability under the laws of any state or to ensure that
the Partnership, the Intermediate Partnership and the Operating Subsidiary will
not be treated as an association taxable as a corporation or otherwise taxed as
an entity for federal income tax purposes;
(d) a change that, in the discretion of the Managing General Partner, (i)
does not adversely affect the Limited Partners in any material respect, (ii) is
necessary or advisable to (A) satisfy any requirements, conditions or guidelines
contained in any opinion, directive, order, ruling or regulation of any federal
or state agency or judicial authority or contained in any federal or state
statute (including the Delaware Act) or (B) facilitate the trading of the
Limited Partner Interests (including the division of any class or classes of
Outstanding Limited Partner Interests into different classes to facilitate
uniformity of tax consequences within such classes of Limited Partner Interests)
or comply with any rule, regulation, guideline or requirement of any National
Securities Exchange on which the Limited Partner Interests are or
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will be listed for trading, compliance with any of which the Managing General
Partner determines in its discretion to be in the best interests of the
Partnership and the Limited Partners, (iii) is necessary or advisable in
connection with action taken by the Managing General Partner pursuant to Section
5.10 or (iv) is required to effect the intent expressed in the Registration
Statement or the intent of the provisions of this Agreement or is otherwise
contemplated by this Agreement;
(e) a change in the fiscal year or taxable year of the Partnership and any
changes that, in the discretion of the Managing General Partner, are necessary
or advisable as a result of a change in the fiscal year or taxable year of the
Partnership including, if the Managing General Partner shall so determine, a
change in the definition of "Quarter" and the dates on which distributions are
to be made by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel, to prevent
the Partnership, or either of the General Partners or their directors, officers,
trustees or agents from in any manner being subjected to the provisions of the
Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940,
as amended, or "plan asset" regulations adopted under the Employee Retirement
Income Security Act of 1974, as amended, regardless of whether such are
substantially similar to plan asset regulations currently applied or proposed by
the United States Department of Labor;
(g) subject to the terms of Section 5.7, an amendment that, in the
discretion of the Managing General Partner, is necessary or advisable in
connection with the authorization of issuance of any class or series of
Partnership Securities pursuant to Section 5.6;
(h) any amendment expressly permitted in this Agreement to be made by the
Managing General Partner acting alone;
(i) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(j) an amendment that, in the discretion of the Managing General Partner,
is necessary or advisable to reflect, account for and deal with appropriately
the formation by the Partnership of, or investment by the Partnership in, any
corporation, partnership, joint venture, limited liability company or other
entity, in connection with the conduct by the Partnership of activities
permitted by the terms of Section 2.4;
(k) a merger or conveyance pursuant to Section 14.3(d); or
(l) any other amendments substantially similar to the foregoing.
SECTION 13.2 Amendment Procedures.
Except as provided in Sections 13.1 and 13.3, all amendments to this
Agreement shall be made in accordance with the following requirements.
Amendments to this Agreement may be proposed only by or with the consent of the
Managing General Partner which consent may be given or withheld in its sole
discretion. A proposed amendment shall be effective upon its approval by the
holders of a Unit Majority, unless a greater or different percentage is required
under this Agreement or by Delaware law. Each proposed amendment that requires
the approval of the holders of a specified percentage of Outstanding Units shall
be set forth in a writing that contains the text of the proposed amendment. If
such an amendment is proposed, the Managing General Partner shall seek the
written approval of the requisite percentage of Outstanding Units or call a
meeting of the Unitholders to consider and vote on such proposed amendment. The
Managing General Partner shall notify all Record Holders upon final adoption of
any such proposed amendments.
SECTION 13.3 Amendment Requirements.
(a) Notwithstanding the provisions of Sections 13.1 and 13.2, no provision
of this Agreement that establishes a percentage of Outstanding Units (including
Units deemed owned by the General Partners) required to take any action shall be
amended, altered, changed, repealed or rescinded in any respect that would have
the effect of reducing such
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voting percentage unless such amendment is approved by the written consent or
the affirmative vote of holders of Outstanding Units whose aggregate Outstanding
Units constitute not less than the voting requirement sought to be reduced.
(b) Notwithstanding the provisions of Sections 13.1 and 13.2, no amendment
to this Agreement may (i) enlarge the obligations of any Limited Partner without
its consent, unless such shall be deemed to have occurred as a result of an
amendment approved pursuant to Section 13.3(c), (ii) enlarge the obligations of,
restrict in any way any action by or rights of, or reduce in any way the amounts
distributable, reimbursable or otherwise payable to, either of the General
Partners or any of their Affiliates without its consent, which consent may be
given or withheld in its sole discretion, (iii) change Section 12.1(a) or
12.1(c), or (iv) change the term of the Partnership or, except as set forth in
Section 12.1(c), give any Person the right to dissolve the Partnership.
(c) Except as provided in Section 14.3, and except as otherwise provided,
and without limitation of the Managing General Partner's authority to adopt
amendments to this Agreement as contemplated in Section 13.1, any amendment that
would have a material adverse effect on the rights or preferences of any class
of Partnership Interests in relation to other classes of Partnership Interests
must be approved by the holders of not less than a majority of the Outstanding
Partnership Interests of the class affected.
(d) Notwithstanding any other provision of this Agreement, except for
amendments pursuant to Section 13.1 and except as otherwise provided by Section
14.3(b), no amendments shall become effective without the approval of the
holders of at least 90% of the Outstanding Common Units and Subordinated Units
voting as a single class unless the Partnership obtains an Opinion of Counsel to
the effect that such amendment will not affect the limited liability of any
Limited Partner under applicable law.
(e) Except as provided in Section 13.1, this Section 13.3 shall only be
amended with the approval of the holders of at least 90% of the Outstanding
Units.
SECTION 13.4 Special Meetings.
All acts of Limited Partners to be taken pursuant to this Agreement shall
be taken in the manner provided in this Article XIII. Special meetings of the
Limited Partners may be called by the Managing General Partner or by Limited
Partners owning 20% or more of the Outstanding Limited Partner Interests of the
class or classes for which a meeting is proposed. Limited Partners shall call a
special meeting by delivering to the Managing General Partner one or more
requests in writing stating that the signing Limited Partners wish to call a
special meeting and indicating the general or specific purposes for which the
special meeting is to be called. Within 60 days after receipt of such a call
from Limited Partners or within such greater time as may be reasonably necessary
for the Partnership to comply with any statutes, rules, regulations, listing
agreements or similar requirements governing the holding of a meeting or the
solicitation of proxies for use at such a meeting, the Managing General Partner
shall send a notice of the meeting to the Limited Partners either directly or
indirectly through the Transfer Agent. A meeting shall be held at a time and
place determined by the Managing General Partner on a date not less than 10 days
nor more than 60 days after the mailing of notice of the meeting. Limited
Partners shall not vote on matters that would cause the Limited Partners to be
deemed to be taking part in the management and control of the business and
affairs of the Partnership so as to jeopardize the Limited Partners' limited
liability under the Delaware Act or the law of any other state in which the
Partnership is qualified to do business.
SECTION 13.5 Notice of a Meeting.
Notice of a meeting called pursuant to Section 13.4 shall be given to the
Record Holders of the class or classes of Limited Partner Interests for which a
meeting is proposed in writing by mail or other means of written communication
in accordance with Section 16.1. The notice shall be deemed to have been given
at the time when deposited in the mail or sent by other means of written
communication.
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SECTION 13.6 Record Date.
For purposes of determining the Limited Partners entitled to notice of or
to vote at a meeting of the Limited Partners or to give approvals without a
meeting as provided in Section 13.11 the Managing General Partner may set a
Record Date, which shall not be less than 10 nor more than 60 days before (a)
the date of the meeting (unless such requirement conflicts with any rule,
regulation, guideline or requirement of any National Securities Exchange on
which the Limited Partner Interests are listed for trading, in which case the
rule, regulation, guideline or requirement of such exchange shall govern) or (b)
in the event that approvals are sought without a meeting, the date by which
Limited Partners are requested in writing by the Managing General Partner to
give such approvals.
SECTION 13.7 Adjournment.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting and a new Record Date need not be fixed, if the
time and place thereof are announced at the meeting at which the adjournment is
taken, unless such adjournment shall be for more than 45 days. At the adjourned
meeting, the Partnership may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than 45 days
or if a new Record Date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given in accordance with this Article XIII.
SECTION 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes.
The transactions of any meeting of Limited Partners, however called and
noticed, and whenever held, shall be as valid as if it had occurred at a meeting
duly held after regular call and notice, if a quorum is present either in person
or by proxy, and if, either before or after the meeting, Limited Partners
representing such quorum who were present in person or by proxy and entitled to
vote, sign a written waiver of notice or an approval of the holding of the
meeting or an approval of the minutes thereof. All waivers and approvals shall
be filed with the Partnership records or made a part of the minutes of the
meeting. Attendance of a Limited Partner at a meeting shall constitute a waiver
of notice of the meeting, except when the Limited Partner does not approve, at
the beginning of the meeting, of the transaction of any business because the
meeting is not lawfully called or convened; and except that attendance at a
meeting is not a waiver of any right to disapprove the consideration of matters
required to be included in the notice of the meeting, but not so included, if
the disapproval is expressly made at the meeting.
SECTION 13.9 Quorum.
The holders of a majority of the Outstanding Limited Partner Interests of
the class or classes for which a meeting has been called (including Limited
Partner Interests deemed owned by the General Partners) represented in person or
by proxy shall constitute a quorum at a meeting of Limited Partners of such
class or classes unless any such action by the Limited Partners requires
approval by holders of a greater percentage of such Limited Partner Interests,
in which case the quorum shall be such greater percentage. At any meeting of the
Limited Partners duly called and held in accordance with this Agreement at which
a quorum is present, the act of Limited Partners holding Outstanding Limited
Partner Interests that in the aggregate represent a majority of the Outstanding
Limited Partner Interests entitled to vote and be present in person or by proxy
at such meeting shall be deemed to constitute the act of all Limited Partners,
unless a greater or different percentage is required with respect to such action
under the provisions of this Agreement, in which case the act of the Limited
Partners holding Outstanding Limited Partner Interests that in the aggregate
represent at least such greater or different percentage shall be required. The
Limited Partners present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment, notwithstanding the
withdrawal of enough Limited Partners to leave less than a quorum, if any action
taken (other than adjournment) is approved by the required percentage of
Outstanding Limited Partner Interests specified in this Agreement (including
Limited Partner Interests deemed owned by the General Partners). In the absence
of a quorum any meeting of Limited Partners may be adjourned from time to time
by the affirmative vote of holders of at least a majority of the Outstanding
Limited Partner Interests entitled to vote at such meeting (including Limited
Partner Interests deemed owned by the General Partners) represented either in
person or by proxy, but no other business may be transacted, except as provided
in Section 13.7.
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SECTION 13.10 Conduct of a Meeting.
The Managing General Partner shall have full power and authority concerning
the manner of conducting any meeting of the Limited Partners or solicitation of
approvals in writing, including the determination of Persons entitled to vote,
the existence of a quorum, the satisfaction of the requirements of Section 13.4,
the conduct of voting, the validity and effect of any proxies and the
determination of any controversies, votes or challenges arising in connection
with or during the meeting or voting. The Managing General Partner shall
designate a Person to serve as chairman of any meeting and shall further
designate a Person to take the minutes of any meeting. All minutes shall be kept
with the records of the Partnership maintained by the Managing General Partner.
The Managing General Partner may make such other regulations consistent with
applicable law and this Agreement as it may deem advisable concerning the
conduct of any meeting of the Limited Partners or solicitation of approvals in
writing, including regulations in regard to the appointment of proxies, the
appointment and duties of inspectors of votes and approvals, the submission and
examination of proxies and other evidence of the right to vote, and the
revocation of approvals in writing.
SECTION 13.11 Action Without a Meeting.
If authorized by the Managing General Partner, any action that may be taken
at a meeting of the Limited Partners may be taken without a meeting if an
approval in writing setting forth the action so taken is signed by Limited
Partners owning not less than the minimum percentage of the Outstanding Limited
Partner Interests (including Limited Partner Interests deemed owned by the
General Partners) that would be necessary to authorize or take such action at a
meeting at which all the Limited Partners were present and voted (unless such
provision conflicts with any rule, regulation, guideline or requirement of any
National Securities Exchange on which the Limited Partner Interests are listed
for trading, in which case the rule, regulation, guideline or requirement of
such exchange shall govern). Prompt notice of the taking of action without a
meeting shall be given to the Limited Partners who have not approved in writing.
The Managing General Partner may specify that any written ballot submitted to
Limited Partners for the purpose of taking any action without a meeting shall be
returned to the Partnership within the time period, which shall be not less than
20 days, specified by the Managing General Partner. If a ballot returned to the
Partnership does not vote all of the Limited Partner Interests held by the
Limited Partners the Partnership shall be deemed to have failed to receive a
ballot for the Limited Partner Interests that were not voted. If approval of the
taking of any action by the Limited Partners is solicited by any Person other
than by or on behalf of the Managing General Partner, the written approvals
shall have no force and effect unless and until (a) they are deposited with the
Partnership in care of the Managing General Partner, (b) approvals sufficient to
take the action proposed are dated as of a date not more than 90 days prior to
the date sufficient approvals are deposited with the Partnership and (c) an
Opinion of Counsel is delivered to the Managing General Partner to the effect
that the exercise of such right and the action proposed to be taken with respect
to any particular matter (i) will not cause the Limited Partners to be deemed to
be taking part in the management and control of the business and affairs of the
Partnership so as to jeopardize the Limited Partners' limited liability, and
(ii) is otherwise permissible under the state statutes then governing the
rights, duties and liabilities of the Partnership and the Partners.
SECTION 13.12 Voting and Other Rights.
(a) Only those Record Holders of the Limited Partner Interests on the
Record Date set pursuant to Section 13.6 (and also subject to the limitations
contained in the definition of "Outstanding") shall be entitled to notice of,
and to vote at, a meeting of Limited Partners or to act with respect to matters
as to which the holders of the Outstanding Limited Partner Interests have the
right to vote or to act. All references in this Agreement to votes of, or other
acts that may be taken by, the Outstanding Limited Partner Interests shall be
deemed to be references to the votes or acts of the Record Holders of such
Outstanding Limited Partner Interests.
(b) With respect to Limited Partner Interests that are held for a Person's
account by another Person (such as a broker, dealer, bank, trust company or
clearing corporation, or an agent of any of the foregoing), in whose name such
Limited Partner Interests are registered, such other Person shall, in exercising
the voting rights in respect of such Limited Partner Interests on any matter,
and unless the arrangement between such Persons provides otherwise, vote such
Limited Partner Interests in favor of, and at the direction of, the Person who
is the beneficial owner, and the Partnership shall be entitled to assume it is
so acting without further inquiry. The provisions of this Section 13.12(b) (as
well as all other provisions of this Agreement) are subject to the provisions of
Section 4.3.
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ARTICLE XIV
MERGER
SECTION 14.1 Authority.
The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("Merger Agreement") in accordance
with this Article XIV.
SECTION 14.2 Procedure for Merger or Consolidation.
Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior approval of the Managing General Partner. If the Managing
General Partner shall determine, in the exercise of its discretion, to consent
to the merger or consolidation, the Managing General Partner shall approve the
Merger Agreement, which shall set forth:
(a) The names and jurisdictions of formation or organization of each of the
business entities proposing to merge or consolidate;
(b) The name and jurisdiction of formation or organization of the business
entity that is to survive the proposed merger or consolidation (the "Surviving
Business Entity");
(c) The terms and conditions of the proposed merger or consolidation;
(d) The manner and basis of exchanging or converting the equity securities
of each constituent business entity for, or into, cash, property or general or
limited partner interests, rights, securities or obligations of the Surviving
Business Entity; and (i) if any general or limited partner interests, securities
or rights of any constituent business entity are not to be exchanged or
converted solely for, or into, cash, property or general or limited partner
interests, rights, securities or obligations of the Surviving Business Entity,
the cash, property or general or limited partner interests, rights, securities
or obligations of any limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity) which the holders of such general or
limited partner interests, securities or rights are to receive in exchange for,
or upon conversion of their general or limited partner interests, securities or
rights, and (ii) in the case of securities represented by certificates, upon the
surrender of such certificates, which cash, property or general or limited
partner interests, rights, securities or obligations of the Surviving Business
Entity or any general or limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity), or evidences thereof, are to be
delivered;
(e) A statement of any changes in the constituent documents or the adoption
of new constituent documents (the articles or certificate of incorporation,
articles of trust, declaration of trust, certificate or agreement of limited
partnership or other similar charter or governing document) of the Surviving
Business Entity to be effected by such merger or consolidation;
(f) The effective time of the merger, which may be the date of the filing
of the certificate of merger pursuant to Section 14.4 or a later date specified
in or determinable in accordance with the Merger Agreement (provided, that if
the effective time of the merger is to be later than the date of the filing of
the certificate of merger, the effective time shall be fixed no later than the
time of the filing of the certificate of merger and stated therein); and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the Managing General
Partner.
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SECTION 14.3 Approval by Limited Partners of Merger or Consolidation.
(a) Except as provided in Section 14.3(d), the Managing General Partner,
upon its approval of the Merger Agreement, shall direct that the Merger
Agreement be submitted to a vote of Limited Partners, whether at a special
meeting or by written consent, in either case in accordance with the
requirements of Article XIII. A copy or a summary of the Merger Agreement shall
be included in or enclosed with the notice of a special meeting or the written
consent.
(b) Except as provided in Section 14.3(d), the Merger Agreement shall be
approved upon receiving the affirmative vote or consent of the holders of a Unit
Majority unless the Merger Agreement contains any provision that, if contained
in an amendment to this Agreement, the provisions of this Agreement or the
Delaware Act would require for its approval the vote or consent of a greater
percentage of the Outstanding Limited Partner Interests or of any class of
Limited Partners, in which case such greater percentage vote or consent shall be
required for approval of the Merger Agreement.
(c) Except as provided in Section 14.3(d), after such approval by vote or
consent of the Limited Partners, and at any time prior to the filing of the
certificate of merger pursuant to Section 14.4, the merger or consolidation may
be abandoned pursuant to provisions therefor, if any, set forth in the Merger
Agreement.
(d) Notwithstanding anything else contained in this Article XIV or in this
Agreement, the Managing General Partner is permitted, in its discretion, without
Limited Partner approval, to merge the Partnership or any Group Member into, or
convey all of the Partnership's assets to, another limited liability entity
which shall be newly formed and shall have no assets, liabilities or operations
at the time of such Merger other than those it receives from the Partnership or
other Group Member if (i) the Managing General Partner has received an Opinion
of Counsel that the merger or conveyance, as the case may be, would not result
in the loss of the limited liability of any Limited Partner or any limited
partner in the Intermediate Partnership or any member of the Operating
Subsidiary or cause the Partnership, the Intermediate Partnership or the
Operating Subsidiary to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes (to the
extent not previously treated as such), (ii) the sole purpose of such merger or
conveyance is to effect a mere change in the legal form of the Partnership into
another limited liability entity and (iii) the governing instruments of the new
entity provide the Limited Partners and the General Partners with the same
rights and obligations as are herein contained.
SECTION 14.4 Certificate of Merger.
Upon the required approval by the Managing General Partner and the
Unitholders of a Merger Agreement, a certificate of merger shall be executed and
filed with the Secretary of State of the State of Delaware in conformity with
the requirements of the Delaware Act.
SECTION 14.5 Effect of Merger.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal
and mixed, and all debts due to any of those business entities and all
other things and causes of action belonging to each of those business
entities, shall be vested in the Surviving Business Entity and after the
merger or consolidation shall be the property of the Surviving Business
Entity to the extent they were of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in any
of those constituent business entities shall not revert and is not in any
way impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests in
property of any of those constituent business entities shall be preserved
unimpaired; and
(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity and may be enforced
against it to the same extent as if the debts, liabilities and duties had
been incurred or contracted by it.
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(b) A merger or consolidation effected pursuant to this Article shall not
be deemed to result in a transfer or assignment of assets or liabilities from
one entity to another.
ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
SECTION 15.1 Right to Acquire Limited Partner Interests.
(a) Notwithstanding any other provision of this Agreement, if at any time
not more than 20% of the total Limited Partner Interests of any class then
Outstanding is held by Persons other than the General Partners and their
Affiliates, the Managing General Partner shall then have the right, which right
it may assign and transfer in whole or in part to the Partnership or any
Affiliate of the Managing General Partner, exercisable in its sole discretion,
to purchase all, but not less than all, of such Limited Partner Interests of
such class then Outstanding held by Persons other than the General Partners and
their Affiliates, at the greater of (x) the Current Market Price as of the date
three days prior to the date that the notice described in Section 15.1(b) is
mailed and (y) the highest price paid by a General Partner or any of its
Affiliates for any such Limited Partner Interest of such class purchased during
the 90-day period preceding the date that the notice described in Section
15.1(b) is mailed. As used in this Agreement, (i) "Current Market Price" as of
any date of any class of Limited Partner Interests listed or admitted to trading
on any National Securities Exchange means the average of the daily Closing
Prices (as hereinafter defined) per limited partner interest of such class for
the 20 consecutive Trading Days (as hereinafter defined) immediately prior to
such date; (ii) "Closing Price" for any day means the last sale price on such
day, regular way, or in case no such sale takes place on such day, the average
of the closing bid and asked prices on such day, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted for trading on the principal National
Securities Exchange (other than the Nasdaq Stock Market) on which such Limited
Partner Interests of such class are listed or admitted to trading or, if such
Limited Partner Interests of such class are not listed or admitted to trading on
any National Securities Exchange (other than the Nasdaq Stock Market), the last
quoted price on such day or, if not so quoted, the average of the high bid and
low asked prices on such day in the over-the-counter market, as reported by the
Nasdaq Stock Market or such other system then in use, or, if on any such day
such Limited Partner Interests of such class are not quoted by any such
organization, the average of the closing bid and asked prices on such day as
furnished by a professional market maker making a market in such Limited Partner
Interests of such class selected by the Managing General Partner, or if on any
such day no market maker is making a market in such Limited Partner Interests of
such class, the fair value of such Limited Partner Interests on such day as
determined reasonably and in good faith by the Managing General Partner; and
(iii) "Trading Day" means a day on which the principal National Securities
Exchange on which such Limited Partner Interests of any class are listed or
admitted to trading is open for the transaction of business or, if Limited
Partner Interests of a class are not listed or admitted to trading on any
National Securities Exchange, a day on which banking institutions in New York
City generally are open.
(b) If the Managing General Partner, any Affiliate of the Managing General
Partner or the Partnership elects to exercise the right to purchase Limited
Partner Interests granted pursuant to Section 15.1(a), the Managing General
Partner shall deliver to the Transfer Agent notice of such election to purchase
(the "Notice of Election to Purchase") and shall cause the Transfer Agent to
mail a copy of such Notice of Election to Purchase to the Record Holders of
Limited Partner Interests of such class (as of a Record Date selected by the
Managing General Partner) at least 10, but not more than 60, days prior to the
Purchase Date. Such Notice of Election to Purchase shall also be published for a
period of at least three consecutive days in at least two daily newspapers of
general circulation printed in the English language and published in the Borough
of Manhattan, New York. The Notice of Election to Purchase shall specify the
Purchase Date and the price (determined in accordance with Section 15.1(a)) at
which Limited Partner Interests will be purchased and state that the Managing
General Partner, its Affiliate or the Partnership, as the case may be, elects to
purchase such Limited Partner Interests, upon surrender of Certificates
representing such Limited Partner Interests in exchange for payment, at such
office or offices of the Transfer Agent as the Transfer Agent may specify, or as
may be required by any National Securities Exchange on which such Limited
Partner Interests are listed or admitted to trading. Any such Notice of Election
to Purchase mailed to a Record Holder of Limited Partner Interests at his
address as reflected in the records of the Transfer Agent shall be conclusively
presumed to have been given regardless of whether the owner receives such
notice. On or prior to the Purchase Date, the Managing General Partner, its
Affiliate or the
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Partnership, as the case may be, shall deposit with the Transfer Agent cash in
an amount sufficient to pay the aggregate purchase price of all of such Limited
Partner Interests to be purchased in accordance with this Section 15.1. If the
Notice of Election to Purchase shall have been duly given as aforesaid at least
10 days prior to the Purchase Date, and if on or prior to the Purchase Date the
deposit described in the preceding sentence has been made for the benefit of the
holders of Limited Partner Interests subject to purchase as provided herein,
then from and after the Purchase Date, notwithstanding that any Certificate
shall not have been surrendered for purchase, all rights of the holders of such
Limited Partner Interests (including any rights pursuant to Articles IV, V, VI,
and XII) shall thereupon cease, except the right to receive the purchase price
(determined in accordance with Section 15.1(a)) for Limited Partner Interests
therefor, without interest, upon surrender to the Transfer Agent of the
Certificates representing such Limited Partner Interests, and such Limited
Partner Interests shall thereupon be deemed to be transferred to the Managing
General Partner, its Affiliate or the Partnership, as the case may be, on the
record books of the Transfer Agent and the Partnership, and the Managing General
Partner or any Affiliate of the Managing General Partner, or the Partnership, as
the case may be, shall be deemed to be the owner of all such Limited Partner
Interests from and after the Purchase Date and shall have all rights as the
owner of such Limited Partner Interests (including all rights as owner of such
Limited Partner Interests pursuant to Articles IV, V, VI and XII).
(c) At any time from and after the Purchase Date, a holder of an
Outstanding Limited Partner Interest subject to purchase as provided in this
Section 15.1 may surrender his Certificate evidencing such Limited Partner
Interest to the Transfer Agent in exchange for payment of the amount described
in Section 15.1(a), therefor, without interest thereon.
ARTICLE XVI
GENERAL PROVISIONS
SECTION 16.1 Addresses and Notices.
Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner or Assignee at the address described below. Any
notice, payment or report to be given or made to a Partner or Assignee hereunder
shall be deemed conclusively to have been given or made, and the obligation to
give such notice or report or to make such payment shall be deemed conclusively
to have been fully satisfied, upon sending of such notice, payment or report to
the Record Holder of such Partnership Securities at his address as shown on the
records of the Transfer Agent or as otherwise shown on the records of the
Partnership, regardless of any claim of any Person who may have an interest in
such Partnership Securities by reason of any assignment or otherwise. An
affidavit or certificate of making of any notice, payment or report in
accordance with the provisions of this Section 16.1 executed by the Managing
General Partner, the Transfer Agent or the mailing organization shall be prima
facie evidence of the giving or making of such notice, payment or report. If any
notice, payment or report addressed to a Record Holder at the address of such
Record Holder appearing on the books and records of the Transfer Agent or the
Partnership is returned by the United States Postal Service marked to indicate
that the United States Postal Service is unable to deliver it, such notice,
payment or report and any subsequent notices, payments and reports shall be
deemed to have been duly given or made without further mailing (until such time
as such Record Holder or another Person notifies the Transfer Agent or the
Partnership of a change in his address) if they are available for the Partner or
Assignee at the principal office of the Partnership for a period of one year
from the date of the giving or making of such notice, payment or report to the
other Partners and Assignees. Any notice to the Partnership shall be deemed
given if received by the Managing General Partner at the principal office of the
Partnership designated pursuant to Section 2.3. The Managing General Partner may
rely and shall be protected in relying on any notice or other document from a
Partner, Assignee or other Person if believed by it to be genuine.
SECTION 16.2 Further Action.
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
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SECTION 16.3 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
SECTION 16.4 Integration.
This Agreement constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.
SECTION 16.5 Creditors.
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
SECTION 16.6 Waiver.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach of any other covenant, duty, agreement or condition.
SECTION 16.7 Counterparts.
This Agreement may be executed in counterparts, all of which together shall
constitute an agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto or, in the case of a Person acquiring a Unit, upon accepting
the certificate evidencing such Unit or executing and delivering a Transfer
Application as herein described, independently of the signature of any other
party.
SECTION 16.8 Applicable Law.
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.
SECTION 16.9 Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
SECTION 16.10 Consent of Partners.
Each Partner hereby expressly consents and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative vote
or consent of less than all of the Partners, such action may be so taken upon
the concurrence of less than all of the Partners and each Partner shall be bound
by the results of such action.
[SIGNATURES ON FOLLOWING PAGE.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
MANAGING GENERAL PARTNER:
ALLIANCE RESOURCE MANAGEMENT GP, LLC
By: /s/ THOMAS L. PEARSON
------------------------------------------------
Thomas L. Pearson
Senior Vice President--Law and Administration,
General Counsel and Secretary
SPECIAL GENERAL PARTNER
ALLIANCE RESOURCE GP, LLC
By: /s/ THOMAS L. PEARSON
------------------------------------------------
Thomas L. Pearson
Senior Vice President--Law and Administration,
General Counsel and Secretary
ORGANIZATIONAL LIMITED PARTNER:
By: /s/ THOMAS L. PEARSON
------------------------------------------------
Thomas L. Pearson
LIMITED PARTNERS:
All Limited Partners now and hereafter admitted as
Limited Partners of the Partnership, pursuant to
powers of attorney now and hereafter executed in
favor of, and granted and delivered to the Managing
General Partner.
ALLIANCE RESOURCE MANAGEMENT GP, LLC
By: /s/ THOMAS L. PEARSON
------------------------------------------------
Thomas L. Pearson
Senior Vice President--Law and Administration,
General Counsel and Secretary
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EXHIBIT A
TO THE FIRST AMENDED AND
RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
ALLIANCE RESOURCE PARTNERS, L.P.
CERTIFICATE EVIDENCING COMMON UNITS
REPRESENTING LIMITED PARTNER INTERESTS IN
ALLIANCE RESOURCE PARTNERS, L.P.
No. Common Units
In accordance with Section 4.1 of the First Amended and Restated Agreement of
Limited Partnership of Alliance Resource Partners, L.P., as amended,
supplemented or restated from time to time (the "Partnership Agreement"),
Alliance Resource Partners, L.P., a Delaware limited partnership (the
"Partnership"), hereby certifies that (the "Holder") is the registered owner of
Common Units representing limited partner interests in the Partnership (the
"Common Units") transferable on the books of the Partnership, in person or by
duly authorized attorney, upon surrender of this Certificate properly endorsed
and accompanied by a properly executed application for transfer of the Common
Units represented by this Certificate. The rights, preferences and limitations
of the Common Units are set forth in, and this Certificate and the Common Units
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Partnership Agreement. Copies of the Partnership
Agreement are on file at, and will be furnished without charge on delivery of
written request to the Partnership at, the principal office of the Partnership
located at 1717 South Boulder Avenue, Tulsa, Oklahoma 74119. Capitalized terms
used herein but not defined shall have the meanings given them in the
Partnership Agreement.
The Holder, by accepting this Certificate, is deemed to have (i) requested
admission as, and agreed to become, a Limited Partner and to have agreed to
comply with and be bound by and to have executed the Partnership Agreement, (ii)
represented and warranted that the Holder has all right, power and authority
and, if an individual, the capacity necessary to enter into the Partnership
Agreement, (iii) granted the powers of attorney provided for in the Partnership
Agreement and (iv) made the waivers and given the consents and approvals
contained in the Partnership Agreement.
This Certificate shall not be valid for any purpose unless it has been
countersigned and registered by the Transfer Agent and Registrar.
73
<TABLE>
<S> <C>
DATED: Alliance Resource Partners, L.P.
Countersigned and Registered by: By: Alliance Resource Management GP, LLC, its
Managing General Partner
By:
----------------------------------------------- -----------------------------------------------
as Transfer Agent and Registrar
Name:
----------------------------------------
By: By:
------------------------------------------- -----------------------------------------------
Authorized Signature Secretary
</TABLE>
A-1
<PAGE> 79
[REVERSE OF CERTIFICATE]
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as follows according to applicable laws or
regulations:
<TABLE>
<S> <C> <C> <C>
TEN COM -- as tenants in common UNIF GIFT/TRANSFERS MIN ACT
TEN ENT -- as tenants by the entireties Custodian
--------------- -----------
(Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts/Transfers to
survivorship and not as tenants Minors Act______________________
in common (State)
</TABLE>
Additional abbreviations, though not in the above list, may also be used.
ASSIGNMENT OF COMMON UNITS
IN
ALLIANCE RESOURCE PARTNERS, L.P.
IMPORTANT NOTICE REGARDING INVESTOR
RESPONSIBILITIES DUE TO TAX SHELTER STATUS OF
ALLIANCE RESOURCE PARTNERS, L.P.
You have acquired an interest in Alliance Resource Partners, L.P., 1717 South
Boulder Avenue, Tulsa, Oklahoma 74119, whose taxpayer identification number is .
The Internal Revenue Service has issued Alliance Resource Partners, L.P. the
following tax shelter registration number: .
YOU MUST REPORT THIS REGISTRATION NUMBER TO THE INTERNAL REVENUE SERVICE IF
YOU CLAIM ANY DEDUCTION, LOSS, CREDIT OR OTHER TAX BENEFIT OR REPORT ANY INCOME
BY REASON OF YOUR INVESTMENT IN ALLIANCE RESOURCE PARTNERS, L.P.
You must report the registration number as well as the name and taxpayer
identification number of Alliance Resource Partners, L.P. on Form 8271. FORM
8271 MUST BE ATTACHED TO THE RETURN ON WHICH YOU CLAIM THE DEDUCTION, LOSS,
CREDIT OR OTHER TAX BENEFIT OR REPORT ANY INCOME BY REASON OF YOUR INVESTMENT IN
ALLIANCE RESOURCE PARTNERS, L.P.
If you transfer your interest in Alliance Resource Partners, L.P. to another
person, you are required by the Internal Revenue Service to keep a list
containing (a) that person's name, address and taxpayer identification number,
(b) the date on which you transferred the interest and (c) the name, address and
tax shelter registration number of Alliance Resource Partners, L.P. If you do
not want to keep such a list, you must (1) send the information specified above
to the Partnership, which will keep the list for this tax shelter, and (2) give
a copy of this notice to the person to whom you transfer your interest. Your
failure to comply with any of the above-described responsibilities could result
in the imposition of a penalty under Section 6707(b) or 6708(a) of the Internal
Revenue Code of 1986, as amended, unless such failure is shown to be due to
reasonable cause.
ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS INVESTMENT OR
THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR APPROVED BY THE
INTERNAL REVENUE SERVICE.
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FOR VALUE RECEIVED, _____________________ HEREBY ASSIGNS, CONVEYS, SELLS AND
TRANSFERS UNTO
<TABLE>
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- ------------------------------------- ---------------------------------------------------
(Please print or typewrite name (Please insert Social Security or other identifying
and address of Assignee) and number of Assignee)
________ Common Units representing limited partner interests evidenced by this
Certificate, subject to the Partnership Agreement, and does hereby irrevocably
constitute and appoint ______________ as its attorney-in-fact with full power of
substitution to transfer the same on the books of Alliance Resource Partners,
L.P.
Date: NOTE: The signature to any endorsement hereon must
correspond with the name as written upon the
face of this Certificate in every particular,
without alteration, enlargement or change.
SIGNATURE(S) MUST BE
GUARANTEED BY A MEMBER FIRM OF
THE NATIONAL ASSOCIATION OF -------------------------------------------------
SECURITIES DEALERS, INC. OR BY A (Signature)
COMMERCIAL BANK OR TRUST
COMPANY -------------------------------------------------
(Signature)
SIGNATURE(S) GUARANTEED
</TABLE>
No transfer of the Common Units evidenced hereby will be registered on the
books of the Partnership, unless the Certificate evidencing the Common Units to
be transferred is surrendered for registration or transfer and an Application
for Transfer of Common Units has been executed by a transferee either (a) on the
form set forth below or (b) on a separate application that the Partnership will
furnish on request without charge. A transferor of the Common Units shall have
no duty to the transferee with respect to execution of the transfer application
in order for such transferee to obtain registration of the transfer of the
Common Units.
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APPLICATION FOR TRANSFER OF COMMON UNITS
The undersigned ("Assignee") hereby applies for transfer to the name of the
Assignee of the Common Units evidenced hereby.
The Assignee (a) requests admission as a Substituted Limited Partner and
agrees to comply with and be bound by, and hereby executes, the First Amended
and Restated Agreement of Limited Partnership of Alliance Resource Partners,
L.P. (the "Partnership"), as amended, supplemented or restated to the date
hereof (the "Partnership Agreement"), (b) represents and warrants that the
Assignee has all right, power and authority and, if an individual, the capacity
necessary to enter into the Partnership Agreement, (c) appoints the General
Partner of the Partnership and, if a Liquidator shall be appointed, the
Liquidator of the Partnership as the Assignee's attorney-in-fact to execute,
swear to, acknowledge and file any document, including, without limitation, the
Partnership Agreement and any amendment thereto and the Certificate of Limited
Partnership of the Partnership and any amendment thereto, necessary or
appropriate for the Assignee's admission as a Substituted Limited Partner and as
a party to the Partnership Agreement, (d) gives the powers of attorney provided
for in the Partnership Agreement, and (e) makes the waivers and gives the
consents and approvals contained in the Partnership Agreement. Capitalized terms
not defined herein have the meanings assigned to such terms in the Partnership
Agreement.
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Date:
---------------------------------------------- ---------------------------------------
Signature of Assignee
- --------------------------------------------------- ---------------------------------------
Social Security or other identifying number of Name and Address of Assignee
Assignee
- ---------------------------------------------------
Purchase Price including commissions, if any
Type of Entity (check one):
[ ] Individual [ ] Partnership [ ] Corporation
[ ] Trust [ ] Other (specify)
Nationality (check one):
[ ] U.S. Citizen, Resident or Domestic Entity
[ ] Foreign Corporation [ ] Non-resident Alien
</TABLE>
If the U.S. Citizen, Resident or Domestic Entity box is checked, the
following certification must be completed.
Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the
"Code"), the Partnership must withhold tax with respect to certain transfers of
property if a holder of an interest in the Partnership is a foreign person. To
inform the Partnership that no withholding is required with respect to the
undersigned interestholder's interest in it, the undersigned hereby certifies
the following (or, if applicable, certifies the following on behalf of the
interestholder).
Complete Either A or B:
A. Individual Interestholder
1. I am not a non-resident alien for purposes of U.S. income taxation.
2. My U.S. taxpayer identification number (Social Security Number)
is
-----------------------------------.
3. My home address is.
------------------------------------------------------------------------.
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<PAGE> 82
B. Partnership, Corporation or Other Interestholder
1. Name of Interestholder) is not a foreign corporation, foreign
partnership, foreign trust or foreign estate (as those terms are defined
in the Code and Treasury Regulations).
2. The interestholder's U.S. employer identification number
is
------------------------------------------.
3. The interestholder's office address and place of incorporation (if
applicable) is
----------------------------------------------------------.
The interestholder agrees to notify the Partnership within sixty (60) days
of the date the interestholder becomes a foreign person.
The interestholder understands that this certificate may be disclosed to the
Internal Revenue Service by the Partnership and that any false statement
contained herein could be punishable by fine, imprisonment or both.
Under penalties of perjury, I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete and, if applicable, I further declare that I have authority to sign
this document on behalf of:
- --------------------------------------------------------------------------------
Name of Interestholder
- --------------------------------------------------------------------------------
Signature and Date
- --------------------------------------------------------------------------------
Title (if applicable)
Note: If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee holder or an agent of any of the foregoing, and is
holding for the account of any other person, this application should be
completed by an officer thereof or, in the case of a broker or dealer, by a
registered representative who is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc.,
or, in the case of any other nominee holder, a person performing a similar
function. If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee owner or an agent of any of the foregoing, the above
certification as to any person for whom the Assignee will hold the Common Units
shall be made to the best of the Assignee's knowledge.
A-5
<PAGE> 1
EXHIBIT 3.2
Execution Copy
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ALLIANCE RESOURCE OPERATING PARTNERS, L.P.
Alliance Resource Operating Partners, L.P.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
DEFINITIONS..............................................................................................1
SECTION 1.1 Definitions................................................................................1
SECTION 1.2 Construction..............................................................................13
ARTICLE II
ORGANIZATION ...........................................................................................13
SECTION 2.1 Formation.................................................................................13
SECTION 2.2 Name......................................................................................13
SECTION 2.3 Registered Office; Registered Agent; Principal Office; Other Offices......................13
SECTION 2.4 Purpose and Business......................................................................14
SECTION 2.5 Powers....................................................................................14
SECTION 2.6 Power of Attorney.........................................................................15
SECTION 2.7 Term......................................................................................16
SECTION 2.8 Title to Partnership Assets...............................................................16
ARTICLE III
RIGHTS OF LIMITED PARTNERS .............................................................................17
SECTION 3.1 Limitation of Liability...................................................................17
SECTION 3.2 Management of Business....................................................................17
SECTION 3.3 Outside Activities of the Limited Partners................................................17
SECTION 3.4 Rights of Limited Partners................................................................18
ARTICLE IV
TRANSFERS OF PARTNERSHIP INTERESTS......................................................................19
SECTION 4.1 Transfer Generally........................................................................19
SECTION 4.2 Transfer of General Partner's Partnership Interest........................................19
SECTION 4.3 Transfer of a Limited Partner's Partnership Interest......................................19
SECTION 4.4 Restrictions on Transfers.................................................................20
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP
INTERESTS...............................................................................................20
SECTION 5.1 Initial Contributions.....................................................................20
SECTION 5.2 Contributions Pursuant to the Contribution Agreement......................................20
SECTION 5.3 Additional Capital Contributions..........................................................22
SECTION 5.4 Interest and Withdrawal...................................................................22
SECTION 5.5 Capital Accounts..........................................................................22
</TABLE>
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SECTION 5.6 Loans from Partners.......................................................................25
SECTION 5.7 Limited Preemptive Rights.................................................................26
SECTION 5.8 Fully Paid and Non-Assessable Nature of Partnership Interests.............................26
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS ..........................................................................26
SECTION 6.1 Allocations for Capital Account Purposes..................................................26
SECTION 6.2 Allocations for Tax Purposes..............................................................31
SECTION 6.3 Distributions.............................................................................33
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS....................................................................33
SECTION 7.1 Management................................................................................33
SECTION 7.2 Certificate of Limited Partnership........................................................36
SECTION 7.3 Restrictions on General Partners' Authority...............................................36
SECTION 7.4 Reimbursement of the General Partners.....................................................37
SECTION 7.5 Outside Activities........................................................................38
SECTION 7.6 Loans from the General Partners; Loans or
Contributions from the Partnership; Contracts with Affiliates;
Certain Restrictions on the General Partners..........................................39
SECTION 7.7 Indemnification...........................................................................41
SECTION 7.8 Liability of Indemnitees..................................................................43
SECTION 7.9 Resolution of Conflicts of Interest.......................................................43
SECTION 7.10 Other Matters Concerning the General Partners............................................45
SECTION 7.11 Reliance by Third Parties................................................................46
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS..................................................................46
SECTION 8.1 Records and Accounting....................................................................46
SECTION 8.2 Fiscal Year...............................................................................47
ARTICLE IX
TAX MATTERS.............................................................................................47
SECTION 9.1 Tax Returns and Information...............................................................47
SECTION 9.2 Tax Elections.............................................................................47
SECTION 9.3 Tax Controversies.........................................................................47
SECTION 9.4 Withholding...............................................................................48
ARTICLE X
ADMISSION OF PARTNERS...................................................................................48
SECTION 10.1 Admission of Managing General Partner....................................................48
</TABLE>
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SECTION 10.2 Admission of Substituted Limited Partner.................................................48
SECTION 10.3 Admission of Additional Limited Partners.................................................49
SECTION 10.4 Admission of Successor or Transferee General Partners....................................49
SECTION 10.5 Amendment of Agreement and Certificate of Limited Partnership............................50
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS.......................................................................50
SECTION 11.1 Withdrawal of the Managing General Partner...............................................50
SECTION 11.2 Removal of the Managing General Partner..................................................52
SECTION 11.3 Interest of Departing Partner............................................................52
SECTION 11.4 Withdrawal or Removal of Special General Partner.........................................52
SECTION 11.5 Withdrawal of a Limited Partner..........................................................54
ARTICLE XII
DISSOLUTION AND LIQUIDATION.............................................................................54
SECTION 12.1 Dissolution..............................................................................54
SECTION 12.2 Continuation of the Business of the Partnership After Dissolution........................55
SECTION 12.3 Liquidator...............................................................................56
SECTION 12.4 Liquidation..............................................................................56
SECTION 12.5 Cancellation of Certificate of Limited Partnership.......................................57
SECTION 12.6 Return of Contributions..................................................................57
SECTION 12.7 Waiver of Partition......................................................................58
SECTION 12.8 Capital Account Restoration..............................................................58
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT......................................................................58
SECTION 13.1 Amendment to be Adopted Solely by the Managing General Partner...........................58
SECTION 13.2 Amendment Procedures.....................................................................60
ARTICLE XIV
MERGER .................................................................................................60
SECTION 14.1 Authority................................................................................60
SECTION 14.2 Procedure for Merger or Consolidation....................................................60
SECTION 14.3 Approval by Limited Partners of Merger or Consolidation..................................61
SECTION 14.4 Certificate of Merger....................................................................62
SECTION 14.5 Effect of Merger.........................................................................62
ARTICLE XV
GENERAL PROVISIONS .....................................................................................63
SECTION 15.1 Addresses and Notices....................................................................63
SECTION 15.2 Further Action...........................................................................63
</TABLE>
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SECTION 15.3 Binding Effect...........................................................................63
SECTION 15.4 Integration..............................................................................63
SECTION 15.5 Creditors................................................................................63
SECTION 15.6 Waiver...................................................................................64
SECTION 15.7 Counterparts.............................................................................64
SECTION 15.8 Applicable Law...........................................................................64
SECTION 15.9 Invalidity of Provisions.................................................................64
SECTION 15.10 Consent of Partners......................................................................64
</TABLE>
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<PAGE> 6
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ALLIANCE RESOURCE OPERATING PARTNERS, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of ALLIANCE
RESOURCE OPERATING PARTNERS, L.P., dated as of August 20, 1999 is entered into
by and between Alliance Resource Management GP, LLC, a Delaware limited
liability company, as the Managing General Partner, Alliance Resource GP, LLC, a
Delaware limited liability company, as the Special General Partner and Alliance
Resource Partners, L.P., a Delaware limited partnership, as the Limited Partner,
together with any other Persons who hereafter become Partners in the Partnership
or parties hereto as provided herein.
R E C I T A L S:
WHEREAS, Alliance Resource GP, LLC and Alliance Resource Partners, L.P.
formed the Partnership pursuant to the Agreement of Limited Partnership of
Alliance Resource Operating Partners, L.P. dated as of June 14, 1999 (the "Prior
Agreement") and a Certificate of Limited Partnership filed with the Secretary of
State of the State of Delaware on such date; and
WHEREAS, the Partners of the Partnership now desire to amend the Prior
Agreement to reflect (i) the addition of Alliance Resource Management GP, LLC as
the Managing General Partner of the Partnership, (ii) additional contributions
by the Partners and (iii) certain other matters.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements contained herein, the parties hereto hereby amend the Prior Agreement
and, as so amended, restate it in its entirety as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
Capitalized terms used herein but not otherwise defined shall have the meaning
assigned to such term in the MLP Agreement.
"Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 10.4 and who is
shown as such on the books and records of the Partnership.
Alliance Resource Operating Partners, L.P.
<PAGE> 7
"Adjusted Capital Account" means the Capital Account
maintained for each Partner as of the end of each fiscal year of the
Partnership, (a) increased by any amounts that such Partner is
obligated to restore under the standards set by Treasury Regulation
Section 1.704- 1(b)(2)(ii)(c) (or is deemed obligated to restore under
Treasury Regulation Sections 1.704- 2(g) and 1.704-2(i)(5)) and (b)
decreased by (i) the amount of all losses and deductions that, as of
the end of such fiscal year, are reasonably expected to be allocated to
such Partner in subsequent years under Sections 704(e)(2) and 706(d) of
the Code and Treasury Regulation Section 1.751-1(b)(2)(ii), and (ii)
the amount of all distributions that, as of the end of such fiscal
year, are reasonably expected to be made to such Partner in subsequent
years in accordance with the terms of this Agreement or otherwise to
the extent they exceed offsetting increases to such Partner's Capital
Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made
(other than increases as a result of a minimum gain chargeback pursuant
to Section 6.1(d)(i) or 6.1(d)(ii)). The foregoing definition of
Adjusted Capital Account is intended to comply with the provisions of
Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith. The "Adjusted Capital Account" of a
Partner in respect of a General Partner Interest or any other specified
interest in the Partnership shall be the amount which such Adjusted
Capital Account would be if such General Partner Interest or other
interest in the Partnership were the only interest in the Partnership
held by a Partner from and after the date on which such General Partner
Interest or other interest was first issued.
"Adjusted Property" means any property the Carrying Value of
which has been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly through one or more intermediaries
controls, is controlled by or is under common control with, the Person
in question. As used herein, the term "control" means the possession,
direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of
voting securities, by contract or otherwise.
"Agreed Allocation" means any allocation, other than a
Required Allocation, of an item of income, gain, loss or deduction
pursuant to the provisions of Section 6.1, including, without
limitation, a Curative Allocation (if appropriate to the context in
which the term "Agreed Allocation" is used).
"Agreed Value" of any Contributed Property means the fair
market value of such property or other consideration at the time of
contribution as determined by the Managing General Partner using such
reasonable method of valuation as it may adopt. The Managing General
Partner shall, in its discretion, use such method as it deems
reasonable and appropriate to allocate the aggregate Agreed Value of
Contributed Properties contributed to
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<PAGE> 8
the Partnership in a single or integrated transaction among each
separate property on a basis proportional to the fair market value of
each Contributed Property.
"Agreement" means this Amended and Restated Agreement of
Limited Partnership of Alliance Resource Operating Partners, L.P., as
it may be amended, supplemented or restated from time to time.
"Alliance Resource Holdings" means Alliance Resource Holdings,
Inc., a Delaware corporation formerly known as Alliance Coal
Corporation.
"Assignee" means a Person to whom one or more Partnership
Interests have been transferred in a manner permitted under this
Agreement, but who has not been admitted as a Substituted Limited
Partner.
"Associate" means, when used to indicate a relationship with
any Person, (a) any corporation or organization of which such Person is
a director, officer or partner or is, directly or indirectly, the owner
of 20% or more of any class of voting stock or other voting interest;
(b) any trust or other estate in which such Person has at least a 20%
beneficial interest or as to which such Person serves as trustee or in
a similar fiduciary capacity; and (c) any relative or spouse of such
Person, or any relative of such spouse, who has the same principal
residence as such Person.
"Available Cash" means, with respect to any Quarter ending
prior to the Liquidation Date,
(a) the sum of (i) all cash and cash equivalents of
the Partnership on hand at the end of such Quarter, and (ii) all
additional cash and cash equivalents of the Partnership on hand on the
date of determination of Available Cash with respect to such Quarter
resulting from Working Capital Borrowings made subsequent to the end of
such Quarter, less
(b) the amount of any cash reserves that is necessary
or appropriate in the reasonable discretion of the Managing General
Partner to (i) provide for the proper conduct of the business of the
Partnership (including reserves for future capital expenditures and for
anticipated future credit needs of the Partnership Group) subsequent to
such Quarter, (ii) comply with applicable law or any loan agreement,
security agreement, mortgage, debt instrument or other agreement or
obligation to which any Group Member is a party or by which it is bound
or its assets are subject or (iii) provide funds for distributions
under Section 6.4 or 6.5 of the MLP Agreement in respect of any one or
more of the next four Quarters; provided, however, that the Managing
General Partner may not establish cash reserves pursuant to (iii) above
if the effect of such reserves would be that the MLP is unable to
distribute the Minimum Quarterly Distribution on all Common Units, plus
any Cumulative
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<PAGE> 9
Common Unit Arrearage on all Common Units, with respect to such
Quarter; and provided further, that disbursements made by a Group
Member or cash reserves established, increased or reduced after the end
of such Quarter but on or before the date of determination of Available
Cash with respect to such Quarter shall be deemed to have been made,
established, increased or reduced, for purposes of determining
Available Cash, within such Quarter if the Managing General Partner so
determines.
Notwithstanding the foregoing, "Available Cash" with
respect to the Quarter in which the Liquidation Date occurs and any
subsequent Quarter shall equal zero.
"Bank Credit Agreement" means the Credit Agreement, dated as
of August 16, 1999 the among the Special General Partner, The Chase
Manhattan Bank, as Paying Agent thereunder, Chase and Citicorp USA,
Inc., as Co-Administrative Agents thereunder and the initial lenders
party thereto.
"Book-Tax Disparity" means with respect to any item of
Contributed Property or Adjusted Property, as of the date of any
determination, the difference between the Carrying Value of such
Contributed Property or Adjusted Property and the adjusted basis
thereof for federal income tax purposes as of such date. A Partner's
share of the Partnership's Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained
pursuant to Section 5.5 and the hypothetical balance of such Partner's
Capital Account computed as if it had been maintained strictly in
accordance with federal income tax accounting principles.
"Business Day" means Monday through Friday of each week,
except that a legal holiday recognized as such by the government of the
United States of America or the states of New York or Oklahoma shall
not be regarded as a Business Day.
"Capital Account" means the capital account maintained for a
Partner pursuant to Section 5.5. The "Capital Account" of a Partner in
respect of a General Partner Interest or any other specified interest
in the Partnership shall be the amount which such Capital Account would
be if such General Partner Interest or other specified interest in the
Partnership were the only interest in the Partnership held by a Partner
from and after the date on which such General Partner Interest or other
specified interest in the Partnership was first issued.
"Capital Contribution" means any cash, cash equivalents or the
Net Agreed Value of Contributed Property that a Partner contributes to
the Partnership pursuant to this Agreement or the Contribution
Agreement.
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"Carrying Value" means (a) with respect to a Contributed
Property, the Agreed Value of such property reduced (but not below
zero) by all depreciation, amortization and cost recovery deductions
charged to the Partners' and Assignees' Capital Accounts in respect of
such Contributed Property, and (b) with respect to any other
Partnership property, the adjusted basis of such property for federal
income tax purposes, all as of the time of determination. The Carrying
Value of any property shall be adjusted from time to time in accordance
with Sections 5.5(d)(i) and 5.5(d)(ii) and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions
and acquisitions of Partnership properties, as deemed appropriate by
the Managing General Partner.
"Certificate of Limited Partnership" means the Certificate of
Limited Partnership of the Partnership filed with the Secretary of
State of the State of Delaware as referenced in Section 2.1, as such
Certificate of Limited Partnership may be amended, supplemented or
restated from time to time.
"Closing Date" means the first date on which Common Units are
sold by the MLP to the Underwriters pursuant to the provisions of the
Underwriting Agreement.
"Code" means the Internal Revenue Code of 1986, as amended and
in effect from time to time. Any reference herein to a specific section
or sections of the Code shall be deemed to include a reference to any
corresponding provision of successor law.
"Commission" means the United States Securities and Exchange
Commission.
"Common Unit" has the meaning assigned to such term in the MLP
Agreement.
"Contributed Property" means each property or other asset, in
such form as may be permitted by the Delaware Act, but excluding cash,
contributed to the Partnership. Once the Carrying Value of a
Contributed Property is adjusted pursuant to Section 5.5(d), such
property shall no longer constitute a Contributed Property, but shall
be deemed an Adjusted Property.
"Contribution Agreement" means that certain Contribution and
Assumption Agreement, dated as of the Closing Date, among the Managing
General Partner, the Special General Partner, the MLP, the Partnership
and certain other parties named therein, together with any additional
documents and instruments contemplated or referenced thereunder.
"Curative Allocation" means any allocation of an item of
income, gain, deduction, loss or credit pursuant to the provisions of
Section 6.1(d)(ix).
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"Delaware Act" means the Delaware Revised Uniform Limited
Partnership Act, 6 Del. C.ss.17-101, et seq., as amended, supplemented
or restated from time to time, and any successor to such statute.
"Departing Partner" means a former General Partner from and
after the effective date of any withdrawal or removal of such former
General Partner pursuant to Section 11.1, 11.2 or 11.4.
"Economic Risk of Loss" has the meaning set forth in Treasury
Regulation Section 1.752-2(a).
"Event of Withdrawal" has the meaning assigned to such term in
Section 11.1(a).
"General Partners" means the Managing General Partner and the
Special General Partner and their successors and permitted assigns as
managing general partner and special general partner, respectively, of
the Partnership.
"General Partner Interest" means the ownership interest of a
General Partner in the Partnership (in its capacity as a general
partner) and includes any and all benefits to which a General Partner
is entitled as provided in this Agreement, together with all
obligations of a General Partner to comply with the terms and
provisions of this Agreement.
"Group Member" means a member of the Partnership Group.
"Indemnitee" means (a) each General Partner, (b) any Departing
Partner, (c) any Person who is or was an Affiliate of a General Partner
or any Departing Partner, (d) any Person who is or was a member,
partner, officer, director, employee, agent or trustee of any Group
Member, a General Partner or any Departing Partner or any Affiliate of
any Group Member, a General Partner or any Departing Partner, and (e)
any Person who is or was serving at the request of a General Partner or
any Departing Partner or any Affiliate of a General Partner or any
Departing Partner as an officer, director, employee, member, partner,
agent, fiduciary or trustee of another Person; provided, that a Person
shall not be an Indemnitee by reason of providing, on a
fee-for-services basis, trustee, fiduciary or custodial services.
"Initial Offering" means the initial offering and sale of
Common Units to the public, as described in the Registration Statement.
"Limited Partner" means any Person that is admitted to the
Partnership as a limited partner pursuant to the terms and conditions
of this Agreement; but the term Limited Partner
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shall not include any Person from and after the time such Person
withdraws as a Limited Partner from the Partnership.
"Limited Partner Interest" means the ownership interest of a
Limited Partner or Assignee in the Partnership and includes any and all
benefits to which such Limited Partner or Assignee is entitled as
provided in this Agreement, together with all obligations of such
Limited Partner or Assignee to comply with the terms and provisions of
this Agreement.
"Liquidation Date" means (a) in the case of an event giving
rise to the dissolution of the Partnership of the type described in
clauses (a) and (b) of the first sentence of Section 12.2, the date on
which the applicable time period during which the Partners have the
right to elect to reconstitute the Partnership and continue its
business has expired without such an election being made, and (b) in
the case of any other event giving rise to the dissolution of the
Partnership, the date on which such event occurs.
"Liquidator" means one or more Persons selected by the
Managing General Partner to perform the functions described in Section
12.3 as liquidating trustee of the Partnership within the meaning of
the Delaware Act.
"Managing General Partner" means Alliance Resource Management
GP, LLC and its successors and permitted assigns as managing general
partner of the Partnership.
"Merger Agreement" has the meaning assigned to such term in
Section 14.1.
"Minimum Quarterly Distribution" has the meaning assigned to
such term in the MLP Agreement.
"MLP" means Alliance Resource Partners, L.P.
"MLP Agreement" means the Amended and Restated Agreement of
Limited Partnership of Alliance Resource Partners, L.P., as it may be
amended, supplemented or restated from time to time.
"MLP Security" has the meaning assigned to the term
"Partnership Security" in the MLP Agreement.
"National Securities Exchange" has the meaning assigned to
such term in the MLP Agreement.
"Net Agreed Value" means, (a) in the case of any Contributed
Property, the Agreed Value of such property reduced by any liabilities
either assumed by the Partnership upon
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<PAGE> 13
such contribution or to which such property is subject when
contributed, and (b) in the case of any property distributed to a
Partner or Assignee by the Partnership, the Partnership's Carrying
Value of such property (as adjusted pursuant to Section 5.5(d)(ii)) at
the time such property is distributed, reduced by any indebtedness
either assumed by such Partner or Assignee upon such distribution or to
which such property is subject at the time of distribution, in either
case, as determined under Section 752 of the Code.
"Net Income" means, for any taxable year, the excess, if any,
of the Partnership's items of income and gain (other than those items
taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year over the Partnership's items of
loss and deduction (other than those items taken into account in the
computation of Net Termination Gain or Net Termination Loss) for such
taxable year. The items included in the calculation of Net Income shall
be determined in accordance with Section 5.5(b) and shall not include
any items specially allocated under Section 6.1(d).
"Net Loss" means, for any taxable year, the excess, if any, of
the Partnership's items of loss and deduction (other than those items
taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year over the Partnership's items of
income and gain (other than those items taken into account in the
computation of Net Termination Gain or Net Termination Loss) for such
taxable year. The items included in the calculation of Net Loss shall
be determined in accordance with Section 5.5(b) and shall not include
any items specially allocated under Section 6.1(d).
"Net Termination Gain" means, for any taxable year, the sum,
if positive, of all items of income, gain, loss or deduction recognized
by the Partnership after the Liquidation Date. The items included in
the determination of Net Termination Gain shall be determined in
accordance with Section 5.5(b) and shall not include any items of
income, gain or loss specially allocated under Section 6.1(d).
"Net Termination Loss" means, for any taxable year, the sum,
if negative, of all items of income, gain, loss or deduction recognized
by the Partnership after the Liquidation Date. The items included in
the determination of Net Termination Loss shall be determined in
accordance with Section 5.5(b) and shall not include any items of
income, gain or loss specially allocated under Section 6.1(d).
"Nonrecourse Built-in Gain" means with respect to any
Contributed Properties or Adjusted Properties that are subject to a
mortgage or pledge securing a Nonrecourse Liability, the amount of any
taxable gain that would be allocated to the Partners pursuant to
Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and 6.2(b)(iii) if such properties
were disposed of in a taxable transaction in full satisfaction of such
liabilities and for no other consideration.
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"Nonrecourse Deductions" means any and all items of loss,
deduction or expenditure (including, without limitation, any
expenditure described in Section 705(a)(2)(B) of the Code) that, in
accordance with the principles of Treasury Regulation Section
1.704-2(b), are attributable to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury
Regulation Section 1.752-1(a)(2).
"Note Purchase Agreement" means the Note Purchase Agreement,
dated as of August 1, 1999, between the Special General Partner and the
several purchasers listed in Schedule A attached thereto.
"Omnibus Agreement" means that Omnibus Agreement, dated as of
the Closing Date, among Alliance Resource Holdings, the Managing
General Partner, the Special General Partner and the MLP.
"Operating Subsidiary" means Alliance Coal, LLC, a Delaware
limited liability company and any successor thereto.
"Operating Subsidiary Agreement" means the Limited Liability
Company Agreement of the Operating Subsidiary, as it may be amended,
supplemented or restated from time to time.
"Opinion of Counsel" means a written opinion of counsel (which
may be regular counsel to the Partnership or either of the General
Partners or any of their Affiliates) acceptable to the Managing General
Partner in its reasonable discretion.
"Organizational Limited Partner" means Thomas L. Pearson in
his capacity as the organizational limited partner of the Partnership
pursuant to this Agreement.
"Partner Nonrecourse Debt" has the meaning set forth in
Treasury Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set
forth in Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all items of
loss, deduction or expenditure (including, without limitation, any
expenditure described in Section 705(a)(2)(B) of the Code) that, in
accordance with the principles of Treasury Regulation Section 1.704-
2(i), are attributable to a Partner Nonrecourse Debt.
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"Partners" means General Partners and Limited Partners.
"Partnership" means Alliance Resource Operating Partners,
L.P., a Delaware limited partnership, and any successors thereto.
"Partnership Group" means the Partnership, the Operating
Subsidiary and any Subsidiary of any such entity, treated as a single
consolidated entity.
"Partnership Interest" means an ownership interest of a
Partner in the Partnership, which shall include the General Partner
Interest(s) and the Limited Partner Interest(s).
"Partnership Minimum Gain" means that amount determined in
accordance with the principles of Treasury Regulation Section
1.704-2(d).
"Percentage Interest" means the percentage interest in the
Partnership held by each Partner upon completion of the transactions in
Section 5.2 and shall mean, (a) as to the Managing General Partner,
1.0001%, (b) as to the Special General Partner, 0.01%, and (c) as to
the MLP, 98.9899%.
"Person" means an individual or a corporation, limited
liability company, partnership, joint venture, trust, unincorporated
organization, association, government agency or political subdivision
thereof or other entity.
"Prior Agreement" is defined in the Recitals.
"Pro Rata" means, when modifying Partners and Assignees,
apportioned among all Partners and Assignees in accordance with their
relative Percentage Interests.
"Quarter" means, unless the context requires otherwise, a
fiscal quarter of the Partnership.
"Recapture Income" means any gain recognized by the
Partnership (computed without regard to any adjustment required by
Section 734 or Section 743 of the Code) upon the disposition of any
property or asset of the Partnership, which gain is characterized as
ordinary income because it represents the recapture of deductions
previously taken with respect to such property or asset.
"Registration Statement" means the Registration Statement on
Form S-1 (Registration No. 333-78845) as it has been or as it may be
amended or supplemented from time to time, filed by the MLP with the
Commission under the Securities Act to register the offering and sale
of the Common Units in the Initial Offering.
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"Required Allocations" means (a) any limitation imposed on any
allocation of Net Losses or Net Termination Losses under Section 6.1(b)
or 6.1(c)(ii) and (b) any allocation of an item of income, gain, loss
or deduction pursuant to Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv),
6.1(d)(vii) or 6.1(d)(ix).
"Residual Gain" or "Residual Loss" means any item of gain or
loss, as the case may be, of the Partnership recognized for federal
income tax purposes resulting from a sale, exchange or other
disposition of a Contributed Property or Adjusted Property, to the
extent such item of gain or loss is not allocated pursuant to Section
6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate Book-Tax
Disparities.
"Restricted Business" has the meaning assigned to such term in
the Omnibus Agreement.
"Securities Act" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such
statute.
"Special Approval" has the meaning assigned to such term in
the MLP Agreement.
"Special General Partner" means Alliance Resource GP, LLC and
its successors and permitted assigns as special general partner of the
Partnership.
"Subordinated Unit" has the meaning assigned to such term in
the MLP Agreement.
"Subordination Period" has the meaning assigned to such term
in the MLP Agreement.
"Subsidiary" means, with respect to any Person, (a) a
corporation of which more than 50% of the voting power of shares
entitled (without regard to the occurrence of any contingency) to vote
in the election of directors or other governing body of such
corporation is owned, directly or indirectly, at the date of
determination, by such Person, by one or more Subsidiaries of such
Person or a combination thereof, (b) a partnership (whether general or
limited) in which such Person or a Subsidiary of such Person is, at the
date of determination, a general or limited partner of such
partnership, but only if more than 50% of the partnership interests of
such partnership (considering all of the partnership interests of the
partnership as a single class) is owned, directly or indirectly, at the
date of determination, by such Person, by one or more Subsidiaries of
such Person, or a combination thereof, or (c) any other Person (other
than a corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or
indirectly, at the date of determination, has (i) at least a majority
ownership interest or (ii) the power to elect or direct the election of
a majority of the directors or other governing body of such Person.
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"Substituted Limited Partner" means a Person who is admitted
as a Limited Partner to the Partnership pursuant to Section 10.2 in
place of and with all the rights of a Limited Partner and who is shown
as a Limited Partner on the books and records of the Partnership.
"Surviving Business Entity" has the meaning assigned to such
term in Section 14.2(b).
"Transfer" has the meaning assigned to such term in Section
4.4(a).
"Underwriter" means each Person named as an underwriter in
Schedule I to the Underwriting Agreement who purchases Common Units
pursuant thereto.
"Underwriting Agreement" means the Underwriting Agreement
dated August 16, 1999 among the Underwriters, the MLP, the Partnership
and certain other parties, providing for the purchase of Common Units
by such Underwriters.
"Unit" has the meaning assigned to such term in the MLP
Agreement.
"Unit Majority" has the meaning assigned to such term in the
MLP Agreement.
"Unrealized Gain" attributable to any item of Partnership
property means, as of any date of determination, the excess, if any, of
(a) the fair market value of such property as of such date (as
determined under Section 5.5(d)) over (b) the Carrying Value of such
property as of such date (prior to any adjustment to be made pursuant
to Section 5.5(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership
property means, as of any date of determination, the excess, if any, of
(a) the Carrying Value of such property as of such date (prior to any
adjustment to be made pursuant to Section 5.5(d) as of such date) over
(b) the fair market value of such property as of such date (as
determined under Section 5.5(d)).
"U.S. GAAP" means United States Generally Accepted Accounting
Principles consistently applied.
"Working Capital Borrowings" means borrowings exclusively for
working capital purposes made pursuant to a credit facility or other
arrangement requiring all such borrowings thereunder to be reduced to a
relatively small amount each year for an economically meaningful period
of time.
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SECTION 1.2 Construction.
Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) the term "include" or "includes" means
includes, without limitation, and "including" means including, without
limitation.
ARTICLE II
ORGANIZATION
SECTION 2.1 Formation.
The Partnership was previously formed as a limited partnership pursuant
to the provisions of the Delaware Act. The Partners hereby amend and restate the
Prior Agreement in its entirety. This amendment and restatement shall become
effective on the date of this Agreement. Except as expressly provided to the
contrary in this Agreement, the rights, duties (including fiduciary duties),
liabilities and obligations of the Partners and the administration, dissolution
and termination of the Partnership shall be governed by the Delaware Act. All
Partnership Interests shall constitute personal property of the owner thereof
for all purposes and a Partner has no interest in specific Partnership property.
SECTION 2.2 Name.
The name of the Partnership shall be "Alliance Resource Operating
Partners, L.P." The Partnership's business may be conducted under any other name
or names deemed necessary or appropriate by the Managing General Partner in its
sole discretion, including the name of the Managing General Partner. The words
"Limited Partnership," "L.P." or "Ltd." or similar words or letters shall be
included in the Partnership's name where necessary for the purpose of complying
with the laws of any jurisdiction that so requires. The Managing General Partner
in its discretion may change the name of the Partnership at any time and from
time to time and shall notify the other Partner(s) of such change in the next
regular communication to the Partners.
SECTION 2.3 Registered Office; Registered Agent; Principal Office; Other
Offices.
Unless and until changed by the Managing General Partner, the
registered office of the Partnership in the State of Delaware shall be located
at 1209 Orange Street, Wilmington, Delaware 19801, and the registered agent for
service of process on the Partnership in the State of Delaware at such
registered office shall be The Corporation Trust Company. The principal office
of the Partnership shall be located at 1717 South Boulder Avenue, Tulsa,
Oklahoma 74119 or such other place as the Managing General Partner may from time
to time designate by notice to the Limited
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Partners. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the Managing General Partner deems
necessary or appropriate. The address of the Managing General Partner shall be
1717 South Boulder Avenue, Tulsa, Oklahoma 74119 or such other place as the
Managing General Partner may from time to time designate by notice to the
Limited Partners.
SECTION 2.4 Purpose and Business.
The purpose and nature of the business to be conducted by the
Partnership shall be to (a) acquire, manage, operate, lease, sell and otherwise
deal with the assets or properties contributed to the Partnership by the
Partners or hereafter acquired by the Partnership, (b) serve as a non- managing
member of the Operating Subsidiary and, in connection therewith, to exercise all
the rights and powers conferred upon the Partnership as a non-managing member of
the Operating Subsidiary pursuant to the Operating Subsidiary Agreement, (c)
engage directly in, or enter into or form any corporation, partnership, joint
venture, limited liability company or other arrangement to engage indirectly in
any type of business or activity engaged in by Alliance Coal, LLC and its
Subsidiaries prior to the Closing Date and, in connection therewith, to exercise
all of the rights and powers conferred upon the Partnership pursuant to the
agreements relating to such business activity, (d) engage directly in, or enter
into or form any corporation, partnership, joint venture, limited liability
company or other arrangement to engage indirectly in, any business activity that
is approved by the Managing General Partner and which lawfully may be conducted
by a limited partnership organized pursuant to the Delaware Act and, in
connection therewith, to exercise all of the rights and powers conferred upon
the Partnership pursuant to the agreements relating to such business activity,
and (e) do anything necessary or appropriate to the foregoing, including the
making of capital contributions or loans to a Group Member, the MLP or any
Subsidiary of the MLP; provided, however, in the case of (c) and (d) above, that
the Managing General Partner reasonably determines, as of the date of the
acquisition or commencement of such activity, that such activity (i) generates
"qualifying income" (as such term is defined pursuant to Section 7704 of the
Code) or (ii) enhances the operations of an activity of the Partnership that
generates qualifying income. The Managing General Partner has no obligation or
duty to the Partnership, the Special General Partner, the Limited Partners, or
the Assignees to propose or approve, and in its discretion may decline to
propose or approve, the conduct by the Partnership of any business.
SECTION 2.5 Powers.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in Section
2.4 and for the protection and benefit of the Partnership.
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SECTION 2.6 Power of Attorney.
(a) Each Partner and each Assignee hereby constitutes and
appoints the Managing General Partner and, if a Liquidator shall have been
selected pursuant to Section 12.3, the Liquidator (and any successor to the
Liquidator by merger, transfer, assignment, election or otherwise) and each of
their authorized officers and attorneys-in-fact, as the case may be, with full
power of substitution, as its true and lawful agent and attorney-in-fact, with
full power and authority in his name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record
in the appropriate public offices (A) all certificates, documents and
other instruments (including this Agreement and the Certificate of
Limited Partnership and all amendments or restatements hereof or
thereof) that the Managing General Partner or the Liquidator deems
necessary or appropriate to form, qualify or continue the existence or
qualification of the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) in
the State of Delaware and in all other jurisdictions in which the
Partnership may conduct business or own property; (B) all certificates,
documents and other instruments that the Managing General Partner or
the Liquidator deems necessary or appropriate to reflect, in accordance
with its terms, any amendment, change, modification or restatement of
this Agreement; (C) all certificates, documents and other instruments
(including conveyances and a certificate of cancellation) that the
Managing General Partner or the Liquidator deems necessary or
appropriate to reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement; (D) all
certificates, documents and other instruments relating to the
admission, withdrawal, removal or substitution of any Partner pursuant
to, or other events described in, Article IV, X, XI or XII; (E) all
certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of any class or
series of Partnership Interests issued pursuant hereto; and (F) all
certificates, documents and other instruments (including agreements and
a certificate of merger) relating to a merger or consolidation of the
Partnership pursuant to Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record
all ballots, consents, approvals, waivers, certificates, documents and
other instruments necessary or appropriate, in the discretion of the
Managing General Partner or the Liquidator, to make, evidence, give,
confirm or ratify any vote, consent, approval, agreement or other
action that is made or given by the Partners hereunder or is consistent
with the terms of this Agreement or is necessary or appropriate, in the
discretion of the Managing General Partner or the Liquidator, to
effectuate the terms or intent of this Agreement; provided, that when
required by any provision of this Agreement that establishes a
percentage of the Limited Partners or of the Limited Partners of any
class or series required to take any action, the Managing General
Partner and the Liquidator may exercise the power of attorney made in
this Section 2.6(a)(ii)
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only after the necessary vote, consent or approval of the Limited
Partners or of the Limited Partners of such class or series, as
applicable.
Nothing contained in this Section 2.6(a) shall be construed as
authorizing the Managing General Partner to amend this Agreement except in
accordance with Article XIII or as may be otherwise expressly provided for in
this Agreement.
(b) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive and, to
the maximum extent permitted by law, not be affected by the subsequent death,
incompetency, disability, incapacity, dissolution, bankruptcy or termination of
any Limited Partner or Assignee and the transfer of all or any portion of such
Limited Partner's or Assignee's Partnership Interest and shall extend to such
Limited Partner's or Assignee's successors and assigns. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
Managing General Partner or the Liquidator acting in good faith pursuant to such
power of attorney; and each such Limited Partner or Assignee, to the maximum
extent permitted by law, hereby waives any and all defenses that may be
available to contest, negate or disaffirm the action of the Managing General
Partner or the Liquidator taken in good faith under such power of attorney. Each
Limited Partner or Assignee shall execute and deliver to the Managing General
Partner or the Liquidator, within 15 days after receipt of the request therefor,
such further designation, powers of attorney and other instruments as the
Managing General Partner or the Liquidator deems necessary to effectuate this
Agreement and the purposes of the Partnership.
SECTION 2.7 Term.
The term of the Partnership commenced upon the filing of the
Certificate of Limited Partnership in accordance with the Delaware Act and shall
continue in existence until the close of Partnership business on December 31,
2098 or until the earlier dissolution of the Partnership in accordance with the
provisions of Article XII. The existence of the Partnership as a separate legal
entity shall continue until the cancellation of the Certificate of Limited
Partnership as provided in the Delaware Act.
SECTION 2.8 Title to Partnership Assets.
Title to Partnership assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the Partnership
as an entity, and no Partner or Assignee, individually or collectively, shall
have any ownership interest in such Partnership assets or any portion thereof.
Title to any or all of the Partnership assets may be held in the name of the
Partnership, the Managing General Partner, one or more of its Affiliates or one
or more nominees, as the Managing General Partner may determine. The Managing
General Partner hereby declares and warrants that any Partnership assets for
which record title is held in the name of the Managing
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General Partner or one or more of its Affiliates or one or more nominees shall
be held by the Managing General Partner or such Affiliate or nominee for the use
and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the Managing General Partner shall use
reasonable efforts to cause record title to such assets (other than those assets
in respect of which the Managing General Partner determines that the expense and
difficulty of conveyancing makes transfer of record title to the Partnership
impracticable) to be vested in the Partnership as soon as reasonably
practicable; provided, further, that, prior to the withdrawal or removal of the
Managing General Partner or as soon thereafter as practicable, the Managing
General Partner shall use reasonable efforts to effect the transfer of record
title to the Partnership and, prior to any such transfer, will provide for the
use of such assets in a manner satisfactory to the Managing General Partner. All
Partnership assets shall be recorded as the property of the Partnership in its
books and records, irrespective of the name in which record title to such
Partnership assets is held.
ARTICLE III
RIGHTS OF LIMITED PARTNERS
SECTION 3.1 Limitation of Liability.
The Limited Partners and the Assignees shall have no liability under
this Agreement except as expressly provided in this Agreement or in the Delaware
Act.
SECTION 3.2 Management of Business.
No Limited Partner or Assignee, in its capacity as such, shall
participate in the operation, management or control (within the meaning of the
Delaware Act) of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind the
Partnership. Any action taken by any Affiliate of a General Partner or any
officer, director, employee, member, general partner, agent or trustee of a
General Partner or any of its Affiliates, or any officer, director, employee,
member, general partner, agent or trustee of a Group Member, in its capacity as
such, shall not be deemed to be participation in the control of the business of
the Partnership by a limited partner of the Partnership (within the meaning of
Section 17-303(a) of the Delaware Act) and shall not affect, impair or eliminate
the limitations on the liability of the Limited Partners or Assignees under this
Agreement.
SECTION 3.3 Outside Activities of the Limited Partners.
Subject to the provisions of Section 7.5 and the Omnibus Agreement,
which shall continue to be applicable to the Persons referred to therein,
regardless of whether such Persons shall also be Limited Partners or Assignees,
any Limited Partner or Assignee shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities in direct competition
with the Partnership Group. Neither
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the Partnership nor any of the other Partners or Assignees shall have any rights
by virtue of this Agreement in any business ventures of any Limited Partner or
Assignee.
SECTION 3.4 Rights of Limited Partners.
(a) In addition to other rights provided by this Agreement or
by applicable law, and except as limited by Section 3.4(b), each Limited Partner
shall have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon reasonable written demand
and at such Limited Partner's own expense:
(i) to obtain true and full information regarding the status
of the business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of
the Partnership's federal, state and local income tax returns for each
year;
(iii) to have furnished to him a current list of the name and
last known business, residence or mailing address of each Partner;
(iv) to have furnished to him a copy of this Agreement and the
Certificate of Limited Partnership and all amendments thereto, together
with a copy of the executed copies of all powers of attorney pursuant
to which this Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
(v) to obtain true and full information regarding the amount
of cash and a description and statement of the Net Agreed Value of any
other Capital Contribution by each Partner and which each Partner has
agreed to contribute in the future, and the date on which each became a
Partner; and
(vi) to obtain such other information regarding the affairs
of the Partnership as is just and reasonable.
(b) The Managing General Partner may keep confidential from
the Limited Partners and Assignees, for such period of time as the Managing
General Partner deems reasonable, (i) any information that the Managing General
Partner reasonably believes to be in the nature of trade secrets or (ii) other
information the disclosure of which the Managing General Partner in good faith
believes (A) is not in the best interests of the MLP or the Partnership Group,
(B) could damage the MLP or the Partnership Group or (C) that any Group Member
is required by law or by agreement with any third party to keep confidential
(other than agreements with Affiliates of the Partnership the primary purpose of
which is to circumvent the obligations set forth in this Section 3.4).
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ARTICLE IV
TRANSFERS OF PARTNERSHIP INTERESTS
SECTION 4.1 Transfer Generally.
(a) The term "transfer," when used in this Agreement with
respect to a Partnership Interest, shall be deemed to refer to a transaction by
which a General Partner assigns its General Partner Interest to another Person
who becomes a General Partner (or an Assignee) or by which the holder of a
Limited Partner Interest assigns such Limited Partner Interest to another Person
who becomes a Limited Partner (or an Assignee), and includes a sale, assignment,
gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other
disposition by law or otherwise.
(b) No Partnership Interest shall be transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this
Article IV. Any transfer or purported transfer of a Partnership Interest not
made in accordance with this Article IV shall be null and void.
(c) Nothing contained in this Agreement shall be construed to
prevent a disposition by any member of a General Partner of any or all of the
issued and outstanding membership interests of such General Partner.
SECTION 4.2 Transfer of General Partner's Partnership Interest.
If a General Partner transfers its interest as a general
partner of the MLP to any Person in accordance with the provisions of the MLP
Agreement, such General Partner shall contemporaneously therewith transfer all,
but not less than all, of its General Partner Interest herein to such Person,
and the Limited Partners and Assignees, if any, hereby expressly consent to such
transfer. Except as set forth in the immediately preceding sentence and in
Section 5.2, a General Partner may not transfer all or any part of its
Partnership Interest as a General Partner.
SECTION 4.3 Transfer of a Limited Partner's Partnership Interest.
A Limited Partner may transfer all, but not less than all, of
its Partnership Interest as a Limited Partner in connection with the merger,
consolidation or other combination of such Limited Partner with or into any
other Person or the transfer by such Limited Partner of all or substantially all
of its assets to another Person, and following any such transfer such Person may
become a Substituted Limited Partner pursuant to Article X. Except as set forth
in the immediately preceding sentence and in Section 5.2, or in connection with
any pledge of (or any related foreclosure on) a Partnership Interest as a
Limited Partner solely for the purpose of securing, directly or indirectly,
indebtedness of the Partnership or the MLP, and except for the transfers
contemplated by Sections 5.2 and 10.1, a Limited Partner may not transfer all or
any part of its Partnership Interest or withdraw from the Partnership.
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SECTION 4.4 Restrictions on Transfers.
(a) Notwithstanding the other provisions of this Article IV,
no transfer of any Partnership Interest shall be made if such transfer would (i)
violate the then applicable federal or state securities laws or rules and
regulations of the Commission, any state securities commission or any other
governmental authority with jurisdiction over such transfer, (ii) terminate the
existence or qualification of the Partnership or the MLP under the laws of the
jurisdiction of its formation or (iii) cause the Partnership or the MLP to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes (to the extent not already so treated
or taxed).
(b) The Managing General Partner may impose restrictions on
the transfer of Partnership Interests if a subsequent Opinion of Counsel
determines that such restrictions are necessary to avoid a significant risk of
the Partnership or the MLP becoming taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes. The restrictions may be
imposed by making such amendments to this Agreement as the Managing General
Partner may determine to be necessary or appropriate to impose such
restrictions.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
SECTION 5.1 Initial Contributions.
In connection with the formation of the Partnership under the Delaware
Act, the Special General Partner made an initial Capital Contribution to the
Partnership in the amount of $10 in exchange for an interest in the Partnership
and was admitted as the general partner, and the Organizational Limited Partner
made an initial Capital Contribution to the Partnership in the amount of $999 in
exchange for an interest in the Partnership and was admitted as a Limited
Partner. As of the Closing Date, the interest of the Organizational Limited
Partner shall be redeemed as provided in the Contribution Agreement; the initial
Capital Contributions of each Partner refunded and the Organizational Limited
Partner shall cease to be a Limited Partner of the Partnership. One percent of
any interest or other profit that may have resulted from the investment or other
use of such initial Capital Contributions shall be allocated and distributed to
the Organizational Limited Partner, and the balance thereof shall be allocated
and distributed to the Special General Partner.
SECTION 5.2 Contributions Pursuant to the Contribution Agreement.
(a) On the Closing Date and pursuant to the Contribution
Agreement, Alliance Resource Holdings shall contribute its 100% membership
interest in the Operating Subsidiary to the Special General Partner in exchange
for a 100% membership interest in the Special General Partner.
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(b) On the Closing Date and pursuant to the Contribution
Agreement, all of the Subsidiaries of the Operating Subsidiary shall distribute
their working capital assets to the Operating Subsidiary, which shall in turn,
distribute its working capital assets to the Special General Partner.
(c) On the Closing Date and pursuant to the Contribution
Agreement, the Special General Partner shall incur certain indebtedness in the
amounts set forth in the Registration Statement and purchase U.S. treasury
notes, the MLP shall offer Common Units to the public in the Initial Offering
and the Managing General Partner shall contribute cash to the MLP in exchange
for a managing general partner interest in the MLP and the Incentive
Distribution Rights (as defined in the MLP Agreement).
(d) On the Closing Date and pursuant to the Contribution
Agreement, the MLP shall contribute the cash received from the Initial Offering
of Common Units and from the Managing General Partner, as described in paragraph
(c) above, to the Partnership in exchange for a Limited Partner Interest.
(e) On the Closing Date and pursuant to the Contribution
Agreement, the Managing General Partner shall contribute $2,987,016 to the
Partnership in exchange for a 1.0001% General Partner Interest as Managing
General Partner.
(f) On the Closing Date and pursuant to the Contribution
Agreement, the Special General Partner will contribute its 100% member interest
in the Operating Subsidiary and the U.S. treasury notes described in paragraph
(c) above to the Partnership in exchange for a .01% General Partner Interest as
Special General Partner, a Limited Partner Interest and the assumption of the
Special General Partner's obligations under the indebtedness incurred by Special
General Partner on the Closing Date, as described in paragraph (c) above.
(g) On the Closing Date and pursuant to the Contribution
Agreement, the Special General Partner shall transfer its Limited Partner
Interest to the MLP in exchange for a special general partner interest in the
MLP and a number of Common Units and Subordinated Units set forth in the
Registration Statement.
(h) On the Closing Date and pursuant to the Contribution
Agreement, the Partnership shall pay certain expenses related to the
transactions described in the Registration Statement, reimburse the Special
General Partner for certain capital expenses incurred, contribute cash to the
Operating Subsidiary and purchase a certain amount of U.S. Treasury notes, as
described in the Registration Statement. Immediately after such actions, the
Operating Subsidiary will contribute the cash received from the Partnership to
its Subsidiaries to replenish their working capital.
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(i) On the Closing Date and pursuant to the Contribution
Agreement, the Managing General Partner shall contribute cash to the Operating
Subsidiary in exchange for a .001% managing membership interest therein.
(j) Following the foregoing transactions, the Managing General
Partner shall hold a 1.0001% Partnership Interest as Managing General Partner,
the Special General Partners shall hold a .01% Partnership Interest as Special
General Partner and the MLP shall hold a 98.9899% Partnership Interest as a
Limited Partner.
SECTION 5.3 Additional Capital Contributions.
With the consent of the Managing General Partner, any Limited Partner
may, but shall not be obligated to, make additional Capital Contributions to the
Partnership. Contemporaneously with the making of any Capital Contributions by a
Limited Partner, in addition to those provided in Sections 5.1 and 5.2, the
Managing General Partner and the Special General Partner shall be obligated to
make an additional Capital Contribution to the Partnership in amounts equal to
1.0001 and 0.01, respectively, divided by 98.9899 times the amount of the
additional Capital Contribution then made by such Limited Partner. Except as set
forth in the immediately preceding sentence and in Article XII, the General
Partners shall not be obligated to make any additional Capital Contributions to
the Partnership.
SECTION 5.4 Interest and Withdrawal.
No interest shall be paid by the Partnership on Capital Contributions.
No Partner or Assignee shall be entitled to the withdrawal or return of its
Capital Contribution, except to the extent, if any, that distributions made
pursuant to this Agreement or upon termination of the Partnership may be
considered as such by law and then only to the extent provided for in this
Agreement. Except to the extent expressly provided in this Agreement, no Partner
or Assignee shall have priority over any other Partner or Assignee either as to
the return of Capital Contributions or as to profits, losses or distributions.
Any such return shall be a compromise to which all Partners and Assignees agree
within the meaning of Section 17-502(b) of the Delaware Act.
SECTION 5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a
beneficial owner of Partnership Interests held by a nominee in any case in which
the nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the Managing General Partner in its sole discretion) owning a Partnership
Interest a separate Capital Account with respect to such Partnership Interest in
accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such
Capital Account shall be increased by (i) the amount of all Capital
Contributions made to the Partnership with respect to such Partnership
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Interest pursuant to this Agreement and (ii) all items of Partnership income and
gain (including, without limitation, income and gain exempt from tax) computed
in accordance with Section 5.5(b) and allocated with respect to such Partnership
Interest pursuant to Section 6.1, and decreased by (x) the amount of cash or Net
Agreed Value of all actual and deemed distributions of cash or property made
with respect to such Partnership Interest pursuant to this Agreement and (y) all
items of Partnership deduction and loss computed in accordance with Section
5.5(b) and allocated with respect to such Partnership Interest pursuant to
Section 6.1.
(b) For purposes of computing the amount of any item of
income, gain, loss or deduction which is to be allocated pursuant to Article VI
and is to be reflected in the Partners' Capital Accounts, the determination,
recognition and classification of any such item shall be the same as its
determination, recognition and classification for federal income tax purposes
(including, without limitation, any method of depreciation, cost recovery or
amortization used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Partnership
shall be treated as owning directly its proportionate share (as
determined by the Managing General Partner) of all property owned by
any Subsidiary of the Partnership that is classified as a partnership
for federal income tax purposes.
(ii) All fees and other expenses incurred by the Partnership
to promote the sale of (or to sell) a Partnership Interest that can
neither be deducted nor amortized under Section 709 of the Code, if
any, shall, for purposes of Capital Account maintenance, be treated as
an item of deduction at the time such fees and other expenses are
incurred and shall be allocated among the Partners pursuant to Section
6.1.
(iii) Except as otherwise provided in Treasury Regulation
Section 1.704- 1(b)(2)(iv)(m), computation of all items of income,
gain, loss and deduction shall be made without regard to any election
under Section 754 of the Code which may be made by the Partnership and,
as to those items described in Section 705(a)(1)(B) or 705(a)(2)(B) of
the Code, without regard to the fact that such items are not includable
in gross income or are neither currently deductible nor capitalized for
federal income tax purposes. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b)
or 743(b) of the Code is required, pursuant to Treasury Regulation
Section 1.704- 1(b)(2)(iv)(m), to be taken into account in determining
Capital Accounts, the amount of such adjustment in the Capital Accounts
shall be treated as an item of gain or loss.
(iv) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as if the
adjusted basis of such property as of such date of disposition were
equal in amount to the Partnership's Carrying Value with respect to
such property as of such date.
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(v) In accordance with the requirements of Section 704(b) of
the Code, any deductions for depreciation, cost recovery or
amortization attributable to any Contributed Property shall be
determined as if the adjusted basis of such property on the date it was
acquired by the Partnership were equal to the Agreed Value of such
property. Upon an adjustment pursuant to Section 5.5(d) to the Carrying
Value of any Partnership property subject to depreciation, cost
recovery or amortization, any further deductions for such depreciation,
cost recovery or amortization attributable to such property shall be
determined (A) as if the adjusted basis of such property were equal to
the Carrying Value of such property immediately following such
adjustment and (B) using a rate of depreciation, cost recovery or
amortization derived from the same method and useful life (or, if
applicable, the remaining useful life) as is applied for federal income
tax purposes; provided, however, that, if the asset has a zero adjusted
basis for federal income tax purposes, depreciation, cost recovery or
amortization derived from the same method and useful life (or, if
applicable, the remaining useful life) as is applied for federal income
tax purposes; provided, however, that, if the asset has a zero adjusted
basis for federal income tax purposes, depreciation, cost recovery or
amortization deductions shall be determined using any reasonable method
that the Managing General Partner may adopt.
(vi) If the Partnership's adjusted basis in a depreciable or
cost recovery property is reduced for federal income tax purposes
pursuant to Section 48(q)(1) or 48(q)(3) of the Code, the amount of
such reduction shall, solely for purposes hereof, be deemed to be an
additional depreciation or cost recovery deduction in the year such
property is placed in service and shall be allocated among the Partners
pursuant to Section 6.1. Any restoration of such basis pursuant to
Section 48(q)(2) of the Code shall, to the extent possible, be
allocated in the same manner to the Partners to whom such deemed
deduction was allocated.
(c) A transferee of a Partnership Interest shall succeed to a
pro rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.
(d) (i) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership
Interests for cash or Contributed Property or the conversion of a
General Partner's Partnership Interest to Common Units pursuant to
Section 11.3(a), the Capital Accounts of all Partners and the Carrying
Value of each Partnership property immediately prior to such issuance
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual
sale of each such property immediately prior to such issuance and had
been allocated to the Partners at such time pursuant to Section 6.1 in
the same manner as any item of gain or loss actually recognized during
such period would have been allocated. In determining such Unrealized
Gain or Unrealized Loss, the aggregate cash amount and fair market
value of all
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Partnership assets (including, without limitation, cash or cash
equivalents) immediately prior to the issuance of additional
Partnership Interests shall be determined by the Managing General
Partner using such reasonable method of valuation as it may adopt;
provided, however, that the Managing General Partner, in arriving at
such valuation, must take fully into account the fair market value of
the Partnership Interests of all Partners at such time. The Managing
General Partner shall allocate such aggregate value among the assets of
the Partnership (in such manner as it determines in its discretion to
be reasonable) to arrive at a fair market value for individual
properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Partner of any Partnership property (other than a
distribution of cash that is not in redemption or retirement of a
Partnership Interest), the Capital Accounts of all Partners and the
Carrying Value of all Partnership property shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable
to such Partnership property, as if such Unrealized Gain or Unrealized
Loss had been recognized in a sale of such property immediately prior
to such distribution for an amount equal to its fair market value, and
had been allocated to the Partners, at such time, pursuant to Section
6.1 in the same manner as any item of gain or loss actually recognized
during such period would have been allocated. In determining such
Unrealized Gain or Unrealized Loss the aggregate cash amount and fair
market value of all Partnership assets (including, without limitation,
cash or cash equivalents) immediately prior to a distribution shall (A)
in the case of an actual distribution which is not made pursuant to
Section 12.4 or in the case of a deemed contribution and/or
distribution occurring as a result of a termination of the Partnership
pursuant to Section 708 of the Code, be determined and allocated in the
same manner as that provided in Section 5.5(d)(i) or (B) in the case of
a liquidating distribution pursuant to Section 12.4, be determined and
allocated by the Liquidator using such reasonable method of valuation
as it may adopt.
SECTION 5.6 Loans from Partners.
Loans by a Partner to the Partnership shall not constitute Capital
Contributions. If any Partner shall advance funds to the Partnership in excess
of the amounts required hereunder to be contributed by it to the capital of the
Partnership, the making of such excess advances shall not result in any increase
in the amount of the Capital Account of such Partner. The amount of any such
excess advances shall be a debt obligation of the Partnership to such Partner
and shall be payable or collectible only out of the Partnership assets in
accordance with the terms and conditions upon which such advances are made.
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SECTION 5.7 Limited Preemptive Rights.
Except as provided in Section 5.3, no Person shall have preemptive,
preferential or other similar rights with respect to (a) additional Capital
Contributions; (b) issuance or sale of any class or series of Partnership
Interests, whether unissued, held in the treasury or hereafter created; (c)
issuance of any obligations, evidences of indebtedness or other securities of
the Partnership convertible into or exchangeable for, or carrying or accompanied
by any rights to receive, purchase or subscribe to, any such Partnership
Interests; (d) issuance of any right of subscription to or right to receive, or
any warrant or option for the purchase of, any such Partnership Interests; or
(e) issuance or sale of any other securities that may be issued or sold by the
Partnership.
SECTION 5.8 Fully Paid and Non-Assessable Nature of Partnership Interests.
All Partnership Interests issued to Limited Partners pursuant to, and
in accordance with the requirements of, this Article V shall be fully paid and
non-assessable Partnership Interests, except as such non-assessability may be
affected by Section 17-607 of the Delaware Act.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
SECTION 6.1 Allocations for Capital Account Purposes.
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
(a) Net Income. After giving effect to the special allocations
set forth in Section 6.1(d), Net Income for each taxable year and all items of
income, gain, loss and deduction taken into account in computing Net Income for
such taxable year shall be allocated among the Partners as follows:
(i) First, 100% to the General Partners, in proportion to
their respective Percentage Interests, until the aggregate Net Income
allocated to the General Partners pursuant to this Section 6.1(a)(i)
for the current taxable year and all previous taxable years is equal to
the aggregate Net Losses allocated to the General Partners pursuant to
Section 6.1(b)(ii) for all previous taxable years;
(ii) Second, 1.0101% to the General Partners, in proportion to
their respective Percentage Interests, and 98.9899% to the Limited
Partners, in proportion to their respective Percentage Interests.
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(b) Net Losses. After giving effect to the special allocations
set forth in Section 6.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses for
such taxable period shall be allocated among the Partners as follows:
(i) First, 1.0101% to the General Partners, in proportion to
their respective Percentage Interests, and 98.9899% to the Limited
Partners, in accordance with their respective Percentage Interests;
provided, however, that Net Losses shall not be allocated to a Limited
Partner pursuant to this Section 6.1(b)(i) to the extent that such
allocation would cause a Limited Partner to have a deficit balance in
its Adjusted Capital Account at the end of such taxable year (or
increase any existing deficit balance in such Limited Partners's
Adjusted Capital Account);
(ii) Second, the balance, if any, 100% to the General
Partners, in proportion to their respective Percentage Interests.
(c) Net Termination Gains and Losses. After giving effect to
the special allocations set forth in Section 6.1(d), all items of income, gain,
loss and deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder. All
allocations under this Section 6.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
6.1 and after all distributions of Available Cash provided under Section 6.4
have been made with respect to the taxable period ending on or before the
Liquidation Date; provided, however, that solely for purposes of this Section
6.1(c), Capital Accounts shall not be adjusted for distributions made pursuant
to Section 12.4.
(i) If a Net Termination Gain is recognized (or
deemed recognized pursuant to Section 5.5(d)), such Net Termination
Gain shall be allocated among the Partners in the following manner (and
the Capital Accounts of the Partners shall be increased by the amount
so allocated in each of the following subclauses, in the order listed,
before an allocation is made pursuant to the next succeeding
subclause):
(A) First, to each Partner having a deficit balance
in its Capital Account, in the proportion that such deficit
balance bears to the total deficit balances in the Capital
Accounts of all Partners, until each such Partner has been
allocated Net Termination Gain equal to any such deficit
balance in its Capital Account; and
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(B) Second, 1.0101% to the General Partners, in
proportion to their respective Percentage Interests, and
98.9899% to the Limited Partners, in proportion to their
respective Percentage Interests.
(ii) If a Net Termination Loss is recognized (or
deemed recognized pursuant to Section 5.5(d)), such Net Termination
Loss shall be allocated among the Partners in the following manner:
(A) First, to the General Partners and the Limited
Partners in proportion to, and to the extent of, the positive
balances in their respective Capital Accounts; and
(B) Second, the balance, if any, 100% to the General
Partners, in proportion to their respective Percentage
Interests.
(d) Special Allocations. Notwithstanding any other provision
of this Section 6.1, the following special allocations shall be made for such
taxable period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any
other provision of this Section 6.1, if there is a net decrease in
Partnership Minimum Gain during any Partnership taxable period, each
Partner shall be allocated items of Partnership income and gain for
such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(f)(6),
1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor provision. For
purposes of this Section 6.1(d), each Partner's Adjusted Capital
Account balance shall be determined, and the allocation of income or
gain required hereunder shall be effected, prior to the application of
any other allocations pursuant to this Section 6.1(d) with respect to
such taxable period (other than an allocation pursuant to Sections
6.1(d)(v) and 6.1(d)(vi)). This Section 6.1(d)(i) is intended to comply
with the Partnership Minimum Gain chargeback requirement in Treasury
Regulation Section 1.704- 2(f) and shall be interpreted consistently
therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 6.1 (other than
Section 6.1(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Partnership taxable period, any Partner with a
share of Partner Nonrecourse Debt Minimum Gain at the beginning of such
taxable period shall be allocated items of Partnership income and gain
for such period (and, if necessary, subsequent periods) in the manner
and amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and
1.704-2(j)(2)(ii), or any successor provisions. For purposes of this
Section 6.1(d), each Partner's Adjusted Capital Account balance shall
be determined, and the allocation of income or gain required hereunder
shall be effected, prior to the application of any other
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allocations pursuant to this Section 6.1(d), other than Section
6.1(d)(i) and other than an allocation pursuant to Sections 6.1(d)(v)
and 6.1(d)(vi), with respect to such taxable period. This Section
6.1(d)(ii) is intended to comply with the chargeback of items of income
and gain requirement in Treasury Regulation Section 1.704-2(i)(4) and
shall be interpreted consistently therewith.
(iii) Qualified Income Offset. In the event any Partner
unexpectedly receives any adjustments, allocations or distributions
described in Treasury Regulation Sections 1.704- 1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of
Partnership income and gain shall be specially allocated to such
Partner in an amount and manner sufficient to eliminate, to the extent
required by the Treasury Regulations promulgated under Section 704(b)
of the Code, the deficit balance, if any, in its Adjusted Capital
Account created by such adjustments, allocations or distributions as
quickly as possible unless such deficit balance is otherwise eliminated
pursuant to Section 6.1(d)(i) or (ii).
(iv) Gross Income Allocations. In the event any Partner has a
deficit balance in its Capital Account at the end of any Partnership
taxable period in excess of the sum of (A) the amount such Partner is
required to restore pursuant to the provisions of this Agreement and
(B) the amount such Partner is deemed obligated to restore pursuant to
Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner
shall be specially allocated items of Partnership gross income and gain
in the amount of such excess as quickly as possible; provided, that an
allocation pursuant to this Section 6.1(d)(iv) shall be made only if
and to the extent that such Partner would have a deficit balance in its
Capital Account as adjusted after all other allocations provided for in
this Section 6.1 have been tentatively made as if this Section
6.1(d)(iv) were not in this Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions for any
taxable period shall be allocated to the Partners in accordance with
their respective Percentage Interests. If the Managing General Partner
determines in its good faith discretion that the Partnership's
Nonrecourse Deductions must be allocated in a different ratio to
satisfy the safe harbor requirements of the Treasury Regulations
promulgated under Section 704(b) of the Code, the Managing General
Partner is authorized, upon notice to the other Partners, to revise the
prescribed ratio to the numerically closest ratio that does satisfy
such requirements.
(vi) Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions for any taxable period shall be allocated 100% to the
Partner that bears the Economic Risk of Loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions
are attributable in accordance with Treasury Regulation Section
1.704-2(i). If more than one Partner bears the Economic Risk of Loss
with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse
Deductions attributable thereto shall be allocated between or among
such Partners in accordance with the ratios in which they share such
Economic Risk of Loss.
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(vii) Nonrecourse Liabilities. For purposes of Treasury
Regulation Section 1.752- 3(a)(3), the Partners agree that Nonrecourse
Liabilities of the Partnership in excess of the sum of (A) the amount
of Partnership Minimum Gain and (B) the total amount of Nonrecourse
Built-in Gain shall be allocated among the Partners in accordance with
their respective Percentage Interests.
(viii) Code Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Partnership asset pursuant
to Section 734(b) or 743(c) of the Code is required, pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into
account in determining Capital Accounts, the amount of such adjustment
to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to
such Section of the Treasury Regulations.
(ix) Curative Allocation.
(A) Notwithstanding any other provision of this
Section 6.1, other than the Required Allocations, the Required
Allocations shall be taken into account in making the Agreed
Allocations so that, to the extent possible, the net amount of
items of income, gain, loss and deduction allocated to each
Partner pursuant to the Required Allocations and the Agreed
Allocations, together, shall be equal to the net amount of
such items that would have been allocated to each such Partner
under the Agreed Allocations had the Required Allocations and
the related Curative Allocation not otherwise been provided in
this Section 6.1. Notwithstanding the preceding sentence,
Required Allocations relating to (1) Nonrecourse Deductions
shall not be taken into account except to the extent that
there has been a decrease in Partnership Minimum Gain and (2)
Partner Nonrecourse Deductions shall not be taken into account
except to the extent that there has been a decrease in Partner
Nonrecourse Debt Minimum Gain. Allocations pursuant to this
Section 6.1(d)(ix)(A) shall only be made with respect to
Required Allocations to the extent the Managing General
Partner reasonably determines that such allocations will
otherwise be inconsistent with the economic agreement among
the Partners. Further, allocations pursuant to this Section
6.1(d)(ix)(A) shall be deferred with respect to allocations
pursuant to clauses (1) and (2) hereof to the extent the
Managing General Partner reasonably determines that such
allocations are likely to be offset by subsequent Required
Allocations.
(B) The Managing General Partner shall have
reasonable discretion, with respect to each taxable period, to
(1) apply the provisions of Section 6.1(d)(ix)(A) in
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whatever order is most likely to minimize the economic
distortions that might otherwise result from the Required
Allocations, and (2) divide all allocations pursuant to
Section 6.1(d)(ix)(A) among the Partners in a manner that is
likely to minimize such economic distortions.
SECTION 6.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income
tax purposes, each item of income, gain, loss and deduction shall be allocated
among the Partners in the same manner as its correlative item of "book" income,
gain, loss or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities
attributable to a Contributed Property or Adjusted Property, items of income,
gain, loss, depreciation, amortization and cost recovery deductions shall be
allocated for federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners in the
manner provided under Section 704(c) of the Code that takes into
account the variation between the Agreed Value of such property and its
adjusted basis at the time of contribution; and (B) any item of
Residual Gain or Residual Loss attributable to a Contributed Property
shall be allocated among the Partners in the same manner as its
correlative item of "book" gain or loss is allocated pursuant to
Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall
(1) first, be allocated among the Partners in a manner consistent with
the principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to such property and
the allocations thereof pursuant to Section 5.5(d)(i) or 5.5(d)(ii),
and (2) second, in the event such property was originally a Contributed
Property, be allocated among the Partners in a manner consistent with
Section 6.2(b)(i)(A); and (B) any item of Residual Gain or Residual
Loss attributable to an Adjusted Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or
loss is allocated pursuant to Section 6.1.
(iii) The Managing General Partner shall apply the principles
of Treasury Regulation Section 1.704-3(d) to eliminate Book-Tax
Disparities.
(c) For the proper administration of the Partnership and for
the preservation of uniformity of the Units or other limited partner interests
of the MLP (or any class or classes thereof), the Managing General Partner shall
have sole discretion to (i) adopt such conventions as it deems appropriate in
determining the amount of depreciation, amortization and cost recovery
deductions; (ii) make special allocations for federal income tax purposes of
income (including, without limitation, gross income) or deductions; and (iii)
amend the provisions of this Agreement as
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appropriate (x) to reflect the proposal or promulgation of Treasury Regulations
under Section 704(b) or Section 704(c) of the Code or (y) otherwise to preserve
or achieve uniformity of the Units or other limited partner interests of the MLP
(or any class or classes thereof). The Managing General Partner may adopt such
conventions, make such allocations and make such amendments to this Agreement as
provided in this Section 6.2(c) only if such conventions, allocations or
amendments would not have a material adverse effect on the Partners, the holders
of any class or classes of Units or other limited partner interests of the MLP
issued and outstanding or the Partnership and if such allocations are consistent
with the principles of Section 704 of the Code.
(d) The Managing General Partner in its discretion may
determine to depreciate or amortize the portion of an adjustment under Section
743(b) of the Code attributable to unrealized appreciation in any Adjusted
Property (to the extent of the unamortized Book-Tax Disparity) using a
predetermined rate derived from the depreciation or amortization method and
useful life applied to the Partnership's common basis of such property, despite
any inconsistency of such approach with Treasury Regulation Section
1.167(c)-l(a)(6), Proposed Treasury Regulation 1.197-2(g)(3), or any successor
regulations thereto. If the Managing General Partner determines that such
reporting position cannot reasonably be taken, the Managing General Partner may
adopt depreciation and amortization conventions under which all purchasers
acquiring limited partner interests of the MLP in the same month would receive
depreciation and amortization deductions, based upon the same applicable rate as
if they had purchased a direct interest in the Partnership's property. If the
Managing General Partner chooses not to utilize such aggregate method, the
Managing General Partner may use any other reasonable depreciation and
amortization conventions to preserve the uniformity of the intrinsic tax
characteristics of any limited partner interests of the MLP that would not have
a material adverse effect on the Partners or the holders of any class or classes
of limited partner interests of the MLP.
(e) Any gain allocated to the Partners upon the sale or other
taxable disposition of any Partnership asset shall, to the extent possible,
after taking into account other required allocations of gain pursuant to this
Section 6.2, be characterized as Recapture Income in the same proportions and to
the same extent as such Partners (or their predecessors in interest) have been
allocated any deductions directly or indirectly giving rise to the treatment of
such gains as Recapture Income.
(f) All items of income, gain, loss, deduction and credit
recognized by the Partnership for federal income tax purposes and allocated to
the Partners in accordance with the provisions hereof shall be determined
without regard to any election under Section 754 of the Code which may be made
by the Partnership; provided, however, that such allocations, once made, shall
be adjusted as necessary or appropriate to take into account those adjustments
permitted or required by Sections 734 and 743 of the Code.
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(g) The Managing General Partner may adopt such methods of
allocation of income, gain, loss or deduction between a transferor and a
transferee of a Partnership Interest as it determines necessary, to the extent
permitted or required by Section 706 of the Code and the regulations or rulings
promulgated thereunder.
(h) Allocations that would otherwise be made to a Partner
under the provisions of this Article VI shall instead be made to the beneficial
owner of Partnership Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the Managing General Partner in its sole discretion.
SECTION 6.3 Distributions.
(a) Within 45 days following the end of each Quarter
commencing with the Quarter ending on September 30, 1999, an amount equal to
100% of Available Cash with respect to such Quarter shall, subject to Section
17-607 of the Delaware Act, be distributed in accordance with this Article VI by
the Partnership to the Partners in accordance with their respective Percentage
Interests. The immediately preceding sentence shall not require any distribution
of cash if and to the extent such distribution would be prohibited by applicable
law or by any loan agreement, security agreement, mortgage, debt instrument or
other agreement or obligation to which the Partnership is a party or by which it
is bound or its assets are subject. All distributions required to be made under
this Agreement shall be made subject to Section 17-607 of the Delaware Act.
(b) In the event of the dissolution and liquidation of the
Partnership, all receipts received during or after the Quarter in which the
Liquidation Date occurs, other than from borrowings described in (a)(ii) of the
definition of Available Cash, shall be applied and distributed solely in
accordance with, and subject to the terms and conditions of, Section 12.4.
(c) The Managing General Partner shall have the discretion to
treat taxes paid by the Partnership on behalf of, or amounts withheld with
respect to, all or less than all of the Partners, as a distribution of Available
Cash to such Partners.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
SECTION 7.1 Management.
(a) The Managing General Partner shall conduct, direct and
manage all activities of the Partnership. Except as otherwise expressly provided
in this Agreement, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the Managing General Partner, and
neither the Special General Partner nor any Limited Partner or Assignee shall
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have any management power over the business and affairs of the Partnership. In
addition to the powers now or hereafter granted a general partner of a limited
partnership under applicable law or which are granted to the Managing General
Partner under any other provision of this Agreement, the Managing General
Partner, subject to Section 7.3, shall have full power and authority to do all
things and on such terms as it, in its sole discretion, may deem necessary or
appropriate to conduct the business of the Partnership, to exercise all powers
set forth in Section 2.5 and to effectuate the purposes set forth in Section
2.4, including the following:
(i) the making of any expenditures, the lending or borrowing
of money, the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences of
indebtedness, including indebtedness that is convertible into a
Partnership Interest, and the incurring of any other obligations;
(ii) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other
agencies having jurisdiction over the business or assets of the
Partnership;
(iii) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any or all of the assets of
the Partnership or the merger or other combination of the Partnership
with or into another Person (the matters described in this clause (iii)
being subject, however, to any prior approval that may be required by
Section 7.3);
(iv) the use of the assets of the Partnership (including cash
on hand) for any purpose consistent with the terms of this Agreement,
including the financing of the conduct of the operations of the
Partnership Group, subject to Section 7.6, the lending of funds to
other Persons (including the MLP and any member of the Partnership
Group), the repayment of obligations of the MLP or any member of the
Partnership Group and the making of capital contributions to any member
of the Partnership Group;
(v) the negotiation, execution and performance of any
contracts, conveyances or other instruments (including instruments that
limit the liability of the Partnership under contractual arrangements
to all or particular assets of the Partnership, with the other party to
the contract to have no recourse against the General Partners or their
assets other than their interests in the Partnership, even if same
results in the terms of the transaction being less favorable to the
Partnership than would otherwise be the case);
(vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees (including
employees having titles such as "president," "vice president,"
"secretary" and "treasurer") and agents, outside
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attorneys, accountants, consultants and contractors and the
determination of their compensation and other terms of employment or
hiring;
(viii) the maintenance of such insurance for the benefit of
the Partnership Group and the Partners as it deems necessary or
appropriate;
(ix) the formation of, or acquisition of an interest in, and
the contribution of property and the making of loans to, any further
limited or general partnerships, joint ventures, corporations or other
relationships subject to the restrictions set forth in Section 2.4;
(x) the control of any matters affecting the rights and
obligations of the Partnership, including the bringing and defending of
actions at law or in equity and otherwise engaging in the conduct of
litigation and the incurring of legal expense and the settlement of
claims and litigation; and
(xi) the indemnification of any Person against liabilities
and contingencies to the extent permitted by law.
(xii) the undertaking of any action in connection with the
Partnership's participation in the Operating Subsidiary as a
non-managing member.
(b) Notwithstanding any other provision of this Agreement, the
MLP Agreement, the Delaware Act or any applicable law, rule or regulation, each
of the Partners and Assignees and each other Person who may acquire an interest
in the Partnership hereby (i) approves, ratifies and confirms the execution,
delivery and performance by the parties thereto of the Partnership Agreement,
the MLP Agreement, the Underwriting Agreement, the Note Purchase Agreement, the
Bank Credit Agreement, the Omnibus Agreement, the Contribution Agreement and the
other agreements and documents described in or filed as exhibits to the
Registration Statement that are related to the transactions contemplated by the
Registration Statement; (ii) agrees that the Managing General Partner (on its
own or through any officer of the Partnership) is authorized to execute, deliver
and perform the agreements referred to in clause (i) of this sentence and the
other agreements, acts, transactions and matters described in or contemplated by
the Registration Statement on behalf of the Partnership without any further act,
approval or vote of the Partners or the Assignees or the other Persons who may
acquire an interest in the Partnership; and (iii) agrees that the execution,
delivery or performance by the General Partners, the MLP, any Group Member or
any Affiliate of any of them, of this Agreement or any agreement authorized or
permitted under this Agreement (including the exercise by the Managing General
Partner or any Affiliate of the Managing General Partner of the rights accorded
pursuant to Article XV), shall not constitute a breach by the General Partners
of any duty that they may owe the Partnership or the Limited Partners or any
other Persons under this Agreement (or any other agreements) or of any duty
stated or implied by law or equity.
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SECTION 7.2 Certificate of Limited Partnership.
The Managing General Partner has caused the Certificate of Limited
Partnership to be filed with the Secretary of State of the State of Delaware as
required by the Delaware Act and shall use all reasonable efforts to cause to be
filed such other certificates or documents as may be determined by the Managing
General Partner in its sole discretion to be reasonable and necessary or
appropriate for the formation, continuation, qualification and operation of a
limited partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware or any other state in which the Partnership
may elect to do business or own property. To the extent that such action is
determined by the Managing General Partner in its sole discretion to be
reasonable and necessary or appropriate, the Managing General Partner shall file
amendments to and restatements of the Certificate of Limited Partnership and do
all things to maintain the Partnership as a limited partnership (or a
partnership or other entity in which the limited partners have limited
liability) under the laws of the State of Delaware or of any other state in
which the Partnership may elect to do business or own property. Subject to the
terms of Section 3.4(a), the Managing General Partner shall not be required,
before or after filing, to deliver or mail a copy of the Certificate of Limited
Partnership, any qualification document or any amendment thereto to any Limited
Partner or Assignee.
SECTION 7.3 Restrictions on General Partners' Authority.
(a) The General Partners may not, without written approval of
the specific act by the Limited Partners or by other written instrument executed
and delivered by the Limited Partners subsequent to the date of this Agreement,
take any action in contravention of this Agreement, including, except as
otherwise provided in this Agreement, (i) committing any act that would make it
impossible to carry on the ordinary business of the Partnership; (ii) possessing
Partnership property, or assigning any rights in specific Partnership property,
for other than a Partnership purpose; (iii) admitting a Person as a Partner;
(iv) amending this Agreement in any manner or (v) transferring either of their
respective General Partner Interests.
(b) Except as provided in Articles XII and XIV, no General
Partner may sell, exchange or otherwise dispose of all or substantially all of
the Partnership's assets in a single transaction or a series of related
transactions (including by way of merger, consolidation or other combination) or
approve on behalf of the Partnership the sale, exchange or other disposition of
all or substantially all of the assets of the Partnership, without the approval
of the Limited Partners; provided, however, that this provision shall not
preclude or limit the General Partners' ability to mortgage, pledge, hypothecate
or grant a security interest in all or substantially all of the assets of the
Partnership and shall not apply to any forced sale of any or all of the assets
of the Partnership pursuant to the foreclosure of, or other realization upon,
any such encumbrance. Without the approval of at least a Unit Majority, the
General Partners shall not, on behalf of the MLP, (i) consent
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to any amendment to this Agreement or, except as expressly permitted by Section
7.9(d) of the MLP Agreement, take any action permitted to be taken by a Partner,
in either case, that would have a material adverse effect on the MLP as a
Partner or (ii) except as permitted under Sections 4.6, 11.1, 11.2 or 11.4 of
the MLP Agreement, elect or cause the MLP to elect a successor general partner
of the Partnership.
SECTION 7.4 Reimbursement of the General Partners.
(a) Except as provided in this Section 7.4 and elsewhere in
this Agreement or in the MLP Agreement, the General Partners shall not be
compensated for their services as General Partners, general partners of the MLP
or as a general partner or managing member of any Group Member.
(b) Each of the General Partners shall be reimbursed on a
monthly basis, or such other reasonable basis as the Managing General Partner
may determine in its sole discretion, for (i) all direct and indirect expenses
it incurs or payments it makes on behalf of the Partnership (including salary,
bonus, incentive compensation and other amounts paid to any Person including
Affiliates of such General Partner to perform services for the Partnership or
for such General Partner in the discharge of its duties to the Partnership), and
(ii) all other necessary or appropriate expenses allocable to the Partnership or
otherwise reasonably incurred by such General Partner in connection with
operating the Partnership's business (including expenses allocated to such
General Partner by its Affiliates). The Managing General Partner shall determine
the expenses that are allocable to the Partnership in any reasonable manner
determined by the Managing General Partner in its sole discretion.
Reimbursements pursuant to this Section 7.4 shall be in addition to any
reimbursement to the General Partners as a result of indemnification pursuant to
Section 7.7.
(c) Subject to Section 5.7, the Managing General Partner, in
its sole discretion and without the approval of the Limited Partners (who shall
have no right to vote in respect thereof), may propose and adopt on behalf of
the Partnership employee benefit plans, employee programs and employee
practices, or cause the Partnership to issue Partnership Interests, in
connection with, pursuant to any employee benefit plan, employee program or
employee practice maintained or sponsored by either of the General Partners or
any of their Affiliates, in each case for the benefit of employees of either of
the General Partners, any Group Member or any Affiliate, or any of them, in
respect of services performed, directly or indirectly, for the benefit of the
Partnership Group. Expenses incurred by the General Partners in connection with
any such plans, programs and practices shall be reimbursed in accordance with
Section 7.4(b). Any and all obligations of the General Partners under any
employee benefit plans, employee programs or employee practices adopted by the
Managing General Partner as permitted by this Section 7.4(c) shall constitute
obligations of the General Partners hereunder and shall be assumed by any
successor General Partner approved pursuant to Section 11.1, 11.2 or 11.4 or the
transferee of or successor to all of the
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Managing General Partner's General Partner Interest or the Special General
Partner's General Partner Interest pursuant to Section 4.2.
SECTION 7.5 Outside Activities.
(a) After the Closing Date, the Managing General Partner, for
so long as it is a General Partner of the Partnership (i) agrees that its sole
business will be to act as a general partner of the Partnership, a general
partner of the MLP, and a general partner or managing member of any other
partnership or limited liability company of which the Partnership or the MLP is,
directly or indirectly, a partner or member, as the case may be, and to
undertake activities that are ancillary or related thereto (including being a
limited partner in the MLP), (ii) shall not engage in any business or activity
or incur any debts or liabilities except in connection with or incidental to (A)
its performance as general partner or managing member, as the case may be, of
the Partnership, the MLP or one or more Group Members or as described in or
contemplated by the Registration Statement or (B) the acquiring, owning or
disposing of debt or equity securities in any Group Member and (iii) except to
the extent permitted in the Omnibus Agreement, shall not, and shall cause its
Affiliates not to, engage in any Restricted Business.
(b) The Omnibus Agreement, to which the Partnership is a
party, sets forth certain restrictions on the ability of Alliance Resource
Holdings and its Affiliates to engage in Restricted Businesses.
(c) Except as specifically restricted by Section 7.5(a) and
the Omnibus Agreement, each Indemnitee (other than the Managing General Partner)
shall have the right to engage in businesses of every type and description and
other activities for profit and to engage in and possess an interest in other
business ventures of any and every type or description, whether in businesses
engaged in or anticipated to be engaged in by the MLP or any Group Member,
independently or with others, including business interests and activities in
direct competition with the business and activities of the MLP or any Group
Member, and none of the same shall constitute a breach of this Agreement or any
duty express or implied by law to the MLP or any Group Member or any Partner or
Assignee. Neither the MLP nor any Group Member, any Limited Partner, nor any
other Person shall have any rights by virtue of this Agreement, the MLP
Agreement or the partnership relationship established hereby or thereby in any
business ventures of any Indemnitee.
(d) Subject to the terms of Section 7.5(a), Section 7.5(b),
Section 7.5(c) and the Omnibus Agreement, but otherwise notwithstanding anything
to the contrary in this Agreement, (i) the engaging in competitive activities by
any Indemnitees (other than the Managing General Partner) in accordance with the
provisions of this Section 7.5 is hereby approved by the Partnership and all
Partners, (ii) it shall be deemed not to be a breach of the General Partners'
fiduciary duty or any other obligation of any type whatsoever of the General
Partners for the Indemnitees (other than the Managing General Partner) to engage
in such business interests and activities in preference to
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or to the exclusion of the Partnership and (iii) except as set forth in the
Omnibus Agreement, the General Partners and the Indemnities shall have no
obligation to present business opportunities to the Partnership.
(e) The General Partners and any of their Affiliates may
acquire Units or other MLP Securities in addition to those acquired on the
Closing Date and, except as otherwise provided in this Agreement, shall be
entitled to exercise all rights relating to such Units or MLP Securities.
(f) The term "Affiliates" when used in Section 7.5(a) and
Section 7.5(e) with respect to the General Partner shall not include any Group
Member or any Subsidiary of the MLP or any Group Member.
(g) Anything in this Agreement to the contrary
notwithstanding, to the extent that provisions of Sections 7.7, 7.8, 7.9, 7.10
or other Sections of this Agreement purport or are interpreted to have the
effect of restricting the fiduciary duties that might otherwise, as a result of
Delaware or other applicable law, be owed by the General Partners to the
Partnership and its Limited Partners, or to constitute a waiver or consent by
the Limited Partners to any such restriction, such provisions shall be
inapplicable and have no effect in determining whether the General Partners have
complied with their fiduciary duties in connection with determinations made by
them under this Section 7.5.
SECTION 7.6 Loans from the General Partners; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on
the General Partners.
(a) Each of the General Partners or any of their Affiliates
may lend to the MLP or any Group Member, and the MLP or any Group Member may
borrow from a General Partner or any of its Affiliates, funds needed or desired
by the MLP or the Group Member for such periods of time and in such amounts as
the Managing General Partner may determine; provided, however, that in any such
case the lending party may not charge the borrowing party interest at a rate
greater than the rate that would be charged the borrowing party or impose terms
less favorable to the borrowing party than would be charged or imposed on the
borrowing party by unrelated lenders on comparable loans made on an arm's-length
basis (without reference to the lending party's financial abilities or
guarantees). The borrowing party shall reimburse the lending party for any costs
(other than any additional interest costs) incurred by the lending party in
connection with the borrowing of such funds. For purposes of this Section 7.6(a)
and Section 7.6(b), the term "Group Member" shall include any Affiliate of a
Group Member that is controlled by the Group Member. No Group Member may lend
funds to the General Partner or any of its Affiliates (other than the MLP, a
Subsidiary of the MLP or a Subsidiary of another Group Member).
(b) The Partnership may lend or contribute to any Group
Member, and any Group Member may borrow from the Partnership, funds on terms and
conditions established in the sole
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discretion of the Managing General Partner; provided, however, that the
Partnership may not charge the Group Member interest at a rate less than the
rate that would be charged to the Group Member (without reference to the
Managing General Partner's financial abilities or guarantees) by unrelated
lenders on comparable loans. The foregoing authority shall be exercised by the
Managing General Partner in its sole discretion and shall not create any right
or benefit in favor of any Group Member or any other Person.
(c) The General Partners may themselves, or may enter into an
agreement with any of their Affiliates to, render services to a Group Member or
to the General Partners in the discharge of their duties as general partners of
the Partnership. Any services rendered to a Group Member by the General Partners
or any of their Affiliates shall be on terms that are fair and reasonable to the
Partnership; provided, however, that the requirements of this Section 7.6(c)
shall be deemed satisfied as to (i) any transaction approved by Special
Approval, (ii) any transaction, the terms of which are no less favorable to the
Partnership Group than those generally being provided to or available from
unrelated third parties or (iii) any transaction that, taking into account the
totality of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to the
Partnership Group), is equitable to the Partnership Group. The provisions of
Section 7.4 shall apply to the rendering of services described in this Section
7.6(c).
(d) The Partnership Group may transfer assets to joint
ventures, other partnerships, corporations, limited liability companies or other
business entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions as are consistent with this Agreement and
applicable law.
(e) Neither of the General Partners nor any of their
Affiliates shall sell, transfer or convey any property to, or purchase any
property from, the Partnership, directly or indirectly, except pursuant to
transactions that are fair and reasonable to the Partnership; provided, however,
that the requirements of this Section 7.6(e) shall be deemed to be satisfied as
to (i) the transactions effected pursuant to Sections 5.2 and 5.3, the
Contribution Agreement and any other transactions described in or contemplated
by the Registration Statement, (ii) any transaction approved by Special
Approval, (iii) any transaction, the terms of which are no less favorable to the
Partnership than those generally being provided to or available from unrelated
third parties, or (iv) any transaction that, taking into account the totality of
the relationships between the parties involved (including other transactions
that may be particularly favorable or advantageous to the Partnership), is
equitable to the Partnership.
(f) The General Partners and their Affiliates will have no
obligation to permit any Group Member to use any facilities or assets of the
General Partners and their Affiliates, except as may be provided in contracts
entered into from time to time specifically dealing with such use, nor
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shall there be any obligation on the part of the General Partners or their
Affiliates to enter into such contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement are hereby
approved by all Partners.
SECTION 7.7 Indemnification.
(a) To the fullest extent permitted by law but subject to the
limitations expressly provided in this Agreement, all Indemnitees shall be
indemnified and held harmless by the Partnership from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, penalties, interest, settlements or
other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, in which
any Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, by reason of its status as an Indemnitee; provided, that in each case
the Indemnitee acted in good faith and in a manner that such Indemnitee
reasonably believed to be in, or (in the case of a Person other than the General
Partners) not opposed to, the best interests of the Partnership and, with
respect to any criminal proceeding, had no reasonable cause to believe its
conduct was unlawful; provided, further, no indemnification pursuant to this
Section 7.7 shall be available to the General Partners with respect to their
obligations incurred pursuant to the Underwriting Agreement or the Contribution
Agreement (other than obligations incurred by the General Partners on behalf of
the MLP, the Partnership or the Operating Subsidiary). The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
the Indemnitee acted in a manner contrary to that specified above. Any
indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, it being agreed that the General Partners shall not
be personally liable for such indemnification and shall have no obligation to
contribute or loan any monies or property to the Partnership to enable it to
effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses
(including legal fees and expenses) incurred by an Indemnitee who is indemnified
pursuant to Section 7.7(a) in defending any claim, demand, action, suit or
proceeding shall, from time to time, be advanced by the Partnership prior to the
final disposition of such claim, demand, action, suit or proceeding upon receipt
by the Partnership of any undertaking by or on behalf of the Indemnitee to repay
such amount if it shall be determined that the Indemnitee is not entitled to be
indemnified as authorized in this Section 7.7.
(c) The indemnification provided by this Section 7.7 shall be
in addition to any other rights to which an Indemnitee may be entitled under any
agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, both as to actions in the Indemnitee's capacity as an Indemnitee and
as to actions in any other capacity (including any capacity under the
Underwriting
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Agreement, the Note Purchase Agreement and the Bank Credit Agreement), and shall
continue as to an Indemnitee who has ceased to serve in such capacity and shall
inure to the benefit of the heirs, successors, assigns and administrators of the
Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse
the General Partners or their Affiliates for the cost of) insurance, on behalf
of the General Partners, their Affiliates and such other Persons as the Managing
General Partner shall determine, against any liability that may be asserted
against or expense that may be incurred by such Person in connection with the
Partnership's activities or such Person's activities on behalf of the
Partnership, regardless of whether the Partnership would have the power to
indemnify such Person against such liability under the provisions of this
Agreement.
(e) For purposes of this Section 7.7, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute "fines" within the meaning of Section 7.7(a); and action taken
or omitted by it with respect to any employee benefit plan in the performance of
its duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is in, or not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners
to personal liability by reason of the indemnification provisions set forth in
this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole
or in part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of
the Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.7
or any provision hereof shall in any manner terminate, reduce or impair the
right of any past, present or future Indemnitee to be indemnified by the
Partnership, nor the obligations of the Partnership to indemnify any such
Indemnitee under and in accordance with the provisions of this Section 7.7 as in
effect immediately prior to such amendment, modification or repeal with respect
to claims arising from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when such claims
may arise or be asserted.
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SECTION 7.8 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, no Indemnitee shall be liable for monetary damages to the
Partnership, the Limited Partners, the Assignees or any other Persons who have
acquired interests in the Partnership, Units or other MLP Securities, for losses
sustained or liabilities incurred as a result of any act or omission if such
Indemnitee acted in good faith.
(b) Subject to its obligations and duties as Managing General
Partner set forth in Section 7.1(a), the Managing General Partner may exercise
any of the powers granted to it by this Agreement and perform any of the duties
imposed upon it hereunder either directly or by or through its agents, and the
Managing General Partner shall not be responsible for any misconduct or
negligence on the part of any such agent appointed by the Managing General
Partner in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has
duties (including fiduciary duties) and liabilities relating thereto to the
Partnership or to the Limited Partners, the General Partners and any other
Indemnitee acting in connection with the Partnership's business or affairs shall
not be liable to the Partnership or to any Partner for its good faith reliance
on the provisions of this Agreement. The provisions of this Agreement, to the
extent that they restrict or otherwise modify the duties and liabilities of an
Indemnitee otherwise existing at law or in equity, are agreed by the Partners to
replace such other duties and liabilities of such Indemnitee.
(d) Any amendment, modification or repeal of this Section 7.8
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the liability to the Partnership, the Limited
Partners, the General Partners, and the Partnership's and General Partners'
directors, officers and employees under this Section 7.8 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
SECTION 7.9 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this Agreement or
the MLP Agreement, whenever a potential conflict of interest exists or arises
between a General Partner or any of its Affiliates, on the one hand, and the
Partnership, the MLP, any Partner or any Assignee, on the other, any resolution
or course of action by a General Partner or its Affiliates in respect of such
conflict of interest shall be permitted and deemed approved by all Partners, and
shall not constitute a breach of this Agreement of the MLP Agreement, of any
agreement contemplated herein or therein, or of any duty stated or implied by
law or equity, if the resolution or course of action is, or by operation of this
Agreement is deemed to be, fair and reasonable to the Partnership. The Managing
General Partner shall be authorized but not required in connection with its
resolution of
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such conflict of interest to seek Special Approval of such resolution. Any
conflict of interest and any resolution of such conflict of interest shall be
conclusively deemed fair and reasonable to the Partnership if such conflict of
interest or resolution is (i) approved by Special Approval (as long as the
material facts known to the Managing General Partner or any of its Affiliates
regarding any proposed transaction were disclosed to the Conflicts Committee at
the time it gave its approval), (ii) on terms no less favorable to the
Partnership than those generally being provided to or available from unrelated
third parties or (iii) fair to the Partnership, taking into account the totality
of the relationships between the parties involved (including other transactions
that may be particularly favorable or advantageous to the Partnership). The
Managing General Partner may also adopt a resolution or course of action that
has not received Special Approval. The Managing General Partner (including the
Conflicts Committee in connection with Special Approval) shall be authorized in
connection with its determination of what is "fair and reasonable" to the
Partnership and in connection with its resolution of any conflict of interest to
consider (A) the relative interests of any party to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such interest;
(B) any customary or accepted industry practices and any customary or historical
dealings with a particular Person; (C) any applicable generally accepted
accounting practices or principles; and (D) such additional factors as the
Managing General Partner (including the Conflicts Committee) determines in its
sole discretion to be relevant, reasonable or appropriate under the
circumstances. Nothing contained in this Agreement, however, is intended to nor
shall it be construed to require the Managing General Partner (including the
Conflicts Committee) to consider the interests of any Person other than the
Partnership. In the absence of bad faith by the Managing General Partner, the
resolution, action or terms so made, taken or provided by the Managing General
Partner with respect to such matter shall not constitute a breach of this
Agreement or any other agreement contemplated herein or a breach of any standard
of care or duty imposed herein or therein or, to the extent permitted by law,
under the Delaware Act or any other law, rule or regulation.
(b) Whenever this Agreement or any other agreement
contemplated hereby provides that the Managing General Partner or any of its
Affiliates is permitted or required to make a decision (i) in its "sole
discretion" or "discretion," that it deems "necessary or appropriate" or
"necessary or advisable" or under a grant of similar authority or latitude,
except as otherwise provided herein, the Managing General Partner or such
Affiliate shall be entitled to consider only such interests and factors as it
desires and shall have no duty or obligation to give any consideration to any
interest of, or factors affecting, the Partnership, the MLP, any Limited Partner
or any Assignee, (ii) it may make such decision in its sole discretion
(regardless of whether there is a reference to "sole discretion" or
"discretion") unless another express standard is provided for, or (iii) in "good
faith" or under another express standard, the Managing General Partner or such
Affiliate shall act under such express standard and shall not be subject to any
other or different standards imposed by this Agreement, the MLP Agreement, the
Operating Subsidiary Agreement any other agreement contemplated hereby or under
the Delaware Act or any other law, rule or regulation. In addition, any actions
taken by the Managing General Partner or such Affiliate consistent with the
standards of "reasonable discretion" set forth in the definition of Available
Cash
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shall not constitute a breach of any duty of the Managing General Partner to the
Partnership or the Limited Partners. The Managing General Partner shall have no
duty, express or implied, to sell or otherwise dispose of any asset of the
Partnership Group other than in the ordinary course of business. No borrowing by
any Group Member or the approval thereof by the Managing General Partner shall
be deemed to constitute a breach of any duty of the General Partner to the
Partnership or the Limited Partners by reason of the fact that the purpose or
effect of such borrowing is directly or indirectly to (A) enable distributions
to the General Partners or their Affiliates to exceed 1.0101% of the total
amount distributed to all Partners or (B) hasten the expiration of the
Subordination Period or the conversion of any Subordinated Units into Common
Units.
(c) Whenever a particular transaction, arrangement or
resolution of a conflict of interest is required under this Agreement to be
"fair and reasonable" to any Person, the fair and reasonable nature of such
transaction, arrangement or resolution shall be considered in the context of all
similar or related transactions.
(d) The Limited Partner hereby authorizes the Managing General
Partner, on behalf of the Partnership as a partner or member of a Group Member,
to approve of actions by the general partner of such Group Member similar to
those actions permitted to be taken by the Managing General Partner pursuant to
this Section 7.9.
SECTION 7.10 Other Matters Concerning the General Partners.
(a) A General Partner may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
(b) A General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it, and any act taken or omitted to be
taken in reliance upon the opinion (including an Opinion of Counsel) of such
Persons as to matters that such General Partner reasonably believes to be within
such Person's professional or expert competence shall be conclusively presumed
to have been done or omitted in good faith and in accordance with such opinion.
(c) A General Partner shall have the right, in respect of any
of its powers or obligations hereunder, to act through any of its duly
authorized officers, a duly appointed attorney or attorneys-in-fact or the duly
authorized officers of the Partnership.
(d) Any standard of care and duty imposed by this Agreement or
under the Delaware Act or any applicable law, rule or regulation shall be
modified, waived or limited, to the extent permitted by law, as required to
permit the General Partners to act under this Agreement or
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any other agreement contemplated by this Agreement and to make any decision
pursuant to the authority prescribed in this Agreement, so long as such action
is reasonably believed by the Managing General Partner to be in, or not
inconsistent with, the best interests of the Partnership.
SECTION 7.11 Reliance by Third Parties.
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the Managing
General Partner and any officer of the Managing General Partner authorized by
the Managing General Partner to act on behalf of and in the name of the
Partnership has full power and authority to encumber, sell or otherwise use in
any manner any and all assets of the Partnership and to enter into any
authorized contracts on behalf of the Partnership, and such Person shall be
entitled to deal with the Managing General Partner or any such officer as if it
were the Partnership's sole party in interest, both legally and beneficially.
Each Limited Partner hereby waives any and all defenses or other remedies that
may be available against such Person to contest, negate or disaffirm any action
of the Managing General Partner or any such officer in connection with any such
dealing. In no event shall any Person dealing with the Managing General Partner
or any such officer or its representatives be obligated to ascertain that the
terms of the Agreement have been complied with or to inquire into the necessity
or expedience of any act or action of the Managing General Partner or any such
officer or its representatives. Each and every certificate, document or other
instrument executed on behalf of the Partnership by the Managing General Partner
or its representatives shall be conclusive evidence in favor of any and every
Person relying thereon or claiming thereunder that (a) at the time of the
execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect, (b) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Partnership and (c) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 8.1 Records and Accounting.
The Managing General Partner shall keep or cause to be kept at the
principal office of the Partnership appropriate books and records with respect
to the Partnership's business, including all books and records necessary to
provide to the Limited Partners any information required to be provided pursuant
to Section 3.4(a). Any books and records maintained by or on behalf of the
Partnership in the regular course of its business, including books of account
and records of Partnership proceedings, may be kept on, or be in the form of,
computer disks, hard drives, punch cards, magnetic tape, photographs,
micrographics or any other information storage device; provided, that the books
and records so maintained are convertible into clearly legible written form
within a
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reasonable period of time. The books of the Partnership shall be maintained, for
financial reporting purposes, on an accrual basis in accordance with U.S. GAAP.
SECTION 8.2 Fiscal Year.
The fiscal year of the Partnership shall be a fiscal year ending
December 31.
ARTICLE IX
TAX MATTERS
SECTION 9.1 Tax Returns and Information.
The Partnership shall timely file all returns of the Partnership that
are required for federal, state and local income tax purposes on the basis of
the accrual method and a taxable year ending on December 31. The tax information
reasonably required by the Partners for federal and state income tax reporting
purposes with respect to a taxable year shall be furnished to them within 90
days of the close of the calendar year in which the Partnership's taxable year
ends. The classification, realization and recognition of income, gain, losses
and deductions and other items shall be on the accrual method of accounting for
federal income tax purposes.
SECTION 9.2 Tax Elections.
(a) The Partnership shall make the election under Section 754
of the Code in accordance with applicable regulations thereunder, subject to the
reservation of the right to seek to revoke any such election upon the Managing
General Partner's determination that such revocation is in the best interests of
the Limited Partners.
(b) The Partnership shall elect to deduct expenses incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.
(c) Except as otherwise provided herein, the Managing General
Partner shall determine whether the Partnership should make any other elections
permitted by the Code.
SECTION 9.3 Tax Controversies.
Subject to the provisions hereof, the Managing General Partner is
designated as the Tax Matters Partner (as defined in the Code) and is authorized
and required to represent the Partnership (at the Partnership's expense) in
connection with all examinations of the Partnership's affairs by tax
authorities, including resulting administrative and judicial proceedings, and to
expend Partnership funds for professional services and costs associated
therewith. Each Partner agrees to cooperate with
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the Managing General Partner and to do or refrain from doing any or all things
reasonably required by the Managing General Partner to conduct such proceedings.
SECTION 9.4 Withholding.
Notwithstanding any other provision of this Agreement, the Managing
General Partner is authorized to take any action that it determines in its
discretion to be necessary or appropriate to cause the Partnership to comply
with any withholding requirements established under the Code or any other
federal, state or local law including, without limitation, pursuant to Sections
1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is
required or elects to withhold and pay over to any taxing authority any amount
resulting from the allocation or distribution of income to any Partner or
Assignee (including, without limitation, by reason of Section 1446 of the Code),
the amount withheld may at the discretion of the Managing General Partner be
treated by the Partnership as a distribution of cash pursuant to Section 6.3 in
the amount of such withholding from such Partner.
ARTICLE X
ADMISSION OF PARTNERS
SECTION 10.1 Admission of Managing General Partner.
Upon the consummation of the transfers and conveyances described in
Section 5.2, the Managing General Partner shall be admitted as a General Partner
, and the Managing General Partner and the Special General Partner shall be the
only general partners of the Partnership and the MLP shall be the sole limited
partner of the Partnership.
SECTION 10.2 Admission of Substituted Limited Partner.
By transfer of a Limited Partner Interest in accordance with Article
IV, the transferor shall be deemed to have given the transferee the right to
seek admission as a Substituted Limited Partner subject to the conditions of,
and in the manner permitted under, this Agreement. A transferor of a Limited
Partner Interest shall, however, only have the authority to convey to a
purchaser or other transferee (a) the right to negotiate such Limited Partner
Interest to a purchaser or other transferee and (b) the right to request
admission as a Substituted Limited Partner to such purchaser or other transferee
in respect of the transferred Limited Partner Interests. Each transferee of a
Limited Partner Interest shall be an Assignee and be deemed to have applied to
become a Substituted Limited Partner with respect to the Limited Partner
Interests so transferred to such Person. Such Assignee shall become a
Substituted Limited Partner (x) at such time as the Managing General Partner
consents thereto, which consent may be given or withheld in the Managing General
Partner's discretion, and (y) when any such admission is shown on the books and
records of the Partnership. If such consent is withheld, such transferee shall
remain an Assignee. An Assignee shall have an interest in the
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Partnership equivalent to that of a Limited Partner with respect to allocations
and distributions, including liquidating distributions, of the Partnership. With
respect to voting rights attributable to Limited Partner Interests that are held
by Assignees, the Managing General Partner shall be deemed to be the Limited
Partner with respect thereto and shall, in exercising the voting rights in
respect of such Limited Partner Interests on any matter, vote such Limited
Partner Interests at the written direction of the Assignee. If no such written
direction is received, such Partnership Interests will not be voted. An Assignee
shall have no other rights of a Limited Partner.
SECTION 10.3 Admission of Additional Limited Partners.
(a) A Person (other than a General Partner, the MLP or a
Substituted Limited Partner) who makes a Capital Contribution to the Partnership
in accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the Managing General Partner
(i) evidence of acceptance in form satisfactory to the Managing General Partner
of all of the terms and conditions of this Agreement, including the power of
attorney granted in Section 2.6, and (ii) such other documents or instruments as
may be required in the discretion of the Managing General Partner to effect such
Person's admission as an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section
10.3, no Person shall be admitted as an Additional Limited Partner without the
consent of the Managing General Partner, which consent may be given or withheld
in the Managing General Partner's discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded as such in the books and records of the
Partnership, following the consent of the Managing General Partner to such
admission.
SECTION 10.4 Admission of Successor or Transferee General Partners.
A successor General Partner approved pursuant to Section 11.1, 11.2 or
11.4 or the transferee of or successor to all of such General Partner's
Partnership Interest pursuant to Section 4.2 who is proposed to be admitted as a
successor General Partner shall, subject to compliance with the terms of Section
11.3, if applicable, be admitted to the Partnership as the Managing General
Partner or the Special General Partner, as the case may be, effective
immediately prior to the withdrawal or removal of the predecessor or
transferring Managing General Partner or the Special General Partner, as the
case may be, pursuant to Section 11.1, 11.2 or 11.4 or the transfer of such
General Partner Interest pursuant to Section 4.2, provided, however, that no
such successor shall be admitted to the Partnership until compliance with the
terms of Section 4.2 has occurred and such successor has executed and delivered
such other documents or instruments as may be required to effect such admission.
Any such successor shall, subject to the terms hereof, carry on the business of
the members of the Partnership Group without dissolution.
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SECTION 10.5 Amendment of Agreement and Certificate of Limited Partnership.
To effect the admission to the Partnership of any Partner, the Managing
General Partner shall take all steps necessary and appropriate under the
Delaware Act to amend the records of the Partnership to reflect such admission
and, if necessary, to prepare as soon as practicable an amendment to this
Agreement and, if required by law, the Managing General Partner shall prepare
and file an amendment to the Certificate of Limited Partnership, and the
Managing General Partner may for this purpose, among others, exercise the power
of attorney granted pursuant to Section 2.6.
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
SECTION 11.1 Withdrawal of the Managing General Partner.
(a) The Managing General Partner shall be deemed to have
withdrawn from the Partnership upon the occurrence of any one of the following
events (each such event herein referred to as an "Event of Withdrawal");
(i) The Managing General Partner voluntarily withdraws from
the Partnership by giving written notice to the other Partners;
(ii) The Managing General Partner transfers all of its rights
as Managing General Partner pursuant to Section 4.2;
(iii) The Managing General Partner is removed pursuant to
Section 11.2;
(iv) The Managing General Partner withdraws from, or is
removed as the Managing General Partner of, the MLP;
(v) The Managing General Partner (A) makes a general
assignment for the benefit of creditors; (B) files a voluntary
bankruptcy petition for relief under Chapter 7 of the United States
Bankruptcy Code; (C) files a petition or answer seeking for itself a
liquidation, dissolution or similar relief (but not a reorganization)
under any law; (D) files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against
the Managing General Partner in a proceeding of the type described in
clauses (A)-(C) of this Section 11.1(a)(v); or (E) seeks, consents to
or acquiesces in the appointment of a trustee (but not a debtor in
possession), receiver or liquidator of the Managing General Partner or
of all or any substantial part of its properties;
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(vi) A final and non-appealable order of relief under
Chapter 7 of the United States Bankruptcy Code is entered by a court
with appropriate jurisdiction pursuant to a voluntary or involuntary
petition by or against the Managing General Partner; or
(vii) (A) in the event the Managing General Partner is a
corporation, a certificate of dissolution or its equivalent is filed
for the Managing General Partner, or 90 days expire after the date of
notice to the Managing General Partner of revocation of its charter
without a reinstatement of its charter, under the laws of its state of
incorporation; (B) in the event the Managing General Partner is a
partnership or limited liability company, the dissolution and
commencement of winding up of the Managing General Partner; (C) in the
event the Managing General Partner is acting in such capacity by virtue
of being a trustee of a trust, the termination of the trust; (D) in the
event the Managing General Partner is a natural person, his death or
adjudication of incompetency; and (E) otherwise in the event of the
termination of the Managing General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv)(with respect
to withdrawal), (v), (vi) or (vii)(A), (B), (C) or (E) occurs, the withdrawing
Managing General Partner shall give notice to the Limited Partners within 30
days after such occurrence. The Partners hereby agree that only the Events of
Withdrawal described in this Section 11.1 shall result in the withdrawal of the
Managing General Partner from the Partnership.
(b) Withdrawal of the Managing General Partner from the
Partnership upon the occurrence of an Event of Withdrawal shall not constitute a
breach of this Agreement under the following circumstances: (i) at any time
during the period beginning on the Closing Date and ending at 12:00 midnight,
Eastern Standard Time, on September 30, 2009, the Managing General Partner
voluntarily withdraws by giving at least 90 days' advance notice of its
intention to withdraw to the Limited Partners; provided, that prior to the
effective date of such withdrawal, the withdrawal is approved by the Limited
Partners and the Managing General Partner delivers to the Partnership an Opinion
of Counsel ("Withdrawal Opinion of Counsel") that such withdrawal (following the
selection of the successor Managing General Partner) would not result in the
loss of the limited liability of any Limited Partner, of the limited partners of
the MLP or of the non-managing member of the Operating Subsidiary or cause the
Partnership, the MLP or the Operating Subsidiary to be treated as an association
taxable as a corporation or otherwise to be taxed as an entity for federal
income tax purposes (to the extent not previously treated as such); (ii) at any
time after 12:00 midnight, Eastern Standard Time, on September 30, 2009, the
Managing General Partner voluntarily withdraws by giving at least 90 days'
advance notice to the Limited Partners, such withdrawal to take effect on the
date specified in such notice; (iii) at any time that the Managing General
Partner ceases to be the Managing General Partner pursuant to Section
11.1(a)(ii), (iii) or (iv). If the Managing General Partner gives a notice of
withdrawal pursuant to Section 11.1(a)(i) hereof or Section 11.1(a)(i) of the
MLP Agreement, the Limited Partners may, prior to the effective date of such
withdrawal, elect a successor Managing General Partner; provided, however, that
such
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successor shall be the same person, if any, that is elected by the limited
partners of the MLP pursuant to Section 11.1 of the MLP Agreement as the
successor to the general partner of the MLP. If, prior to the effective date of
the Managing General Partner's withdrawal, a successor is not selected by the
Limited Partners as provided herein or the Partnership does not receive a
Withdrawal Opinion of Counsel, the Partnership shall be dissolved in accordance
with Section 12.1. Any successor Managing General Partner elected in accordance
with the terms of this Section 11.1 shall be subject to the provisions of
Section 10.3.
SECTION 11.2 Removal of the Managing General Partner.
The Managing General Partner shall be removed if the Managing General
Partner is removed as the managing general partner of the MLP pursuant to
Section 11.2 of the MLP Agreement. Such removal shall be effective concurrently
with the effectiveness of the removal of the Managing General Partner as the
managing general partner of the MLP pursuant to the terms of the MLP Agreement.
If a successor managing general partner for the MLP is elected in connection
with the removal of the Managing General Partner, such successor managing
general partner for the MLP shall, upon admission pursuant to Article X,
automatically become the successor Managing General Partner of the Partnership.
The admission of any such successor Managing General Partner to the Partnership
shall be subject to the provisions of Section 10.4.
SECTION 11.3 Interest of Departing Partner.
(a) The Partnership Interest of the Departing Partner
departing as a result of withdrawal or removal pursuant to Section 11.1 or 11.2
shall (unless it is otherwise required to be converted into Common Units
pursuant to Section 11.3(b) of the MLP Agreement) be purchased by the successor
to the Departing Partner for cash in the manner specified in the MLP Agreement.
Such purchase (or conversion into Common Units, as applicable) shall be a
condition to the admission to the Partnership of the successor as the Managing
General Partner. Any successor Managing General Partner shall indemnify the
Departing Partner as to all debts and liabilities of the Partnership arising on
or after the effective date of the withdrawal or removal of the Departing
Partner.
(b) The Departing Partner shall be entitled to receive all
reimbursements due such Departing Partner pursuant to Section 7.4, including any
employee-related liabilities (including severance liabilities), incurred in
connection with the termination of any employees employed by such Departing
Partner for the benefit of the Partnership.
SECTION 11.4 Withdrawal or Removal of Special General Partner.
(a) The Special General Partner may withdraw from the
Partnership in the capacity of Special General Partner (i) upon 90 days' advance
written notice to the Managing General Partner or (ii) by transferring its
General Partner Interest in the Partnership pursuant to
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Section 4.2 hereof. Such withdrawal shall take effect on the date specified in
such notice. Upon receiving such notice, the Managing General Partner shall
select a successor Special General Partner within such 90-day period. Any
withdrawal of the Special General Partner shall not become effective unless the
Partnership has received by the end of such 90-day period a Withdrawal Opinion
of Counsel that such withdrawal will not result in the loss of limited liability
of any Limited Partner, of a limited partner of the MLP or of a non-managing
member of the Operating Subsidiary or cause the Partnership or the MLP or the
Operating Subsidiary to be treated as a corporation or as an association taxable
as a corporation for federal income tax purposes. Following any withdrawal of
the Special General Partner, the business and operations of the Partnership
shall be continued by the Managing General Partner.
(b) In addition to the voluntary withdrawal described above,
the Special General Partner shall be deemed to have withdrawn (i) when and if,
the Special General Partner (A) makes a general assignment for the benefit of
creditors, (B) files a voluntary bankruptcy petition, (C) files a petition or
answer seeking for itself a reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any law, (D)
files an answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Special General Partner in a
proceeding of the type described in clauses (A)-(C) of this subsection, or (E)
seeks, consents to or acquiesces in the appointment of a trustee, receiver or
liquidator of the Special General Partner or of all or any substantial part of
its properties; or (ii) when the Special General Partner withdraws from or is
removed as the special general partner of the MLP; or (iii) when a final and
non-appealable judgment is entered by a court with appropriate jurisdiction
ruling that the Special General Partner is bankrupt or insolvent, or a final and
non-appealable order for relief is entered by a court with appropriate
jurisdiction against the Special General Partner, in each case under any federal
or state bankruptcy or insolvency laws as now or hereinafter in effect; or (iv)
(A) the event the Special General Partner is a corporation, when a certificate
of dissolution or its equivalent is filed for the Special General Partner, or 90
days expire after the date of notice to the Special General Partner of
revocation of its charter without a reinstatement of its charter, under the laws
of its state of incorporation, (B) in the event the Special General Partner is a
partnership or a limited liability company, the dissolution and commencement of
winding up of the Special General Partner, (C) in the event the Special General
Partner is acting in such capacity by virtue of being a trustee of a trust, the
termination of the trust, (D) in the event the Special General Partner is a
natural person, his death or adjudication of incompetency, and (E) otherwise in
the event of the termination of the Special General Partner.
(c) The Special General Partner shall be removed if the
Special General Partner is removed as the special general partner of the MLP
pursuant to Section 11.4 of the MLP Agreement. Such removal shall be effective
concurrently with the effectiveness of the removal of the Special General
Partner as the special general partner of the MLP pursuant to the terms of the
MLP Agreement. If a successor special general partner for the MLP is elected in
connection with the removal of the Special General Partner, such successor
special general partner for the MLP shall,
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upon admission pursuant to Article X, automatically become the successor Special
General Partner of the Partnership. The admission of any such successor Special
General Partner to the Partnership shall be subject to the provisions of Section
10.4.
(d) Notwithstanding the other provisions of this Section 11.4,
a successor Special General Partner need not be selected if the Partnership has
received an Opinion of Counsel that the failure to select a successor would not
cause the Partnership or the MLP or the Operating Subsidiary to be treated as a
corporation or as an association taxable as a corporation for federal income tax
purposes.
SECTION 11.5 Withdrawal of a Limited Partner.
Without the prior written consent of the Managing General Partner,
which may be granted or withheld in its sole discretion, and except as provided
in Section 10.1, no Limited Partner shall have the right to withdraw from the
Partnership.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
SECTION 12.1 Dissolution.
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor Managing General Partner or a successor Special General Partner in
accordance with the terms of this Agreement or by the withdrawal of the Special
General Partner pursuant to Section 11.4. Upon the removal or withdrawal of the
Managing General Partner, if a successor Managing General Partner is elected
pursuant to Section 11.1 or 11.2, the Partnership shall not be dissolved and
such successor Managing General Partner shall continue the business of the
Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its
affairs shall be wound up, upon:
(a) the expiration of its term as provided in Section 2.7;
(b) an Event of Withdrawal of the Managing General Partner as
provided in Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor
is elected and an Opinion of Counsel is received as provided in Section 11.1(b)
or 11.2 and such successor is admitted to the Partnership pursuant to Section
10.3;
(c) an election to dissolve the Partnership by the Managing
General Partner that is approved by all of the Limited Partners;
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(d) the entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Delaware Act;
(e) the sale of all or substantially all of the assets and
properties of the Partnership Group; or
(f) the dissolution of the MLP.
SECTION 12.2 Continuation of the Business of the Partnership After Dissolution.
Upon (a) dissolution of the Partnership following an Event of
Withdrawal caused by the withdrawal or removal of the Managing General Partner
as provided in Section 11.1(a)(i) or (iii) and the failure of the Partners to
select a successor to such Departing Partner pursuant to Section 11.1 or 11.2,
then within 90 days thereafter, or (b) dissolution of the Partnership upon an
event constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v)
or (vi) of the MLP Agreement, then, to the maximum extent permitted by law,
within 180 days thereafter, all of the Limited Partners may elect to
reconstitute the Partnership and continue its business on the same terms and
conditions set forth in this Agreement by forming a new limited partnership on
terms identical to those set forth in this Agreement and having as a managing
general partner a Person approved by a majority in interest of the Limited
Partners. In addition, upon dissolution of the Partnership pursuant to Section
12.1(f), if the MLP is reconstituted pursuant to Section 12.2 of the MLP
Agreement, the reconstituted MLP may, within 180 days after such event of
dissolution, acting alone, regardless of whether there are any other Limited
Partners, elect to reconstitute the Partnership in accordance with the
immediately preceding sentence. Upon any such election by the Limited Partners
or the MLP, as the case may be, all Partners shall be bound thereby and shall be
deemed to have approved same. Unless such an election is made within the
applicable time period as set forth above, the Partnership shall conduct only
activities necessary to wind up its affairs. If such an election is so made,
then:
(a) the reconstituted Partnership shall continue until the end
of the term set forth in Section 2.7 unless earlier dissolved in accordance with
this Article XII;
(b) if the successor Managing General Partner is not the
former Managing General Partner, then the interest of the former Managing
General Partner shall be purchased by the successor Managing General Partner or
converted into Common Units as provided in the MLP Agreement; and
(c) all necessary steps shall be taken to cancel this
Agreement and the Certificate of Limited Partnership and to enter into and, as
necessary, to file, a new partnership agreement and certificate of limited
partnership, and the successor Managing General Partner may for this purpose
exercise the power of attorney granted the Managing General Partner pursuant to
Section 2.6;
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provided, that the right to approve a successor Managing General Partner and to
reconstitute and to continue the business of the Partnership shall not exist and
may not be exercised unless the Partnership has received an Opinion of Counsel
that (x) the exercise of the right would not result in the loss of limited
liability of the Limited Partners or any limited partner of the MLP and (y)
neither the Partnership, the reconstituted limited partnership, the MLP nor the
Operating Subsidiary would be treated as an association taxable as a corporation
or otherwise be taxable as an entity for federal income tax purposes upon the
exercise of such right to continue.
SECTION 12.3 Liquidator.
Upon dissolution of the Partnership, unless the Partnership is
continued under an election to reconstitute and continue the Partnership
pursuant to Section 12.2, the Managing General Partner shall select one or more
Persons to act as Liquidator. The Liquidator (if other than the Managing General
Partner) shall be entitled to receive such compensation for its services as may
be approved by a majority of the Limited Partners. The Liquidator (if other than
the Managing General Partner) shall agree not to resign at any time without 15
days' prior notice and may be removed at any time, with or without cause, by
notice of removal approved by a majority in interest of the Limited Partners.
Upon dissolution, removal or resignation of the Liquidator, a successor and
substitute Liquidator (who shall have and succeed to all rights, powers and
duties of the original Liquidator) shall within 30 days thereafter be approved
by at least a majority in interest of the Limited Partners. The right to approve
a successor or substitute Liquidator in the manner provided herein shall be
deemed to refer also to any such successor or substitute Liquidator approved in
the manner herein provided. Except as expressly provided in this Article XII,
the Liquidator approved in the manner provided herein shall have and may
exercise, without further authorization or consent of any of the parties hereto,
all of the powers conferred upon the Managing General Partner under the terms of
this Agreement (but subject to all of the applicable limitations, contractual
and otherwise, upon the exercise of such powers, other than the limitation on
sale set forth in Section 7.3(b)) to the extent necessary or desirable in the
good faith judgment of the Liquidator to carry out the duties and functions of
the Liquidator hereunder for and during such period of time as shall be
reasonably required in the good faith judgment of the Liquidator to complete the
winding up and liquidation of the Partnership as provided for herein.
SECTION 12.4 Liquidation.
The Liquidator shall proceed to dispose of the assets of the
Partnership, discharge its liabilities, and otherwise wind up its affairs in
such manner and over such period as the Liquidator determines to be in the best
interest of the Partners, subject to Section 17-804 of the Delaware Act and the
following:
(a) Disposition of Assets. The assets may be disposed of by
public or private sale or by distribution in kind to one or more Partners on
such terms as the Liquidator and such
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Partner or Partners may agree. If any property is distributed in kind, the
Partner receiving the property shall be deemed for purposes of Section 12.4(c)
to have received cash equal to its fair market value; and contemporaneously
therewith, appropriate cash distributions must be made to the other Partners.
The Liquidator may, in its absolute discretion, defer liquidation or
distribution of the Partnership's assets for a reasonable time if it determines
that an immediate sale or distribution of all or some of the Partnership's
assets would be impractical or would cause undue loss to the Partners. The
Liquidator may, in its absolute discretion, distribute the Partnership's assets,
in whole or in part, in kind if it determines that a sale would be impractical
or would cause undue loss to the Partners.
(b) Discharge of Liabilities. Liabilities of the Partnership
include amounts owed to Partners otherwise than in respect of their distribution
rights under Article VI. With respect to any liability that is contingent,
conditional or unmatured or is otherwise not yet due and payable, the Liquidator
shall either settle such claim for such amount as it thinks appropriate or
establish a reserve of cash or other assets to provide for its payment. When
paid, any unused portion of the reserve shall be distributed as additional
liquidation proceeds.
(c) Liquidation Distributions. All property and all cash in
excess of that required to discharge liabilities as provided in Section 12.4(b)
shall be distributed to the Partners in accordance with, and to the extent of,
the positive balances in their respective Capital Accounts, as determined after
taking into account all Capital Account adjustments (other than those made by
reason of distributions pursuant to this Section 12.4(c)) for the taxable year
of the Partnership during which the liquidation of the Partnership occurs (with
such date of occurrence being determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such
taxable year (or, if later, within 90 days after said date of such occurrence).
SECTION 12.5 Cancellation of Certificate of Limited Partnership.
Upon the completion of the distribution of Partnership cash and
property as provided in Section 12.4 in connection with the liquidation of the
Partnership, the Partnership shall be terminated and the Certificate of Limited
Partnership, and all qualifications of the Partnership as a foreign limited
partnership in jurisdictions other than the State of Delaware, shall be canceled
and such other actions as may be necessary to terminate the Partnership shall be
taken.
SECTION 12.6 Return of Contributions.
No General Partner shall be personally liable for, and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate, the return of the Capital Contributions of the Limited
Partners, or any portion thereof, it being expressly understood that any such
return shall be made solely from Partnership assets.
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SECTION 12.7 Waiver of Partition.
To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.
SECTION 12.8 Capital Account Restoration.
No Limited Partner shall have any obligation to restore any negative
balance in its Capital Account upon liquidation of the Partnership. Each General
Partner shall be obligated to restore any negative balance in its Capital
Account upon liquidation of its interest in the Partnership by the end of the
taxable year of the Partnership during which such liquidation occurs, or, if
later, within 90 days after the date of such liquidation.
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT
SECTION 13.1 Amendment to be Adopted Solely by the Managing General Partner.
Each Partner agrees that the Managing General Partner, without the
approval of any Partner or Assignee, may amend any provision of this Agreement
and execute, swear to, acknowledge, deliver, file and record whatever documents
may be required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of
the principal place of business of the Partnership, the registered agent of the
Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners
in accordance with this Agreement;
(c) a change that, in the sole discretion of the Managing
General Partner, is necessary or advisable to qualify or continue the
qualification of the Partnership as a limited partnership or a partnership in
which the Limited Partners have limited liability under the laws of any state or
to ensure that no Group Member will be treated as an association taxable as a
corporation or otherwise taxed as an entity for federal income tax purposes;
(d) a change that, in the discretion of the Managing General
Partner, (i) does not adversely affect the Limited Partners in any material
respect, (ii) is necessary or advisable to (A) satisfy any requirements,
conditions or guidelines contained in any opinion, directive, order, ruling or
regulation of any federal or state agency or judicial authority or contained in
any federal or state statute (including the Delaware Act) or (B) facilitate the
trading of limited partner interests of the MLP (including the division of any
class or classes of outstanding limited partner interests of
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the MLP into different classes to facilitate uniformity of tax consequences
within such classes of limited partner interests of the MLP) or comply with any
rule, regulation, guideline or requirement of any National Securities Exchange
on which such limited partner interests are or will be listed for trading,
compliance with any of which the Managing General Partner determines in its
discretion to be in the best interests of the MLP and the limited partners of
the MLP, (iii) is required to effect the intent expressed in the Registration
Statement or the intent of the provisions of this Agreement or is otherwise
contemplated by this Agreement or (iv) is required to conform the provisions of
this Agreement with the provisions of the MLP Agreement as the provisions of the
MLP Agreement may be amended, supplemented or restated from time to time;
(e) a change in the fiscal year or taxable year of the
Partnership and any changes that, in the discretion of the Managing General
Partner, are necessary or advisable as a result of a change in the fiscal year
or taxable year of the Partnership including, if the Managing General Partner
shall so determine, a change in the definition of "Quarter" and the dates on
which distributions are to be made by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel,
to prevent the Partnership, or either of the General Partners or their
directors, officers, trustees or agents from in any manner being subjected to
the provisions of the Investment Company Act of 1940, as amended, the Investment
Advisers Act of 1940, as amended, or "plan asset" regulations adopted under the
Employee Retirement Income Security Act of 1974, as amended, regardless of
whether such are substantially similar to plan asset regulations currently
applied or proposed by the United States Department of Labor;
(g) any amendment expressly permitted in this Agreement to be
made by the Managing General Partner acting alone;
(h) an amendment effected, necessitated or contemplated by a
Merger Agreement approved in accordance with Section 14.3;
(i) an amendment that, in the discretion of the Managing
General Partner, is necessary or advisable to reflect, account for and deal with
appropriately the formation by the Partnership of, or investment by the
Partnership in, any corporation, partnership, joint venture, limited liability
company or other entity, in connection with the conduct by the Partnership of
activities permitted by the terms of Section 2.4;
(j) a merger or conveyance pursuant to Section 14.3(d); or
(k) any other amendments substantially similar to the
foregoing.
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SECTION 13.2 Amendment Procedures.
Except with respect to amendments of the type described in Section
13.1, all amendments to this Agreement shall be made in accordance with the
following requirements: Amendments to this Agreement may be proposed only by or
with the consent of the Managing General Partner which consent may be given or
withheld in its sole discretion. A proposed amendment shall be effective upon
its approval by the Limited Partner.
ARTICLE XIV
MERGER
SECTION 14.1 Authority.
The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("Merger Agreement") in accordance
with this Article XIV.
SECTION 14.2 Procedure for Merger or Consolidation.
Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior approval of the Managing General Partner. If the Managing
General Partner shall determine, in the exercise of its discretion, to consent
to the merger or consolidation, the Managing General Partner shall approve the
Merger Agreement, which shall set forth:
(a) The names and jurisdictions of formation or organization
of each of the business entities proposing to merge or consolidate;
(b) The name and jurisdiction of formation or organization of
the business entity that is to survive the proposed merger or consolidation (the
"Surviving Business Entity");
(c) The terms and conditions of the proposed merger or
consolidation;
(d) The manner and basis of exchanging or converting the
equity securities of each constituent business entity for, or into, cash,
property or general or limited partner interests, rights, securities or
obligations of the Surviving Business Entity; and (i) if any general or limited
partner interests, securities or rights of any constituent business entity are
not to be exchanged or converted solely for, or into, cash, property or general
or limited partner interests, rights, securities or obligations of the Surviving
Business Entity, the cash, property or general or limited partner
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interests, rights, securities or obligations of any limited partnership,
corporation, trust or other entity (other than the Surviving Business Entity)
which the holders of such general or limited partner interests, securities or
rights are to receive in exchange for, or upon conversion of their general or
limited partner interests, securities or rights, and (ii) in the case of
securities represented by certificates, upon the surrender of such certificates,
which cash, property or general or limited partner interests, rights, securities
or obligations of the Surviving Business Entity or any general or limited
partnership, corporation, trust or other entity (other than the Surviving
Business Entity), or evidences thereof, are to be delivered;
(e) A statement of any changes in the constituent documents or
the adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or agreement
of limited partnership or other similar charter or governing document) of the
Surviving Business Entity to be effected by such merger or consolidation;
(f) The effective time of the merger, which may be the date of
the filing of the certificate of merger pursuant to Section 14.4 or a later date
specified in or determinable in accordance with the Merger Agreement (provided,
that if the effective time of the merger is to be later than the date of the
filing of the certificate of merger, the effective time shall be fixed no later
than the time of the filing of the certificate of merger and stated therein);
and
(g) Such other provisions with respect to the proposed merger
or consolidation as are deemed necessary or appropriate by the Managing General
Partner.
SECTION 14.3 Approval by Limited Partners of Merger or Consolidation.
(a) Except as provided in Section 14.3(d), the Managing
General Partner, upon its approval of the Merger Agreement, shall direct that
the Merger Agreement be submitted to a vote of the Limited Partners, whether at
a special meeting or by written consent, in either case in accordance with the
requirements of Article XIII. A copy or a summary of the Merger Agreement shall
be included in or enclosed with the notice of a special meeting or the written
consent.
(b) Except as provided in Section 14.3(d), the Merger
Agreement shall be approved upon receiving the affirmative vote or consent of
the Limited Partners.
(c) Except as provided in Section 14.3(d), after such approval
by vote or consent of the Limited Partners, and at any time prior to the filing
of the certificate of merger pursuant to Section 14.4, the merger or
consolidation may be abandoned pursuant to provisions therefor, if any, set
forth in the Merger Agreement.
(d) Notwithstanding anything else contained in this Article
XIV or in this Agreement, the Managing General Partner is permitted, in its
discretion, without Limited Partner
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approval, to merge the Partnership or any Group Member into, or convey all of
the Partnership's assets to, another limited liability entity which shall be
newly formed and shall have no assets, liabilities or operations at the time of
such Merger other than those it receives from the Partnership or other Group
Member if (i) the Managing General Partner has received an Opinion of Counsel
that the merger or conveyance, as the case may be, would not result in the loss
of the limited liability of any Limited Partner, any limited partner in the MLP
or any non-managing member of the Operating Subsidiary or cause the Partnership,
the MLP or the Operating Subsidiary to be treated as an association taxable as a
corporation or otherwise to be taxed as an entity for federal income tax
purposes (to the extent not previously treated as such), (ii) the sole purpose
of such merger or conveyance is to effect a mere change in the legal form of the
Partnership into another limited liability entity and (iii) the governing
instruments of the new entity provide the Limited Partners and the General
Partner with the same rights and obligations as are herein contained.
SECTION 14.4 Certificate of Merger.
Upon the required approval by the Managing General Partner and the
Limited Partners of a Merger Agreement, a certificate of merger shall be
executed and filed with the Secretary of State of the State of Delaware in
conformity with the requirements of the Delaware Act.
SECTION 14.5 Effect of Merger.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the
business entities that has merged or consolidated, and all property,
real, personal and mixed, and all debts due to any of those business
entities and all other things and causes of action belonging to each of
those business entities, shall be vested in the Surviving Business
Entity and after the merger or consolidation shall be the property of
the Surviving Business Entity to the extent they were of each
constituent business entity;
(ii) the title to any real property vested by deed or
otherwise in any of those constituent business entities shall not
revert and is not in any way impaired because of the merger or
consolidation;
(iii) all rights of creditors and all liens on or security
interests in property of any of those constituent business entities
shall be preserved unimpaired; and
(iv) all debts, liabilities and duties of those constituent
business entities shall attach to the Surviving Business Entity and may
be enforced against it to the same extent as if the debts, liabilities
and duties had been incurred or contracted by it.
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(b) A merger or consolidation effected pursuant to this
Article shall not be deemed to result in a transfer or assignment of assets or
liabilities from one entity to another.
ARTICLE XV
GENERAL PROVISIONS
SECTION 15.1 Addresses and Notices.
Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner at the address described below. Any notice to the
Partnership shall be deemed given if received by the Managing General Partner at
the principal office of the Partnership designated pursuant to Section 2.3. The
Managing General Partner may rely and shall be protected in relying on any
notice or other document from a Partner, Assignee or other Person if believed by
it to be genuine.
SECTION 15.2 Further Action.
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
SECTION 15.3 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
SECTION 15.4 Integration.
This Agreement constitutes the entire agreement among the parties
hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
SECTION 15.5 Creditors.
None of the provisions of this Agreement shall be for the benefit of,
or shall be enforceable by, any creditor of the Partnership.
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SECTION 15.6 Waiver.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach of any other covenant, duty, agreement or condition.
SECTION 15.7 Counterparts.
This Agreement may be executed in counterparts, all of which together
shall constitute an agreement binding on all the parties hereto, notwithstanding
that all such parties are not signatories to the original or the same
counterpart. Each party shall become bound by this Agreement immediately upon
affixing its signature hereto, independently of the signature of any other
party.
SECTION 15.8 Applicable Law.
This Agreement shall be construed in accordance with and governed by
the laws of the State of Delaware, without regard to the principles of conflicts
of law.
SECTION 15.9 Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
SECTION 15.10 Consent of Partners.
Each Partner hereby expressly consents and agrees that, whenever in
this Agreement it is specified that an action may be taken upon the affirmative
vote or consent of less than all of the Partners, such action may be so taken
upon the concurrence of less than all of the Partners and each Partner shall be
bound by the results of such action.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
MANAGING GENERAL PARTNER:
ALLIANCE RESOURCE MANAGEMENT GP, LLC.
By: /s/ THOMAS L. PEARSON
-------------------------------------
Name: Thomas L. Pearson
Title: Senior Vice President--Law and
Administration, General Counsel
and Secretary
SPECIAL GENERAL PARTNER:
ALLIANCE RESOURCE GP, LLC.
By: /s/ THOMAS L. PEARSON
-------------------------------------
Name: Thomas L. Pearson
Title: Senior Vice President--Law and
Administration, General Counsel
and Secretary
ORGANIZATIONAL LIMITED PARTNER
By: /s/ THOMAS L. PEARSON
-------------------------------------
Thomas L. Pearson
LIMITED PARTNER:
ALLIANCE RESOURCE PARTNERS, L.P.
By: Alliance Resource Management GP, LLC
its Managing General Partner
By: /s/ THOMAS L. PEARSON
---------------------------------
Name: Thomas L. Pearson
Title: Senior Vice President--Law
and Administration, General
Counsel and Secretary
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EXHIBIT 10.1
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of August 16, 1999 among ALLIANCE RESOURCE
GP, LLC, a Delaware limited liability company (the "COMPANY"), the banks,
financial institutions and other institutional lenders listed on the signature
pages hereof as the Initial Lenders (the "INITIAL LENDERS"), the Swing Line Bank
(as hereinafter defined), THE CHASE MANHATTAN BANK ("CHASE"), as paying agent
(together with any successor paying agent appointed pursuant to Article VII, the
"PAYING AGENT"), Deutsche Bank AG, New York Branch, as documentation agent (the
"DOCUMENTATION AGENT"), and CITICORP USA, INC. ("CITICORP") and CHASE, as
co-administrative agents (together with any successor administrative agent
appointed pursuant to Article VII, the "CO-ADMINISTRATIVE Agents" and, together
with the Paying Agent, the "AGENTS") for the Lender Parties (as hereinafter
defined), with Chase Securities, Inc. and Salomon Smith Barney Inc., as joint
advisors, joint lead arrangers and joint book managers.
PRELIMINARY STATEMENTS:
(1) Alliance Resource Partners, L.P., a Delaware limited partnership
(the "MLP"), intends to complete an initial public offering (the "INITIAL PUBLIC
OFFERING") of common units (the "MLP UNITS"), representing at least a 40%
ownership interest in the MLP on a fully diluted basis and yielding net proceeds
of at least $110,000,000, and the remainder of which will be owned by the Equity
Investor (as hereinafter defined) or one or more of its affiliates.
(2) The Company intends to issue at least $180,000,000 of senior notes
as most recently amended (as defined in Section 1.02) (the "SENIOR NOTES") in a
private placement pursuant to the Note Purchase Agreement (as hereinafter
defined). Immediately upon the closings under the Note Purchase Agreement and
this Agreement, Alliance Resource Operating Partners, L.P., a Delaware limited
partnership ("AROP"), will assume the obligations of the Company under the Loan
Documents and under the Note Purchase Agreement and the Senior Notes. The
Initial Public Offering, the issuance and sale of the Senior Notes, the making
of the Advances (as hereinafter defined) under this Agreement and all related
transactions are hereinafter collectively referred to as the "TRANSACTION". As
used herein, the term "BORROWER" shall mean (i) prior to the time the Assumption
Agreement (as hereinafter defined) shall become effective, the Company, and (ii)
thereafter, AROP.
(3) The Borrower has requested the Lender Parties lend to the Borrower
up to $100,000,000 to purchase Qualifying Securities (as hereinafter defined)
that will be liquidated from time to time to finance certain capital
expenditures of AROP and its Subsidiaries (as hereinafter defined), to pay a
cash distribution to Alliance Resource Holdings, Inc. or one of its Affiliates
(as hereinafter defined) on the Effective Date (as hereinafter defined) in
connection with the Transaction, to pay cash distributions to the holders of the
MLP Units, to provide
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2
working capital for the Borrower and its Subsidiaries and for other general
business purposes of AROP and its Subsidiaries (including, without limitation,
acquisitions and capital expenditures). The Lender Parties have indicated their
willingness to agree to lend such amount on the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms . As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ACCEPTABLE BANK" means (a) any bank or trust company (i) which is
organized under the laws of the United States of America or any State
thereof, (ii) which has capital, surplus and undivided profits aggregating
at least $500,000,000, and (iii) (A) whose long-term unsecured debt
obligations (or the long-term unsecured debt obligations of the holding
company owning all of the capital stock of such bank or trust company)
shall have been given a rating of "AA-" or better by S&P, "Aa3" or better
by Moody's or an equivalent rating by any other credit rating agency of
recognized national standing or (B) the commercial paper or other
short-term unsecured debt obligations of which (or the short-term unsecured
debt obligations of the holding company owning all of the capital stock of
such bank or trust company) shall have been given a rating of "Al " or
better by S&P or "Prime 1" or better by Moody's or an equivalent rating by
any other credit rating agency of recognized national standing or (b) any
Lender Party.
"ACCEPTABLE BROKER-DEALER" means any Person other than a natural
person (a) which is registered as a broker or dealer pursuant to the
Exchange Act and (b) whose long-term unsecured debt obligations shall have
been given a rating of "AA-" or better by S&P, "Aa3" or better by Moody's
or an equivalent rating by any other credit rating agency of recognized
national standing.
"ADVANCE" means a Term Advance, a Working Capital Advance, a Revolving
Credit Advance or a Swing Line Advance.
"AFFILIATE" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or
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3
officer of such Person. For purposes of this definition, the term "control"
(including the terms "controlling", "controlled by" and "under common
control with") of a Person means the possession, direct or indirect, of the
power to vote 10% or more of the Voting Stock of such Person or to direct
or cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an
"Affiliate" is a reference to an Affiliate of the Borrower; provided,
however, the Borrower shall not be an Affiliate of any Restricted
Subsidiary and no Restricted Subsidiary shall be an Affiliate of the
Borrower or any Restricted Subsidiary.
"AGENTS" has the meaning specified in the recital of parties to this
Agreement.
"ALLIANCE RESOURCE GROUP" means the Wholly Owned Subsidiaries of
Alliance Resource Holdings, Inc., a Delaware corporation.
"APPLICABLE LENDING OFFICE" means, with respect to each Lender Party,
such Lender Party's Domestic Lending Office in the case of a Base Rate
Advance and such Lender Party's Eurodollar Lending Office in the case of a
Eurodollar Rate Advance.
"APPLICABLE MARGIN" means (a) in the case of Secured Advances, (i)
during the period from the Effective Date to the one-year anniversary of
the Effective Date, in the case of Eurodollar Rate Advances, 0.75% per
annum and, in the case of Base Rate Advances, 0% per annum, (ii) during the
period from the one-year anniversary of the Effective Date to the two-year
anniversary of the Effective Date, in the case of Eurodollar Rate Advances,
1.25% per annum and, in the case of Base Rate Advances, 0.25% per annum,
and (iii) thereafter, a percentage per annum determined by reference to the
Consolidated Net Debt to Consolidated Cash Flow Ratio as set forth below
and (b) in the case of all other Advances, (i) during the period from the
Effective Date to the six-month anniversary of the Effective Date, in the
case of Eurodollar Rate Advances, 1.5% per annum, and in the case of Base
Rate Advances, 0.5% per annum, and (ii) thereafter, a percentage per annum
determined by reference to the Consolidated Net Debt to Consolidated Cash
Flow Ratio as set forth below:
Alliance Credit Agreement
<PAGE> 4
4
<TABLE>
<CAPTION>
====================================================================================
Consolidated Net Debt to Base Rate Advances Eurodollar Rate Advances
Consolidated Cash Flow Ratio
====================================================================================
<S> <C> <C>
Level I
less than 1.75:1.0 0.00% 1.00%
- ------------------------------------------------------------------------------------
Level II
1.75:1.0 or greater,
but less than 2.50:1.0 0.25% 1.25%
- ------------------------------------------------------------------------------------
Level III
2.50:1.0 or greater,
but less than 3.50:1.0 0.50% 1.50%
- ------------------------------------------------------------------------------------
Level IV
3.50:1.0 or greater 0.75% 1.75%
====================================================================================
</TABLE>
In the case of Advances for which the Applicable Margin is determined based
on the preceding table, the Applicable Margin for each Advance shall be
determined by reference to the Consolidated Net Debt to Consolidated Cash
Flow Ratio in effect from time to time which ratio shall be determined by
reference to the financial statements most recently delivered in accordance
with Section 5.03(b) or (c), as the case may be; provided, however, that
the Applicable Margin shall be at Level IV for so long as the Borrower has
not submitted to the Paying Agent the financial statements as and when
required under Section 5.03(b) or (c), as the case may be.
"APPLICABLE PERCENTAGE" means (a) during the period from the date
hereof to the six-month anniversary hereof, 0.50% per annum and (b)
thereafter, a percentage per annum determined by reference to the
Consolidated Net Debt to Consolidated Cash Flow Ratio as set forth below:
<TABLE>
<CAPTION>
================================================================================
Consolidated Net Debt to Applicable Percentage
Consolidated Cash Flow Ratio
================================================================================
<S> <C>
Level I
less than 1.75:1.0 0.375%
- --------------------------------------------------------------------------------
Level II
1.75:1.0 or greater,
but less than 2.50:1.0 0.375%
- --------------------------------------------------------------------------------
Level III
2.50:1.0 or greater,
but less than 3.50:1.0 0.500%
- --------------------------------------------------------------------------------
Level IV
3.50:1.0 or greater 0.500%
================================================================================
</TABLE>
Alliance Credit Agreement
<PAGE> 5
5
In the case of the Applicable Percentage specified in clause (b), the
Applicable Percentage shall be determined by reference to the Consolidated
Net Debt to Consolidated Cash Flow Ratio, in effect from time to time,
which ratio shall be determined by reference to the financial statements
most recently delivered in accordance with Section 5.03(b) or (c), as the
case may be; provided, however, that the Applicable Margin shall be at
Level IV for so long as the Borrower has not submitted to the Paying Agent
the financial statements as and when required under Section 5.03(b) or (c),
as the case may be.
"APPROPRIATE LENDER" means, at any time, with respect to (a) any of
the Term or Revolving Credit or Working Capital Facilities, a Lender that
has a Commitment with respect to such Facility at such time, or (b) the
Swing Line Facility, (i) the Swing Line Bank and (ii) if the Revolving
Credit Lenders have made Swing Line Advances pursuant to Section 2.02(b)
that are outstanding at such time, each such Revolving Credit Lender.
"AROP" has the meaning specified in Preliminary Statement (2).
"ASSET ACQUISITION" means (a) an Investment by the Borrower or any
Restricted Subsidiary in any other Person pursuant to which such Person
shall become a Restricted Subsidiary or shall be merged with or into the
Borrower or any Restricted Subsidiary, (b) the acquisition by the Borrower
or any Restricted Subsidiary of the assets of any Person (other than a
Restricted Subsidiary) which constitute all or substantially all of the
assets of such Person or (c) the acquisition by the Borrower or any
Restricted Subsidiary of any division or line of business of any Person
(other than a Restricted Subsidiary).
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered
into by a Lender Party and an Eligible Assignee, and accepted by the Paying
Agent, in accordance with Section 8.07 and in substantially the form of
Exhibit C hereto.
"ASSUMPTION AGREEMENT" has the meaning specified in Section
3.01(a)(x).
"BASE RATE" means a fluctuating interest rate per annum in effect from
time to time, which rate per annum shall at all times be equal to the
higher of:
(a) the rate of interest announced publicly by The Chase
Manhattan Bank in New York, New York, from time to time, as its prime
rate; and
(b) 1/2 of 1% per annum above the Federal Funds Rate.
Alliance Credit Agreement
<PAGE> 6
6
"BASE RATE ADVANCE" means an Advance that bears interest as provided
in Section 2.06(a)(i).
"BEACON INVESTORS" means collectively, The Beacon Group Energy
Investment Fund, L.P., a Delaware limited partnership, and MPC Partners,
L.P., a Delaware limited partnership.
"BEACON CONTROLLED AFFILIATE" means any Person which directly or
indirectly, is in control of, is controlled by, or is under common control
with The Beacon Group Energy Investment Fund, L.P. or the Equity Investor
or its Affiliates; for purposes of this definition, "control" (including
the terms "controlling", "controlled by" and "under common control with")
of a Person shall mean the power, direct or indirect, to direct or cause
the direction of the management and policies of such Person whether by
contract or otherwise, but shall not include any Person who is a director
or officer of any Beacon Investor or such Person.
"BORROWER" has the meaning specified in Preliminary Statement (2).
"BORROWER'S ACCOUNT" means the account of the Borrower maintained by
the Borrower with Chase at its office at 270 Park Avenue, New York, New
York 10017, Account No. 323138721, or such other account as the Borrower
shall specify in writing to the Paying Agent.
"BORROWING" means a Term Borrowing, a Working Capital Borrowing, a
Revolving Credit Borrowing or a Swing Line Borrowing.
"BUSINESS DAY" means a day of the year on which banks are not required
or authorized by law to close in New York City and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings are
carried on in the London interbank market.
"BUSINESS PLAN" means a rolling five year business plan for the
Borrower which shall include, without limitation, forecasts prepared by
management of the Borrower, in form satisfactory to the Co-Administrative
Agents, of balance sheets, income statements and cash flow statements on an
annual basis for each of the next five Fiscal Years and which shall set
forth (without limitation) mine development plans, an analysis of business
outlook (including the Gibson County Project) for the term of the Facility
in form and scope satisfactory to the Co-Administrative Agents, capital
expenditures, coal reserve profiles, property acquisitions, production
levels and other similar items, which Business Plan may be revised by the
Borrower from time to time to reflect changes in operating and market
conditions.
Alliance Credit Agreement
<PAGE> 7
7
"CAPITAL EXPENDITURES" means, for any Person for any period, the sum
of, without duplication, all expenditures made, directly or indirectly, by
such Person or any of its Subsidiaries during such period for equipment,
fixed assets, real property or improvements, or for replacements or
substitutions therefor or additions thereto, that have been or should be,
in accordance with GAAP, reflected as additions to property, plant or
equipment on a Consolidated balance sheet of such Person or have a useful
life of more than one year.
"CAPITAL LEASE" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset
and the incurrence of a liability in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, with respect to any Person and a
Capital Lease, the amount of the obligation of such Person as the lessee
under such Capital Lease which would, in accordance with GAAP, appear as a
liability on a balance sheet of such Person.
"CAPITAL STOCK" shall mean, with respect to any Person, any and all
shares, units representing interests, participations, rights in or other
equivalents (however designated) of such Person's capital stock, including,
(a) with respect to partnerships, partnership interests (whether general or
limited) and any other interest or participation that confers upon a Person
the right to receive a share of the profits and losses of, or distributions
of assets of, such partnership, (b) with respect to limited liability
companies, member interests, and (c) with respect to any Person, any rights
(other than debt securities convertible into capital stock), warrants or
options exchangeable for or convertible into such capital stock.
"CASH EQUIVALENTS" means any of the following, to the extent owned by
the Borrower or any of its Restricted Subsidiaries free and clear of all
Liens other than Liens created under the Pledge Agreement and, unless
otherwise specified below, having a maturity of not greater than two years
from the date of acquisition thereof:
(a) United States Governmental Securities maturing within one
year (or, in the case of Qualifying Securities, two years) from the
date of acquisition;
(b) certificates of deposit, banker's acceptances or other bank
instruments maturing within one year from the date of acquisition
thereof, issued by Acceptable Banks;
(c) Repurchase Agreements;
Alliance Credit Agreement
<PAGE> 8
8
(d) obligations of any state of the United States of America, or
any municipality of any such state, in each case rated "AA" or better
by S&P, "Aa2" or better by Moody's or an equivalent rating by any
other credit rating agency of recognized national standing, provided
that such obligations mature within one year from the date of
acquisition thereof; and
(e) commercial paper maturing in 270 days or less from the date
of issuance which, at the time of acquisition by the Borrower or any
Restricted Subsidiary, is rated A-l or better by S&P or P1 or better
by Moody's or an equivalent rating by any other credit rating agency
of recognized national standing.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System maintained by the U.S. Environmental
Protection Agency.
"CHANGE OF CONTROL" means the occurrence of either of the following:
(a) Beacon Investors and the Beacon Controlled Affiliates shall at any time
for any reason cease collectively to own, directly or indirectly, at least
51% of the managing ownership interest of the sole or managing general
partner, as the case may be, of the Borrower or (b) the managing general
partner of the Borrower shall at any time for any reason cease to be either
the sole or managing general partner of Alliance Resource Partners, L.P.
"CHASE" has the meaning specified in the recital of parties to this
Agreement.
"CITICORP" has the meaning specified in the recital of parties to this
Agreement.
"CO-ADMINISTRATIVE AGENTS" has the meaning specified in the recital of
parties to this Agreement.
"COLLATERAL" means all "Collateral" referred to in the Pledge
Agreement and all other property that is or is intended to be subject to
any Lien in favor of the Paying Agent for the benefit of the Secured
Parties.
"COMMITMENT" means a Term Commitment, a Working Capital Commitment, a
Revolving Credit Commitment or a Swing Line Commitment.
"COMPANY" has the meaning specified in the recital of parties to this
Agreement.
Alliance Credit Agreement
<PAGE> 9
9
"CONFIDENTIAL INFORMATION" means information that any Loan Party
furnishes to any Agent or any Lender Party as confidential; provided,
however, that such term does not include any such information that is or
becomes generally available to the public or that is or becomes available
to such Agent or such Lender Party from a source other than the Loan
Parties (it being understood that except as set forth in the proviso, all
information that any Loan Party submits to any Agent or any Lender Party is
confidential).
"CONSOLIDATED" refers to the consolidation of accounts in accordance
with GAAP.
"CONSOLIDATED CASH FLOW" means, as of any date of determination for
any applicable period, the excess, if any, of (a) the sum of, without
duplication, the amounts for such period, taken as a single accounting
period, of (i) Consolidated Net Income for such period, plus (ii) to the
extent deducted in the determination of Consolidated Net Income for such
period, without duplication, (A) Consolidated Non-Cash Charges, (B)
Consolidated Interest Expense and (C) Consolidated Income Tax Expense, over
(b) any non-cash items increasing Consolidated Net Income for such period
to the extent that such items constitute reversals of Consolidated Non-Cash
Charges for a previous period and which were included in the computation of
Consolidated Cash Flow for such previous period pursuant to the provisions
of the preceding clause (a), provided that in calculating Consolidated Cash
Flow for any such period, (1) full effect shall be given to the proviso to
the definition of "Consolidated Interest Expense" set forth below and (2)
Consolidated Cash Flow shall be calculated after giving effect on a pro
forma basis for such period, in all respects in accordance with GAAP, to
any Transfer or Asset Acquisitions (including, without limitation any Asset
Acquisition by the Borrower or any Restricted Subsidiary giving rise to the
need to determine Consolidated Cash Flow as a result of the Borrower or one
of its Restricted Subsidiaries (including any Person that becomes a
Restricted Subsidiary as result of any such Asset Acquisition) incurring,
assuming or otherwise becoming liable for any Debt) occurring during the
period commencing on the first day of such period to and including the date
of the transaction, as if such Transfer or Asset Acquisition occurred on
the first day of such period.
"CONSOLIDATED INCOME TAX EXPENSE" means, with respect to any period,
all provisions for Federal, state, local and foreign income taxes of the
Borrower and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, as of the date of any
determination for any applicable period, the sum (without duplication) of
the following (in each case, eliminating all offsetting debits and credits
between the Borrower and its Restricted Subsidiaries and all other items
required to be eliminated in the course of the preparation
Alliance Credit Agreement
<PAGE> 10
10
of consolidated financial statements of the Borrower and its Restricted
Subsidiaries in accordance with GAAP): (a) all interest in respect of Debt
of the Borrower and its Restricted Subsidiaries whether paid or accrued
(including non-cash interest payments and imputed interest on Capital Lease
Obligations) deducted in determining Consolidated Net Income for such
period, and (b) all debt discount (but not expense) amortized or required
to be amortized in the determination of Consolidated Net Income for such
period, less (c) all interest earned or accrued with respect to Qualifying
Securities during such period. In computing Consolidated Interest Expense
for any period prior to the end of the first four fiscal quarters ending
after the Effective Date, Consolidated Interest Expense of the Borrower and
the Restricted Subsidiaries shall be determined with respect to the
principal amount of Debt actually outstanding from time to time but on the
basis of interest accruing at a rate equal to the weighted average interest
rate payable on the date of determination with respect to Debt outstanding
under the Senior Notes and this Agreement, rather than the rates of
interest actually applicable to the Debt refinanced thereby.
"CONSOLIDATED NET DEBT" means, as of any date of determination, the
aggregate outstanding principal amount of all Debt of the Borrower and its
Restricted Subsidiaries outstanding on such date, after eliminating all
offsetting debits and credits between the Borrower and its Restricted
Subsidiaries and all other items required to be eliminated in the course of
the preparation of consolidated financial statements of the Borrower and
its Restricted Subsidiaries in accordance with GAAP; less the principal
amount of all Qualifying Securities held by the Borrower and its Restricted
Subsidiaries.
"CONSOLIDATED NET DEBT TO CONSOLIDATED CASH FLOW RATIO" means, at any
date of determination, the ratio of Consolidated Net Debt of the Borrower
and its Restricted Subsidiaries as at the end of the most recently ended
fiscal quarter of the Borrower for which financial statements are required
to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c),
as the case may be, to Consolidated Cash Flow of the Borrower and its
Restricted Subsidiaries for such fiscal quarter and the immediately
preceding three fiscal quarters; provided, however, that for purposes of
calculating the Consolidated Net Debt to Consolidated Cash Flow Ratio for
the periods commencing on October 1, 1999 and ending on the last day of the
fiscal quarters of the Borrower ending December 31, 1999, March 31, 2000
and June 30, 2000, Consolidated Cash Flow for purposes of this definition
shall be the actual Consolidated Cash Flow for such period multiplied by a
fraction the numerator of which is four and the denominator of which is the
actual number of fiscal quarters that have elapsed since October 1, 1999.
"CONSOLIDATED NET INCOME" means, with reference to any period, the net
income (or loss) of the Borrower and its Restricted Subsidiaries for such
period (taken as a
Alliance Credit Agreement
<PAGE> 11
11
cumulative whole), as determined in accordance with GAAP, provided that
there shall be excluded:
(a) the income (or loss) of any Person accrued prior to the date
it becomes a Subsidiary or is merged into or consolidated with the
Borrower or a Subsidiary, and the income (or loss) of any Person,
substantially all of the assets of which have been acquired in any
manner, realized by such other Person prior to the date of
acquisition,
(b) the income (or loss) of any Person (other than a Restricted
Subsidiary) in which the Borrower or any Restricted Subsidiary has an
ownership interest, except to the extent that any such income has been
actually received by the Borrower or such Restricted Subsidiary in the
form of cash dividends or similar cash distributions,
(c) the undistributed earnings of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary is not at the time
permitted by the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary,
(d) any aggregate net gain or loss during such period arising
from the sale, conversion, exchange or other disposition of capital
assets (such term to include, without limitation, (i) all non-current
assets, and, without duplication, (ii) the following, whether or not
current: all fixed assets, whether tangible or intangible, all
inventory sold in conjunction with the disposition of fixed assets,
and all Securities), and
(e) any net income or gain or loss during such period from (i)
any change in accounting principles in accordance with GAAP, (ii) any
prior period adjustments resulting from any change in accounting
principles in accordance with GAAP, or (iii) any extraordinary or
unusual items.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to the Borrower
and its Restricted Subsidiaries for any period, the aggregate depreciation,
depletion and amortization (other than amortization of debt discount and
expense), the non-cash portion of advance royalties and any non-cash
employee compensation expenses for such period, in each case, reducing
Consolidated Net Income of the Borrower and its Restricted Subsidiaries for
such period as determined on a consolidated basis in accordance with GAAP.
Alliance Credit Agreement
<PAGE> 12
12
"CONSTITUTIVE DOCUMENTS" means, with respect to any Person, the
certificate of incorporation or registration or formation (including, if
applicable, certificate of change of name), articles of incorporation or
association, memorandum of association, charter, bylaws, partnership
agreement, trust agreement, joint venture agreement, limited liability
company operating or members agreement, joint venture agreement or one or
more similar agreements, instruments or documents constituting the
organization or formation of such Person.
"CONTRIBUTION AGREEMENT" means the Contribution Agreement dated August
20, 1999 between the Company and AROP, as most recently amended in
accordance with this Agreement.
"CONTRIBUTION TRANSACTION" has the meaning specified in Section
3.01(m).
"CONVERSION", "CONVERT" and "CONVERTED" each refer to a conversion of
Advances of one Type into Advances of the other Type pursuant to Section
2.06(d), 2.08 or 2.09.
"CURRENT ASSETS" of any Person means all assets of such Person that
would, in accordance with GAAP, be classified as current assets, after
deducting adequate reserves in each case in which a reserve is proper in
accordance with GAAP.
"CURRENT LIABILITIES" of any Person means (a) all Debt of such Person
that by its terms is payable on demand or matures within one year after the
date of determination (excluding current maturities of long term Debt and
any Debt renewable or extendible, at the option of such Person, to a date
more than one year from such date or arising under a revolving credit or
similar agreement that obligates the lender or lenders to extend credit
during a period of more than one year from such date), and (b) all other
items (including taxes accrued as estimated) that in accordance with GAAP
would be classified as current liabilities of such Person.
"DEBT" means, with respect to any Person, without duplication,
(a) its liabilities for borrowed money;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the
ordinary course of business but including, without limitation, all
liabilities created or arising under any conditional sale or other
title retention agreement with respect to any such property);
(c) its Capital Lease Obligations;
Alliance Credit Agreement
<PAGE> 13
13
(d) all liabilities secured by any Lien with respect to any
property owned by such Person (whether or not it has assumed or
otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks or other financial institutions (whether or not
representing obligations for borrowed money), other than any thereof
incurred in the ordinary course of business of such Person and which
are issued (i) to support such Person's obligations in respect of
workmen's compensation or unemployment insurance laws, the payment of
retirement benefits or performance guarantees relating to coal
deliveries or insurance deductibles and aggregating no more than
$10,000,000 at any time outstanding for all of the foregoing or (ii)
in respect of current trade payables of such Person;
(f) Swaps of such Person, to the extent required to be reflected
on a balance sheet of such Person prepared as of any date of
determination in accordance with GAAP;
(g) Preferred Stock of Restricted Subsidiaries owned by Persons
other than the Borrower, a Subsidiary Guarantor or a Wholly-Owned
Restricted Subsidiary; and
(h) any Guaranty of such Person with respect to liabilities of a
type described in any of clauses (a) through (g) hereof.
Debt of any Person shall include all obligations of such Person of the
character described in clauses (a) through (h) to the extent such Person
remains legally liable in respect thereof notwithstanding that any such
obligation is deemed to be extinguished under GAAP.
"DEFAULT" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be given
or time elapse or both.
"DEFAULTED ADVANCE" means, with respect to any Lender Party at any
time, the portion of any Advance required to be made by such Lender Party
to the Borrower pursuant to Section 2.01 or 2.02 at or prior to such time
that has not been made by such Lender Party or by the Paying Agent for the
account of such Lender Party pursuant to Section 2.02(e) as of such time.
In the event that a portion of a Defaulted Advance shall be deemed made
pursuant to Section 2.14(a), the remaining portion of such Defaulted
Advance shall be considered a Defaulted Advance originally required to be
made
Alliance Credit Agreement
<PAGE> 14
14
pursuant to Section 2.01 on the same date as the Defaulted Advance so
deemed made in part.
"DEFAULTED AMOUNT" means, with respect to any Lender Party at any
time, any amount required to be paid by such Lender Party to any Agent or
any other Lender Party hereunder or under any other Loan Document at or
prior to such time that has not been so paid as of such time, including,
without limitation, any amount required to be paid by such Lender Party to
(a) the Swing Line Bank pursuant to Section 2.02(b) to purchase a portion
of a Swing Line Advance made by the Swing Line Bank, (b) the Paying Agent
pursuant to Section 2.02(e) to reimburse the Paying Agent for the amount of
any Advance made by the Paying Agent for the account of such Lender Party,
(c) any other Lender Party pursuant to Section 2.12 to purchase any
participation in Advances owing to such other Lender Party and (d) any
Agent pursuant to Section 7.05 to reimburse such Agent for such Lender
Party's ratable share of any amount required to be paid by the Lender
Parties to such Agent as provided therein. In the event that a portion of a
Defaulted Amount shall be deemed paid pursuant to Section 2.14(b), the
remaining portion of such Defaulted Amount shall be considered a Defaulted
Amount originally required to be paid hereunder or under any other Loan
Document on the same date as the Defaulted Amount so deemed paid in part.
"DEFAULTING LENDER" means, at any time, any Lender Party that, at such
time (a) owes a Defaulted Advance or a Defaulted Amount or (b) shall take
any action or be the subject of any action or proceeding of a type
described in Section 6.01(f).
"DISCLOSED LITIGATION" has the meaning specified in Section 3.01(i).
"DOCUMENTATION AGENT" has the meaning specified in the recital of
parties to this Agreement.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender Party, the
office of such Lender Party specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and Acceptance
pursuant to which it became a Lender Party, as the case may be, or such
other office of such Lender Party as such Lender Party may from time to
time specify to the Borrower and the Paying Agent.
"DOMESTIC SUBSIDIARY" means any Subsidiary other than a Foreign
Subsidiary.
"EFFECTIVE DATE" means the first date on which the conditions set
forth in Article III shall have satisfied.
Alliance Credit Agreement
<PAGE> 15
15
"ELIGIBLE ASSIGNEE" means (a) a Lender; (b) an Affiliate of a Lender
that qualifies under clause (c), (d), (e), or (f) of this definition; (c) a
commercial bank organized under the laws of the United States, or any state
thereof, and having total assets in excess of $1,000,000,000; (d) a
commercial bank organized under the laws of any other country which is a
member of the OECD, or a political subdivision of any such country, and
having total assets in excess of $1,000,000,000; provided that such bank is
acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (e) the
central bank of any country which is a member of the OECD; and (f) any
other financial institution or Person approved by the Paying Agent and,
unless a Default has occurred and is continuing at the time any assignment
is effected pursuant to Section 8.07, the Borrower (which approvals shall
not be unreasonably withheld or delayed); provided, however, that neither
any Loan Party nor any Affiliate of a Loan Party, nor any competitor, or
Affiliate of a competitor, of the Borrower shall qualify as an Eligible
Assignee under this definition.
"ENVIRONMENTAL ACTION" means any action, suit, demand, demand letter,
claim, notice of non-compliance or violation, notice of liability or
potential liability, investigation, proceeding, consent order or consent
agreement relating in any way to any Environmental Law, any Environmental
Permit or Hazardous Material or arising from alleged injury or threat to
health, safety or the environment, including, without limitation, (a) by
any governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages and (b) by any governmental
or regulatory authority or third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"ENVIRONMENTAL LAW" means any Federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, writ, judgment,
injunction, decree or judicial or agency interpretation, policy or guidance
relating to pollution or protection of the environment, health, safety or
natural resources, including, without limitation, those relating to the
use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials.
"ENVIRONMENTAL PERMIT" means any permit, approval, identification
number, license or other authorization required under any Environmental
Law.
"EQUITY INVESTOR" means The Beacon Group, LP, a Delaware limited
partnership.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
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<PAGE> 16
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"ERISA AFFILIATE" means any Person that for purposes of Title IV of
ERISA is a member of the controlled group of any Loan Party, or under
common control with any Loan Party, within the meaning of Section 414 of
the Internal Revenue Code.
"ERISA EVENT" means (a)(i) the occurrence of a reportable event,
within the meaning of Section 4043 of ERISA, with respect to any Plan
unless the 30-day notice requirement with respect to such event has been
waived by the PBGC or (ii) the requirements of Section 4043(b) of ERISA
apply with respect to a contributing sponsor, as defined in Section
4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9),
(10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected
to occur with respect to such Plan within the following 30 days; (b) the
application for a minimum funding waiver with respect to a Plan; (c) the
provision by the administrator of any Plan of a notice of intent to
terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any
such notice with respect to a plan amendment referred to in Section 4041(e)
of ERISA); (d) the cessation of operations at a facility of any Loan Party
or any ERISA Affiliate in the circumstances described in Section 4062(e) of
ERISA; (e) the withdrawal by any Loan Party or any ERISA Affiliate from a
Multiple Employer Plan during a plan year for which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for
imposition of a lien under Section 302(f) of ERISA shall have been met with
respect to any Plan; (g) the adoption of an amendment to a Plan requiring
the provision of security to such Plan pursuant to Section 307 of ERISA; or
(h) the institution by the PBGC of proceedings to terminate a Plan pursuant
to Section 4042 of ERISA, or the occurrence of any event or condition
described in Section 4042 of ERISA that constitutes grounds for the
termination of, or the appointment of a trustee to administer, such Plan.
"EUROCURRENCY LIABILITIES" has the meaning specified in Regulation D
of the Board of Governors of the Federal Reserve System, as in effect from
time to time.
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender Party,
the office of such Lender Party specified as its "Eurodollar Lending
Office" opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender Party (or, if no such
office is specified, its Domestic Lending Office), or such other office of
such Lender Party as such Lender Party may from time to time specify to the
Borrower and the Paying Agent.
"EURODOLLAR RATE" means, for any Interest Period for all Eurodollar
Rate Advances comprising part of the same Borrowing, an interest rate per
annum equal to the rate per annum obtained by dividing (a) (i) the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing
on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in U.S. dollars at 11:00 A.M.
Alliance Credit Agreement
<PAGE> 17
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(London time) two Business Days before the first day of such Interest
Period for a period equal to such Interest Period (provided that, if for
any reason such rate is not available, the term "Eurodollar Rate" shall
mean, for any Interest Period for all Eurodollar Rate Advances comprising
part of the same Borrowing, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO
Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 A.M. (London time) two Business Days prior to the first
day of such Interest Period for a term comparable to such Interest Period;
provided, however, if more than one rate is specified on Reuters Screen
LIBO Page, the applicable rate shall be the arithmetic mean of all such
rates) by (ii) a percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage for such Interest Period or (b) upon 3 Business Days' prior
written request by the Borrower to the Paying Agent, (i) the average
(rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if
such average is not such a multiple) of the rate per annum at which
deposits in U.S. dollars are offered by the principal office of each of the
Reference Banks in London, England to prime banks in the London interbank
market at 11:00 A.M. (London time) two Business Days before the first day
of such Interest Period in an amount substantially equal to such Reference
Bank's Eurodollar Rate Advance comprising part of such Borrowing to be
outstanding during such Interest Period (or, if such Reference Bank shall
not have such a Eurodollar Rate Advance, $1,000,000) and for a period equal
to such Interest Period by (ii) a percentage equal to 100% minus the
Eurodollar Rate Reserve Percentage for such Interest Period. The Eurodollar
Rate for any Interest Period for each Eurodollar Rate Advance comprising
part of the same Borrowing shall be determined by the Paying Agent on the
basis of applicable rates furnished to and received by the Paying Agent
from the Reference Banks two Business Days before the first day of such
Interest Period, subject, however, to the provisions of Section 2.06.
"EURODOLLAR RATE ADVANCE" means an Advance that bears interest as
provided in Section 2.06(a)(ii).
"EURODOLLAR RATE RESERVE PERCENTAGE" for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing means the
reserve percentage applicable two Business Days before the first day of
such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for a
member bank of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities
(or with respect to any other category of liabilities that includes
deposits by reference to which the interest rate on Eurodollar Rate
Advances is determined) having a term equal to such Interest Period.
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<PAGE> 18
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"EVENTS OF DEFAULT" has the meaning specified in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING DEBT" means Debt of each Loan Party and its Subsidiaries
outstanding immediately before giving effect to the consummation of the
Transaction.
"FACILITY" means the Term Facility, the Working Capital Facility, the
Revolving Credit Facility or the Swing Line Facility.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the
average of the quotations for such day for such transactions received by
the Paying Agent from three Federal funds brokers of recognized standing
selected by it.
"FEE LETTER" means the fee letter dated July 6, 1999 between the
Borrower and the Agents, as amended.
"FISCAL YEAR" means a fiscal year of the Borrower and its Consolidated
Subsidiaries ending on December 31 in any calendar year.
"FOREIGN SUBSIDIARY" means a Subsidiary organized under the laws of a
jurisdiction other than the United States or any State thereof or the
District of Columbia.
"GAAP" has the meaning specified in Section 1.03.
"GENERAL PARTNER" means Alliance Resource Management GP, LLC, a
Delaware limited liability company.
"GIBSON COUNTY PROJECT" means the mining development project on the
property of the Borrower located in Gibson County, Indiana.
"GREENFIELD PROJECT" means any mine development project involving the
expenditure of greater than $5,000,000 for the development of mine
infrastructure to access unmined reserves.
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<PAGE> 19
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"GUARANTY" and, with correlative meaning, "GUARANTEED" means, with
respect to any Person, any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or
collection) of such Person guaranteeing or in effect guaranteeing any Debt
of any other Person in any manner, whether directly or indirectly,
including (without limitation) obligations incurred through an agreement,
contingent or otherwise, by such Person:
(a) to purchase such Debt or any property constituting security
therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such Debt, or (ii) to maintain any working capital or other balance
sheet condition or any income statement condition of any other Person
or otherwise to advance or make available funds for the purchase or
payment of such Debt;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such Debt of the
ability of any other Person to make payment of the Debt; or
(d) otherwise to assure the owner of such Debt against loss in
respect thereof.
In any computation of the Debt of the obligor under any Guaranty, the
Debt that is the subject of such Guaranty shall be assumed to be a direct
obligation of such obligor. The amount of any Guaranty shall be equal to
the outstanding amount of the Debt guaranteed, or such lesser amount to
which the maximum exposure of such Person shall have been specifically
limited.
"HAZARDOUS MATERIALS" means (a) petroleum or petroleum products,
by-products or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas and
(b) any other chemicals, materials or substances designated, classified or
regulated as hazardous or toxic or as a pollutant or contaminant under any
Environmental Law.
"INDEMNIFIED PARTY" has the meaning specified in Section 8.04(b).
"INFORMATION MEMORANDUM" means the information memorandum dated July
1999 used by the Joint Arrangers in connection with the syndication of the
Commitments.
"INITIAL EXTENSION OF CREDIT" means the initial Borrowing hereunder.
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<PAGE> 20
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"INITIAL LENDERS" has the meaning specified in the recital of parties
to this Agreement.
"INITIAL PUBLIC OFFERING" has the meaning specified in Preliminary
Statement (1).
"INSUFFICIENCY" means, with respect to any Plan, the amount, if any,
of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of
ERISA.
"INTERCREDITOR AGREEMENT" has the meaning specified in Section
3.01(a)(xviii).
"INTEREST COVERAGE RATIO" means, at any date of determination, the
ratio of (a) Consolidated Cash Flow to (b) Consolidated Interest Expense
during the four consecutive fiscal quarters most recently ended for which
financial statements are required to be delivered to the Lender Parties
pursuant to Section 5.03(b) or (c), as the case may be; provided, however,
that for purposes of calculating the Interest Coverage Ratio for the fiscal
quarters of the Borrower ending December 31, 1999, March 31, 2000 and June
30, 2000, each component of the Interest Coverage Ratio for purposes of
this definition shall be the actual amount of such component for the period
ending at the end of such fiscal quarter since October 1, 1999 multiplied
by a fraction the numerator of which is four and the denominator of which
is the number of fiscal quarters that have elapsed since October 1, 1999.
"INTEREST PERIOD" means, for each Eurodollar Rate Advance comprising
part of the same Borrowing, the period commencing on the date of such
Eurodollar Rate Advance or the date of the Conversion of any Base Rate
Advance into such Eurodollar Rate Advance, and ending on the last day of
the period selected by the Borrower pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three or six or,
if available to each Appropriate Lender, nine or twelve months, as the
Borrower may, upon notice received by the Paying Agent not later than 12:00
noon (New York City time) on the third Business Day prior to the first day
of such Interest Period, select; provided, however, that:
(a) the Borrower may not select any Interest Period with respect
to any Eurodollar Rate Advance under a Facility that ends after any
principal repayment installment date for such Facility unless, after
giving effect to such selection, the aggregate principal amount of
Base Rate Advances and of Eurodollar Rate Advances having Interest
Periods that end on or prior to such principal repayment installment
date for such Facility shall be at least equal to the aggregate
principal amount of Advances under such Facility due and payable on or
prior to such date;
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<PAGE> 21
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(b) Interest Periods commencing on the same date for Eurodollar
Rate Advances comprising part of the same Borrowing shall be of the
same duration;
(c) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding
Business Day, provided, however, that, if such extension would cause
the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day; and
(d) whenever the first day of any Interest Period occurs on a day
of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months
in such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"INVENTORY" means inventory held for sale or lease in the ordinary
course of business.
"INVESTMENT" means any investment, made in cash or by delivery of
property, by the Borrower or any of its Restricted Subsidiaries (a) in any
Person, whether by acquisition of stock, debt or other obligations or
Security, or by loan, guaranty of any debt, advance, capital contribution
or otherwise, or (b) in any property.
"JOINT ARRANGERS" means Salomon Smith Barney Inc. and Chase
Securities, Inc. and/or its Affiliates.
"LENDER PARTY" means any Lender or the Swing Line Bank.
"LENDERS" means the Initial Lenders and each Person that shall become
a Lender hereunder pursuant to Section 8.07 for so long as such Initial
Lender or Person, as the case may be, shall be a party to this Agreement.
"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest, production payment or other encumbrance, or any
interest or title of any vendor, lessor, lender or other secured party to
or of such Person under any conditional sale or other title retention
agreement or Capital Lease, upon or with respect to any
Alliance Credit Agreement
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property or asset of such Person (including in the case of stock,
stockholder agreements, voting trust agreements and all similar
arrangements); provided, however, "Lien" shall not include any negative
pledge nor any royalty interest or overriding royalty interest under any
lease, sublease or other similar agreement entered into in the ordinary
course of business.
"LOAN DOCUMENTS" means (a) this Agreement, (b) the Notes, (c) the
Subsidiary Guaranty, (d) the Pledge Agreement, (e) the Fee Letter, (f) the
Intercreditor Agreement, and (g) the Assumption Agreement, in each case as
amended.
"LOAN PARTIES" means the Company, AROP and the Subsidiary Guarantors.
"MARGIN STOCK" has the meaning specified in Regulation U.
"MATERIAL ADVERSE CHANGE" means any material adverse change in the
business, operations, affairs, financial condition, assets or properties of
the Borrower and its Restricted Subsidiaries, taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of
the Borrower and its Restricted Subsidiaries taken as a whole, (b) the
ability of the Borrower to perform its payment obligations, its obligations
under Article V or any other material obligations under any Loan Document
to which it is a party, (c) the ability of any Subsidiary Guarantor to
perform its payment obligations or other material obligations under the
Subsidiary Guaranty, or (d) the validity or enforceability of any Loan
Document.
"MLP" has the meaning specified in Preliminary Statement (1).
"MLP AGREEMENT" means the First Amended and Restated Agreement of
Limited Partnership of Alliance Resource Partners, L.P., as amended, to the
extent permitted under the Loan Documents.
"MLP UNITS" has the meaning specified in Preliminary Statement (1).
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any
of the preceding five plan years made or accrued an obligation to make
contributions.
Alliance Credit Agreement
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"MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
Loan Party or any ERISA Affiliate and at least one Person other than the
Loan Parties and the ERISA Affiliates or (b) was so maintained and in
respect of which any Loan Party or any ERISA Affiliate could have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or were
to be terminated.
"NET CASH PROCEEDS" means, with respect to any sale, lease, transfer
or other disposition of any asset or the incurrence or issuance of any Debt
or the sale or issuance of any Capital Stock (including, without
limitation, any capital contribution) by any Person, the aggregate amount
of cash received from time to time (whether as initial consideration or
through payment or disposition of deferred consideration) by or on behalf
of such Person in connection with such transaction after deducting
therefrom only (without duplication) (a) reasonable and customary brokerage
commissions, underwriting fees and discounts, legal fees, finder's fees and
other similar fees and commissions, and (b) the amount of taxes payable in
connection with or as a result of such transaction and (c) the amount of
any Debt secured by a Lien on such asset that, by the terms of the
agreement or instrument governing such Debt, is required to be repaid upon
such disposition, in each case to the extent, but only to the extent, that
the amounts so deducted are, at the time of receipt of such cash, actually
paid to a Person that is not an Affiliate of such Person or any Loan Party
or any Affiliate of any Loan Party and are properly attributable to such
transaction or to the asset that is the subject thereof.
"NOTE" means a Term Note, a Working Capital Note or a Revolving Credit
Note.
"NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement dated as
of August 16, 1999 among the Borrower and the purchasers of the Senior
Notes, pursuant to which the Senior Notes are issued, as amended, to the
extent permitted under the Loan Documents.
"NOTICE OF BORROWING" has the meaning specified in Section 2.02(a).
"NOTICE OF SWING LINE BORROWING" has the meaning specified in Section
2.02(b).
"NPL" means the National Priorities List under CERCLA.
"OBLIGATION" means, as used in the Pledge Agreement, the Notes, the
Solvency Certificates and the Subsidiary Guaranty, with respect to any Loan
Party, any payment, performance or other obligation of such Loan Party of
any kind under the Loan Documents, including, without limitation, any
liability of such Loan Party on any claim, whether or not the right of any
creditor to payment in respect of such claim is reduced to
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judgment, liquidated, unliquidated, fixed, absolute or contingent, direct
or indirect, matured, disputed, undisputed, legal, equitable, secured or
unsecured, and whether or not such claim is discharged, stayed or otherwise
affected by any proceeding referred to in Section 6.01(f), including
without limitation, (a) the obligation to pay principal, interest, charges,
expenses, fees, attorneys' fees and disbursements, indemnities and other
amounts payable by such Loan Party under any Loan Document and (b) the
obligation of such Loan Party to reimburse any amount in respect of any of
the foregoing that any Lender Party, in its sole discretion, may elect to
pay or advance on behalf of such Loan Party.
"OECD" means the Organization for Economic Cooperation and
Development.
"OPEN YEAR" has the meaning specified in Section 4.01(r)(iii).
"OTHER TAXES" has the meaning specified in Section 2.11(b).
"PARTNERSHIP AGREEMENT" means the partnership agreement of AROP, as
most recently amended in accordance with the terms of this Agreement.
"PAYING AGENT" has the meaning specified in the recital of parties to
this Agreement.
"PAYING AGENT'S ACCOUNT" means the account of the Paying Agent
maintained by the Paying Agent with Chase at its office at 270 Park Avenue,
New York, New York 10017, Account No. 323138721, or such other account as
the Paying Agent shall specify in writing to the Lender Parties.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"PERMITTED LIENS" means each of the following:
(a) Liens for property taxes, assessments or other
governmental charges which are not yet due and payable and
delinquent or the validity of which is being contested in good
faith in compliance with Section 5.01(b);
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Liens,
in each case, incurred in the ordinary course of business for
sums not yet due and payable or the amount, applicability or
validity thereof is being contested by the Borrower or such
Restricted Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Borrower or a Restricted
Alliance Credit Agreement
<PAGE> 25
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Subsidiary has established adequate reserves therefor in
accordance with GAAP on the books of the Borrower or such
Restricted Subsidiary;
(c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business (i) in
connection with workers' compensation, unemployment insurance
and other types of social security or retirement benefits, or
(ii) to secure (or to obtain letters of credit that secure) the
performance of tenders, statutory obligations, surety bonds,
appeal bonds, bids, leases (other than Capital Leases),
performance bonds, purchase, construction or sales contracts
and other similar obligations, in each case not incurred or
made in connection with the borrowing of money, the obtaining
of advances or credit or the payment of the deferred purchase
price of property;
(d) any attachment or judgment Lien for the payment of
money in an aggregate amount not to exceed $10,000,000,
provided that the execution or other enforcement of such Liens
is effectively stayed and the claims secured thereby are
contested by the Borrower or such Restricted Subsidiary on a
timely basis in good faith and in appropriate proceedings, and
the Borrower or a Restricted Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books
of the Borrower or such Restricted Subsidiary; and
(e) leases or subleases granted to others, zoning
restrictions, easements, licenses, reservations, provisions,
covenants, conditions, waivers, restrictions on the use of
property or irregularities of title (and with respect to
leasehold interests, mortgages, obligations, liens and other
encumbrances incurred, created, assumed or permitted to exist
and arising by, through or under a landlord or owner of the
leased property, with or without consent of the lessee), and
not interfering with, the ordinary conduct of the business of
the Borrower or any of its Restricted Subsidiaries, provided
that such Liens do not, in the aggregate, materially detract
from the value of such property or impair the use of such
property.
"PERSON" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government
or any political subdivision or agency thereof.
"PLAN" means a Single Employer Plan or a Multiple Employer Plan.
Alliance Credit Agreement
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"PLEDGE AGREEMENT" has the meaning specified in Section 3.01(a)(ii).
"PREFERRED STOCK" of any Person means any class of Capital Stock of
such Person that is preferred over any other class of Capital Stock of such
Person as to the payment of dividends or the payment of any amount upon
liquidation or dissolution of such Person.
"PREPAYMENT DATE" has the meaning specified in Section 2.05(b)(i).
"PRO RATA SHARE" of any amount means, with respect to any Revolving
Credit Lender at any time, the product of such amount times a fraction the
numerator of which is the amount of such Lender's Revolving Credit
Commitment at such time (or, if the Commitments shall have been terminated
pursuant to Section 2.04 or 6.01, such Lender's Revolving Credit Commitment
as in effect immediately prior to such termination) and the denominator of
which is the Revolving Credit Facility at such time (or, if the Commitments
shall have been terminated pursuant to Section 2.04 or 6.01, the Revolving
Credit Facility as in effect immediately prior to such termination).
"QUALIFYING SECURITIES" means readily marketable direct obligations of
the Government of the United States or any agency or instrumentality
thereof or obligations unconditionally guaranteed by the full faith and
credit of the Government of the United States to the extent owned by the
Borrower free and clear of all Liens (other than Liens created under the
Pledge Agreement) and having a remaining maturity not greater than 24
months and which have been pledged to, and are under the control of, the
Paying Agent pursuant to, and in accordance with the terms of, the Pledge
Agreement as Collateral for the Term Advances.
"REFERENCE BANKS" means Citicorp, Chase and Deutsche Bank AG, New York
Branch.
"REGISTER" has the meaning specified in Section 8.07(d).
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"RELATED DOCUMENTS" means the Note Purchase Agreement, the Partnership
Agreement, the MLP Agreement, the Contribution Agreement and the Senior
Notes.
"REPURCHASE AGREEMENT" means any written agreement:
(a) that provides for (i) the transfer of one or more United
States Governmental Securities in an aggregate principal amount at
least equal to the
Alliance Credit Agreement
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amount of the Transfer Price (defined below) to the Borrower or any of
its Restricted Subsidiaries from an Acceptable Bank or an Acceptable
Broker-Dealer against a transfer of funds (the "TRANSFER PRICE") by
the Borrower or such Restricted Subsidiary to such Acceptable Bank or
Acceptable Broker-Dealer, and (ii) a simultaneous agreement by the
Borrower or such Restricted Subsidiary, in connection with such
transfer of funds, to transfer to such Acceptable Bank or Acceptable
Broker-Dealer the same or substantially similar United States
Governmental Securities for a price not less than the Transfer Price
plus a reasonable return thereon at a date certain not later than 365
days after such transfer of funds,
(b) in respect of which the Borrower or such Restricted
Subsidiary shall have the right, whether by contract or pursuant to
applicable law, to liquidate such agreement upon the occurrence of any
default thereunder, and
(c) in connection with the Borrower or such Restricted
Subsidiary, or an agent thereof, shall have taken all action required
by applicable law or regulations to perfect a Lien in such United
States Governmental Securities.
"REQUIRED LENDERS" means, at any time, Lenders owed or holding at
least a majority in interest of the sum of (a) the aggregate principal
amount of the Advances outstanding at such time, (b) the aggregate Unused
Term Commitments at such time, (c) the aggregate Unused Working Capital
Commitments at such time and (d) the aggregate Unused Revolving Credit
Commitments at such time; provided, however, that if any Lender shall be a
Defaulting Lender at such time, there shall be excluded from the
determination of Required Lenders at such time (A) the aggregate principal
amount of the Advances owing to such Lender (in its capacity as a Lender)
and outstanding at such time, (B) the Unused Term Commitment of such Lender
at such time, (C) Unused Working Capital Commitment of such Lender at such
time and (D) the Unused Revolving Credit Commitment of such Lender at such
time. For purposes of this definition, the aggregate principal amount of
Swing Line Advances owing to the Swing Line Bank shall be considered to be
owed to the Revolving Credit Lenders ratably in accordance with their
respective Revolving Credit Commitments.
"RESPONSIBLE OFFICER" means any officer of any Loan Party or any of
its Subsidiaries.
"RESTRICTED PAYMENT" has the meaning set forth in Section 5.02(g).
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Borrower (a) of
which more than 50% (by number of votes) of each class of (i) Voting Stock,
and (ii) all other
Alliance Credit Agreement
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securities convertible into, exchangeable for or representing the right to
purchase, Voting Stock is beneficially owned, directly or indirectly, by
the Borrower, (b) which is organized under the laws of the United States or
any State thereof, (c) which maintains substantially all of its assets and
conducts substantially all of its business within the United States, and
(d) which is properly designated as such by the Borrower in the most recent
notice (or, prior to any such notice, on Schedule 4.01(b) hereto,
including, without limitation, Alliance Coal, LLC, a Delaware limited
liability company), with respect to such Subsidiary given by the Borrower
pursuant to and in accordance with the provisions of Section 5.02(r).
"REVOLVING CREDIT ADVANCE" has the meaning specified in Section
2.01(c).
"REVOLVING CREDIT BORROWING" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by the
Revolving Credit Lenders.
"REVOLVING CREDIT COMMITMENT" means, with respect to any Revolving
Credit Lender, the amount set forth opposite such Lender's name on Schedule
I hereto under the caption "Revolving Credit Commitment", or, if such
Lender has entered into one or more Assignment and Acceptances, set forth
for such Lender in the Register maintained by the Paying Agent pursuant to
Section 8.07(d) as such Lender's "Revolving Credit Commitment", as such
amount may be reduced at or prior to such time pursuant to Section 2.04.
"REVOLVING CREDIT FACILITY" means, at any time, the aggregate amount
of the Revolving Credit Lenders' Revolving Credit Commitments at such time.
"REVOLVING CREDIT LENDER" means any Lender that has a Revolving Credit
Commitment.
"REVOLVING CREDIT NOTE" means a promissory note of the Borrower
payable to the order of any Revolving Credit Lender, in substantially the
form of Exhibit A-3 hereto, evidencing the aggregate indebtedness of the
Borrower to such Lender resulting from the Revolving Credit Advances and
Swing Line Advances made by such Lender, as amended.
"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc.
"SBHC" means Salomon Brothers Holding Company Inc.
Alliance Credit Agreement
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29
"SECURED ADVANCES" means Term Advances that are secured by Qualifying
Securities. For purposes of this definition, the amount of Term Advances
constituting Secured Advances on any day shall be equal to the aggregate
mark-to-market value of the Qualifying Securities held by the Paying Agent
as Collateral on such day which value shall be marked-to-market by the
Paying Agent from time to time but no less frequently than monthly.
"SECURED OBLIGATIONS" has the meaning specified in Section 2 of the
Pledge Agreement.
"SECURED PARTIES" means the Term Lenders.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SECURITY" has the meaning set forth in Section 2(a)(1) of the
Securities Act.
"SENIOR NOTE PERCENTAGE" means, at any time, an amount, expressed as a
percentage, equal to (a) the principal amount outstanding at such time
under the Senior Notes divided by (b) the sum of the principal amount
outstanding at such time under the Senior Notes plus the outstanding at
such time principal amount of the Term Advances.
"SENIOR NOTES" has the meaning specified in Preliminary Statement (2).
"SINGLE EMPLOYER PLAN" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
Loan Party or any ERISA Affiliate and no Person other than the Loan Parties
and the ERISA Affiliates or (b) was so maintained and in respect of which
any Loan Party or any ERISA Affiliate could have liability under Section
4069 of ERISA in the event such plan has been or were to be terminated.
"SOLVENCY CERTIFICATE" has the meaning set forth in Section
3.01(a)(xi).
"SOLVENT" and "SOLVENCY" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person, (b) the present
fair salable value of the assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond
such Person's ability to pay such debts and liabilities as they mature and
(d) such Person is not engaged in business or a transaction, and is not
about to engage in business or a transaction, for which such Person's
property
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would constitute an unreasonably small capital. The amount of contingent
liabilities at any time shall be computed as the amount that, in the light
of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability.
"SPECIAL GENERAL PARTNER" means Alliance Resource GP, LLC, a Delaware
limited liability company, and its successors and permitted assigns as a
special general partner of AROP.
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, joint venture, association, trust
or other entity of which (or in which) more than 50% of (a) the issued and
outstanding Capital Stock having ordinary voting power to elect a majority
of the board of directors of such corporation (irrespective of whether at
the time Capital Stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any contingency),
(b) the interests in the capital or profits of such partnership, limited
liability company, joint venture or association with ordinary voting power
to elect a majority of the board of directors (or Persons performing
similar functions) of such partnership, limited liability company, joint
venture or association, or (c) the beneficial interests in such trust or
other entity with ordinary voting power to elect a majority of the board of
trustees (or Persons performing similar functions) of such trust or other
entity, is at the time directly or indirectly owned or controlled by such
Person, by such Person and one or more of its Subsidiaries, or by one or
more of such Person's other Subsidiaries.
"SUBSIDIARY GUARANTORS" means the Subsidiaries of the Borrower listed
on Schedule II hereto and each other Restricted Subsidiary of the Borrower
that shall be required to execute and deliver a guaranty pursuant to
Section 5.01(j).
"SUBSIDIARY GUARANTY" has the meaning specified in Section
3.01(a)(iii).
"SURVIVING DEBT" means Debt of each Loan Party and its Subsidiaries
outstanding immediately before and after giving effect to the Transaction.
"SWAPS" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency or commodity swaps and hedging
obligations obligating such Person to make payments, whether periodically
or upon the happening of a contingency. For the purposes of this Agreement,
the amount of the obligation under any Swap shall be the amount determined
in respect thereof as of the end of the then most recently ended fiscal
quarter of such Person, based on the assumption that such Swap had
terminated at the end of such fiscal quarter, and in making such
determination, if any agreement relating to such Swap provides for the
netting of amounts payable by and to
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such Person thereunder or if any such agreement provides for the
simultaneous payment of amounts by and to such Person, then in each such
case, the amount of such obligation shall be the net amount so determined.
"SWING LINE ADVANCE" means an advance made by (a) the Swing Line Bank
pursuant to Section 2.01(d) or (b) any Revolving Credit Lender pursuant to
Section 2.02(b).
"SWING LINE BANK" means Chase.
"SWING LINE BORROWING" means a borrowing consisting of a Swing Line
Advance made by the Swing Line Bank pursuant to Section 2.01(d) or the
Revolving Credit Lenders pursuant to Section 2.02(b).
"SWING LINE COMMITMENT" means, with respect to the Swing Line Bank,
the amount of the Swing Line Facility set forth in Section 2.01(d), as such
amount may be reduced at or prior to such time pursuant to Section 2.04.
"SWING LINE FACILITY" has the meaning specified in Section 2.01(d).
"TAXES" has the meaning specified in Section 2.11(a).
"TERM ADVANCE" has the meaning specified in Section 2.01(a).
"TERM BORROWING" means a borrowing consisting of simultaneous Term
Advances of the same Type made by the Term Lenders.
"TERM COMMITMENT" means, with respect to any Term Lender at any time,
the amount set forth opposite such Lender's name on Schedule I hereto under
the caption "Term Commitment" or, if such Lender has entered into one or
more Assignment and Acceptances, set forth for such Lender in the Register
maintained by the Paying Agent pursuant to Section 8.07(d) as such Lender's
"Term Commitment", as such amount may be reduced at or prior to such time
pursuant to Section 2.04.
"TERM FACILITY" means, at any time, the aggregate amount of the Term
Lenders' Term Commitments at such time.
"TERM LENDER" means any Lender that has a Term Commitment.
"TERM LOAN PERCENTAGE" means, at any time, a percentage equal to 100%
less the Senior Note Percentage at such time.
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"TERM NOTE" means a promissory note of the Borrower payable to the
order of any Term Lender, in substantially the form of Exhibit A-2 hereto,
evidencing the indebtedness of the Borrower to such Lender resulting from
the Term Advance made by such Lender, as amended.
"TERMINATION DATE" means the earlier of August 16, 2004 and the date
of termination in whole of the Working Capital Commitments, the Revolving
Credit Commitments, the Swing Line Commitment and the Term Commitments
pursuant to Section 2.04 or 6.01.
"TRANSACTION" has the meaning specified in Preliminary Statement (2).
"TRANSACTION DOCUMENTS" means, collectively, the Loan Documents and
the Related Documents.
"TRANSFER" means, with respect to any Person, any transaction in which
such Person sells, conveys, abandons, transfers, leases (as lessor), or
otherwise disposes of any of its assets; provided, however, that "Transfer"
shall not include (a) the granting of any Liens permitted to be granted
pursuant to this Agreement, (b) any transfer of assets permitted pursuant
to Section 5.02(d), (c) the making of any Restricted Payment permitted
pursuant to Section 5.02(g) or (d) the making of any Investments permitted
pursuant to Section 5.02(f).
"TYPE" refers to the distinction between Advances bearing interest at
the Base Rate and Advances bearing interest at the Eurodollar Rate.
"UNITED STATES GOVERNMENTAL SECURITY" means any direct obligation of,
or obligation guaranteed by, the United States of America, or any agency
controlled or supervised by or acting as an instrumentality of the United
States of America pursuant to authority granted by the Congress of the
United States of America, so long as such obligation or guarantee shall
have the benefit of the full faith and credit of the United Sates of
America which shall have been pledged pursuant to authority granted by the
Congress of the United States of America.
"UNRESTRICTED SUBSIDIARY" means a Subsidiary which is not a Restricted
Subsidiary.
"UNUSED REVOLVING CREDIT COMMITMENT" means, with respect to any
Revolving Credit Lender at any time (a) such Lender's Revolving Credit
Commitment at such time minus (b) the sum of (i) the aggregate principal
amount of all Revolving Credit Advances and Swing Line Advances made by
such Lender (in its capacity as a Lender and not as the
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<PAGE> 33
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Swing Line Bank) and outstanding at such time plus (ii) such Lender's Pro
Rata Share of the aggregate principal amount of all Swing Line Advances
made by the Swing Line Bank pursuant to Section 2.01(d) and outstanding at
such time.
"UNUSED TERM COMMITMENT" means with respect to any Term Lender at any
time, such Lender's unused Term Commitment at such time.
"UNUSED WORKING CAPITAL COMMITMENT" means, with respect to any Working
Capital Lender at any time (a) such Lender's Working Capital Commitment at
such time minus (b) the aggregate principal amount of all Working Capital
Advances made by such Lender (in its capacity as a Lender) and outstanding
at such time.
"VOTING STOCK" means, (i) Securities of any class of classes, the
holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the directors (or Persons performing similar
functions) or (ii) in the case of a partnership, limited liability company
or joint venture, interests in the profits or capital thereof entitling the
holders of such interests to approve major business actions.
"WHOLLY OWNED" means, at any time, with respect to any Subsidiary of
any Person, a Subsidiary of which at least ninety-eight percent (98%) of
all of the equity interests (except directors' qualifying shares) and
Voting Stock are owned by any one or more of such Person and such Person's
other Wholly Owned Subsidiaries at such time.
"WITHDRAWAL LIABILITY" has the meaning specified in Part I of Subtitle
E of Title IV of ERISA.
"WORKING CAPITAL ADVANCE" has the meaning specified in Section
2.01(b).
"WORKING CAPITAL BORROWING" means a borrowing consisting of
simultaneous Working Capital Advances of the same Type made by the Working
Capital Lenders.
"WORKING CAPITAL COMMITMENT" means, with respect to any Working
Capital Lender at any time, the amount set forth opposite such Lender's
name on Schedule I hereto under the caption "Working Capital Commitment",
or, if such Lender has entered into one or more Assignment and Acceptances,
set forth for such Lender in the Register maintained by the Paying Agent
pursuant to Section 8.07(d) as such Lender's "Working Capital Commitment",
as such amount may be reduced at or prior to such time pursuant to Section
2.04.
"WORKING CAPITAL FACILITY" means, at any time, the aggregate amount of
the Working Capital Lenders' Working Capital Commitments at such time.
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"WORKING CAPITAL LENDER" means any Lender that has a Working Capital
Commitment.
"WORKING CAPITAL NOTE" means a promissory note of the Borrower payable
to the order of any Working Capital Lender, in substantially the form of
Exhibit A-1 hereto, evidencing the aggregate indebtedness of the Borrower
to such Lender resulting from the Working Capital Advances made by such
Lender, as amended.
SECTION 1.02. Computation of Time Periods; Other Definitional
Provisions . In this Agreement and the other Loan Documents in the computation
of periods of time from a specified date to a later specified date, the word
"FROM" means "from and including" and the words "TO" and "UNTIL" each mean "to
but excluding". References in the Loan Documents to any agreement or contract
"AS AMENDED" shall mean and be a reference to such agreement or contract as
amended, amended and restated, supplemented or otherwise modified from time to
time in accordance with its terms.
SECTION 1.03. Accounting Terms . All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles in effect from time to time ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances . (a) The Term Advances. Each Term Lender
severally agrees, on the terms and conditions hereinafter set forth, to make a
single advance (a "TERM ADVANCE") to the Borrower on the Effective Date in an
amount not to exceed such Lender's Term Commitment at such time. The Term
Borrowing shall consist of Term Advances made simultaneously by the Term Lenders
ratably according to their Term Commitments. Amounts borrowed under this Section
2.01(a) and repaid or prepaid may not be reborrowed.
(b) The Working Capital Advances. Each Working Capital Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
advances (each a "WORKING CAPITAL ADVANCE") to the Borrower from time to time on
any Business Day during the period from the date hereof until the Termination
Date in an amount for each such Advance not to exceed such Lender's Unused
Working Capital Commitment at such time. Each Working Capital Borrowing shall be
in an aggregate amount of $1,000,000 or an integral multiple of $100,000 in
excess thereof in the case of Base Rate Advances, and in an aggregate amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof in the case
of Eurodollar Rate Advances and shall consist of Working Capital Advances made
simultaneously by the Working Capital Lenders
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<PAGE> 35
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ratably according to their Working Capital Commitments. Within the limits of
each Working Capital Lender's Unused Working Capital Commitment in effect from
time to time, the Borrower may borrow under this Section 2.01(b), prepay
pursuant to Section 2.05(a) and reborrow under this Section 2.01(b).
(c) The Revolving Credit Advances. Each Revolving Credit Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
advances (each a "REVOLVING CREDIT ADVANCE") to the Borrower from time to time
on any Business Day during the period from the date hereof until the Termination
Date in an amount for each such Advance not to exceed such Lender's Unused
Revolving Credit Commitment at such time. Each Revolving Credit Borrowing shall
be in an aggregate amount of $1,000,000 or an integral multiple of $100,000 in
excess thereof in the case of Base Rate Advances and in an aggregate amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof in the case
of Eurodollar Rate Advances (other than, in each case, a Borrowing the proceeds
of which shall be used solely to repay or prepay in full outstanding Swing Line
Advances) and shall consist of Revolving Credit Advances made simultaneously by
the Revolving Credit Lenders ratably according to their Revolving Credit
Commitments. Within the limits of each Revolving Credit Lender's Unused
Revolving Credit Commitment in effect from time to time, the Borrower may borrow
under this Section 2.01(c), prepay pursuant to Section 2.05(a) and reborrow
under this Section 2.01(c).
(d) The Swing Line Advances. The Borrower may request the Swing Line
Bank to make, and the Swing Line Bank agrees to make, on the terms and
conditions hereinafter set forth, Swing Line Advances to the Borrower from time
to time on any Business Day during the period from the date hereof until the
Termination Date (i) in an aggregate outstanding amount not to exceed at any
time $10,000,000 (the "SWING LINE FACILITY") and (ii) in an amount for each such
Swing Line Borrowing not to exceed the aggregate of the Unused Revolving Credit
Commitments of the Revolving Credit Lenders at such time. No Swing Line Advance
shall be used for the purpose of funding the payment of principal of any other
Swing Line Advance. Each Swing Line Borrowing shall be in an amount of $500,000
or an integral multiple of $100,000 in excess thereof and shall be made as a
Base Rate Advance. Within the limits of the Swing Line Facility and within the
limits referred to in clause (ii) above the Borrower may borrow under this
Section 2.01(d), repay pursuant to Section 2.03(d) or prepay pursuant to Section
2.05(a) and reborrow under this Section 2.01(d).
SECTION 2.02. Making the Advances. (a) Except as otherwise provided
in Section 2.02(b), each Borrowing shall be made on notice, given not later than
12:00 noon (New York City time) on the third Business Day prior to the date of
the proposed Borrowing in the case of a Borrowing consisting of Eurodollar Rate
Advances, or the first Business Day prior to the date of the proposed Borrowing
in the case of a Borrowing consisting of Base Rate Advances, by the Borrower to
the Paying Agent, which shall give to each Appropriate Lender prompt notice
thereof by telecopier. Each such notice of a Borrowing (a "NOTICE OF BORROWING")
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shall be by telephone, confirmed immediately in writing, or by telecopier, in
substantially the form of Exhibit B hereto, specifying therein the requested (i)
date of such Borrowing, (ii) Facility under which such Borrowing is to be made,
(iii) Type of Advances comprising such Borrowing, (iv) aggregate amount of such
Borrowing and (v) in the case of a Borrowing consisting of Eurodollar Rate
Advances, initial Interest Period for each such Advance. Each Appropriate Lender
shall, before 12:00 noon (New York City time) on the date of such Borrowing,
make available for the account of its Applicable Lending Office to the Paying
Agent at the Paying Agent's Account, in same day funds, such Lender's ratable
portion of such Borrowing in accordance with the respective Commitments under
the applicable Facility of such Lender and the other Appropriate Lenders. After
the Paying Agent's receipt of such funds and upon fulfillment of the applicable
conditions set forth in Article III, the Paying Agent will make such funds
available to the Borrower by crediting the Borrower's Account; provided,
however, that, in the case of any Revolving Credit Borrowing, the Paying Agent
shall first make a portion of such funds equal to the aggregate principal amount
of any Swing Line Advances made by the Swing Line Bank and by any other
Revolving Credit Lender and outstanding on the date of such Revolving Credit
Borrowing, plus interest accrued and unpaid thereon to and as of such date,
available to the Swing Line Bank and such other Revolving Credit Lenders for
repayment of such Swing Line Advances.
(b) Each Swing Line Borrowing shall be made on notice, given not later
than 12:00 noon (New York City time) on the date of the proposed Swing Line
Borrowing, by the Borrower to the Swing Line Bank and the Paying Agent. Each
such notice of a Swing Line Borrowing (a "NOTICE OF SWING LINE BORROWING") shall
be by telephone, confirmed immediately in writing, or by telecopier, specifying
therein the requested (i) date of such Borrowing, (ii) amount of such Borrowing
and (iii) maturity of such Borrowing (which maturity shall be no later than the
thirtieth day after the requested date of such Borrowing). The Swing Line Bank
will make the amount thereof available to the Paying Agent at the Paying Agent's
Account, in same day funds. After the Paying Agent's receipt of such funds and
upon fulfillment of the applicable conditions set forth in Article III, the
Paying Agent will make such funds available to the Borrower by crediting the
Borrower's Account. Upon written demand by the Swing Line Bank, with a copy of
such demand to the Paying Agent, each other Revolving Credit Lender shall
purchase from the Swing Line Bank, and the Swing Line Bank shall sell and assign
to each such other Revolving Credit Lender, such other Lender's Pro Rata Share
of such outstanding Swing Line Advance as of the date of such demand, by making
available for the account of its Applicable Lending Office to the Paying Agent
for the account of the Swing Line Bank, by deposit to the Paying Agent's
Account, in same day funds, an amount equal to the portion of the outstanding
principal amount of such Swing Line Advance to be purchased by such Lender. The
Borrower hereby agrees to each such sale and assignment. Each Revolving Credit
Lender agrees to purchase its Pro Rata Share of an outstanding Swing Line
Advance on (i) the Business Day on which demand therefor is made by the Swing
Line Bank, provided that notice of such demand is given not later than 12:00
noon (New York City time) on such Business Day or (ii) the first
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<PAGE> 37
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Business Day next succeeding such demand if notice of such demand is given after
such time. Upon any such assignment by the Swing Line Bank to any other
Revolving Credit Lender of a portion of a Swing Line Advance, the Swing Line
Bank represents and warrants to such other Lender that the Swing Line Bank is
the legal and beneficial owner of such interest being assigned by it, but makes
no other representation or warranty and assumes no responsibility with respect
to such Swing Line Advance, the Loan Documents or any Loan Party. If and to the
extent that any Revolving Credit Lender shall not have so made the amount of
such Swing Line Advance available to the Paying Agent, such Revolving Credit
Lender agrees to pay to the Paying Agent forthwith on demand such amount
together with interest thereon, for each day from the date of demand by the
Swing Line Bank until the date such amount is paid to the Paying Agent, at the
Federal Funds Rate. If such Lender shall pay to the Paying Agent such amount for
the account of the Swing Line Bank on any Business Day, such amount so paid in
respect of principal shall constitute a Swing Line Advance made by such Lender
on such Business Day for purposes of this Agreement, and the outstanding
principal amount of the Swing Line Advance made by the Swing Line Bank shall be
reduced by such amount on such Business Day.
(c) Anything in subsection (a) above to the contrary notwithstanding,
(i) the Borrower may not select Eurodollar Rate Advances for the initial
Borrowing hereunder or for any Borrowing if the aggregate amount of such
Borrowing is less than $5,000,000 or if the obligation of the Appropriate
Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to
Section 2.06(d)(ii), 2.08(b)(iii) or 2.09(c) or (d) and (i) the Revolving Credit
Advances and the Revolving Credit Advances may not be outstanding as part of
more than eight separate Borrowings in aggregate.
(d) Each Notice of Borrowing and Notice of Swing Line Borrowing shall
be irrevocable and binding on the Borrower.
(e) Unless the Paying Agent shall have received notice from an
Appropriate Lender prior to the date of any Borrowing under a Facility under
which such Lender has a Commitment that such Lender will not make available to
the Paying Agent such Lender's ratable portion of such Borrowing, the Paying
Agent may assume that such Lender has made such portion available to the Paying
Agent on the date of such Borrowing in accordance with subsection (a) of this
Section 2.02 and the Paying Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If and to the
extent that such Lender shall not have so made such ratable portion available to
the Paying Agent, such Lender and the Borrower severally agree to repay or pay
to the Paying Agent forthwith on demand such corresponding amount and to pay
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid or paid to the Paying Agent at
(i) in the case of the Borrower, the interest rate applicable at such time under
Section 2.06 to Advances comprising such Borrowing and (ii) in the case of such
Lender, the Federal Funds Rate. If such Lender shall pay to the Paying Agent
such corresponding amount,
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such amount so paid shall constitute such Lender's Advance as part of such
Borrowing for all purposes.
(f) The failure of any Lender to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation, if
any, hereunder to make its Advance on the date of such Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Repayment of Advances. (a) Term Advances. The Borrower
shall repay to the Paying Agent for the ratable account of the Term Lenders the
aggregate outstanding principal amount of the Term Advances on the following
dates in amounts equal to the percentage indicated of the principal amount of
Term Advances outstanding on October 31, 2001 (as such amounts shall be reduced
as a result of the application of prepayments in accordance with the order of
priority set forth in Section 2.05):
<TABLE>
<CAPTION>
Date Percentage
---- ----------
<S> <C>
October 31, 2001 7.50%
January 31, 2002 7.50%
April 30, 2002 7.50%
July 31, 2002 7.50%
October 31, 2002 7.50%
January 31, 2003 7.50%
April 30, 2003 7.50%
July 31, 2003 7.50%
October 31, 2003 10.00%
January 31, 2004 10.00%
April 30, 2004 10.00%
August 16, 2004 10.00%
</TABLE>
provided, however, that the final principal installment shall be repaid on the
Termination Date and in any event shall be in an amount equal to the aggregate
principal amount of the Term Advances outstanding on such date.
(b) Working Capital Advances. The Borrower shall repay to the Paying
Agent for the ratable account of the Working Capital Lenders on the Termination
Date the aggregate principal amount of the Working Capital Advances then
outstanding.
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(c) Revolving Credit Advances. The Borrower shall repay to the Paying
Agent for the ratable account of the Revolving Credit Lenders on the Termination
Date the aggregate principal amount of the Revolving Credit Advances then
outstanding.
(d) Swing Line Advances. The Borrower shall repay to the Paying Agent
for the account of the Swing Line Bank and each other Revolving Credit Lender
that has made a Swing Line Advance the outstanding principal amount of each
Swing Line Advance made by each of them on the earlier of the maturity date
specified in the applicable Notice of Swing Line Borrowing (which maturity shall
be no later than the thirtieth day after the requested date of such Borrowing)
and the Termination Date.
SECTION 2.04. Termination or Reduction of the Commitments . (a)
Optional. The Borrower may, upon at least three Business Days' notice to the
Paying Agent, terminate in whole or reduce in part the Unused Term Commitments,
the Unused Working Capital Commitments and the Unused Revolving Credit
Commitments; provided, however, that each partial reduction of a Facility (i)
shall be in an aggregate amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof and (ii) shall be made ratably among the
Appropriate Lenders in accordance with their Commitments with respect to such
Facility.
(b) Mandatory. (i) On the date of the Term Borrowing, after giving
effect to such Term Borrowing, and from time to time thereafter upon each
repayment or prepayment of the Term Advances, the aggregate Term Commitments of
the Term Lenders shall be automatically and permanently reduced, on a pro rata
basis, by an amount equal to the amount by which the aggregate Term Commitments
immediately prior to such reduction exceed the aggregate unpaid principal amount
of the Term Advances then outstanding.
(ii) If, on the fourth anniversary of the Effective Date, the
aggregate Revolving Credit Commitments of the Revolving Credit Lenders exceed
$15,000,000, then, on such day, the aggregate Revolving Credit Commitments of
the Revolving Credit Lenders shall be automatically and permanently reduced, on
a pro rata basis, in an amount such that, after giving effect to such reduction,
the aggregate Revolving Credit Commitments equal $15,000,000.
(iii) The Swing Line Facility shall be permanently reduced from time
to time on the date of each reduction in the Revolving Credit Facility by the
amount, if any, by which the amount of the Swing Line Facility exceeds the
Revolving Credit Facility after giving effect to such reduction of the Revolving
Credit Facility.
SECTION 2.05. Prepayments. (a) Optional. The Borrower may, upon at
least one Business Day's notice in the case of Base Rate Advances and three
Business Days' notice in the case of Eurodollar Rate Advances, in each case to
the Paying Agent stating the proposed date and aggregate principal amount of the
prepayment, and if such notice is given the Borrower shall,
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prepay the outstanding aggregate principal amount of the Advances comprising
part of the same Borrowing in whole or ratably in part, together with accrued
interest to the date of such prepayment on the aggregate principal amount
prepaid; provided, however, that (x) each partial prepayment shall be in an
aggregate principal amount of $1,000,000 or an integral multiple of $100,000 in
excess thereof in the case of Base Rate Advances and $5,000,000 or an integral
multiple of $1,000,000 in excess thereof in the case of Eurodollar Rate Advances
and if any prepayment of a Eurodollar Rate Advance is made on a date other than
the last day of an Interest Period for such Advance, the Borrower shall also pay
any amounts owing pursuant to Section 8.04(c). Each such prepayment of any Term
Advances shall be applied to the installments thereof on a pro rata basis.
(b) Mandatory. (i) The Borrower shall, on the date (the "PREPAYMENT
DATE") that is the earlier of (A) the first anniversary of the date of receipt
of the Net Cash Proceeds by the Borrower or any of its Subsidiaries from the
sale, lease, transfer or other disposition of any assets of the Borrower or any
of its Subsidiaries (other than any sale, lease, transfer or other disposition
of assets pursuant to clause (i), (ii ), (iii) or (iv) of Section 5.02(e)) and
(B) the date on which the Borrower is required to apply any portion of such Net
Cash Proceeds to prepay the Senior Notes pursuant to the Note Purchase
Agreement, but only to the extent such Net Cash Proceeds shall not have been
reinvested prior to such date in substantially similar assets constituting
Investments permitted under Section 5.02(f), prepay an aggregate principal
amount of the Term Advances comprising part of the same Borrowings in an amount
equal to the sum of (x) the Term Loan Percentage on the Prepayment Date of such
Net Cash Proceeds and (y) the amount of such Net Cash Proceeds that shall not be
required to prepay the Senior Notes on such Prepayment Date. Each such
prepayment of the Term Advances made on or after October 31, 2001 shall be
applied to the installments due thereon pursuant to Section 2.03(a) on a pro
rata basis.
(ii) The Borrower shall, on each Business Day, prepay an aggregate
principal amount of the Revolving Credit Advances comprising part of the same
Borrowings and the Swing Line Advances in an amount equal to the amount by which
(A) the sum of the aggregate principal amount of (x) the Revolving Credit
Advances and (y) the Swing Line Advances then outstanding exceeds (B) the
Revolving Credit Facility on such Business Day.
(iii) Prepayments of the Revolving Credit Facility made pursuant to
clause (ii) shall be first applied to prepay Swing Line Advances then
outstanding until such Advances are paid in full and second applied to prepay
Revolving Credit Advances then outstanding comprising part of the same
Borrowings until such Advances are paid in full.
(iv) The Borrower shall, on each Business Day, prepay an aggregate
principal amount of the Working Capital Advances comprising part of the same
Borrowings in an amount
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equal to the amount by which (A) the aggregate principal amount of the Working
Capital Advances then outstanding exceeds (B) the Working Capital Facility on
such Business Day.
(v) The Borrower shall, on the last day of each of the first three
fiscal quarters and the last day of each fiscal year of the Borrower, prepay the
principal amount of each Swing Line Borrowing in excess of $2,500,000
outstanding on such day.
(vi) All prepayments under this subsection (b) shall be made together
with accrued interest to the date of such prepayment on the principal amount
prepaid.
SECTION 2.06. Interest . (a) Scheduled Interest. The Borrower shall
pay interest on the unpaid principal amount of each Advance owing to each Lender
from the date of such Advance until such principal amount shall be paid in full,
at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a Base
Rate Advance, a rate per annum equal at all times to the sum of (A) the
Base Rate in effect from time to time plus (B) the Applicable Margin in
effect from time to time, which ratio shall be determined in accordance
with the definition of that term, payable in arrears quarterly on the last
day of each fiscal quarter during such periods and on the date such Base
Rate Advance shall be Converted or paid in full.
(ii) Eurodollar Rate Advances. During such periods as such Advance is
a Eurodollar Rate Advance, a rate per annum equal at all times during each
Interest Period for such Advance to the sum of (A) the Eurodollar Rate for
such Interest Period for such Advance plus (B) the Applicable Margin in
effect prior to the first day of such Interest Period, which ratio shall be
determined in accordance with the definition of that term, payable in
arrears on the last day of such Interest Period and, if such Interest
Period has a duration of more than three months, on each day that occurs
during such Interest Period every three months from the first day of such
Interest Period and on the date such Eurodollar Rate Advance shall be
Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the continuance
of an Event of Default, the Borrower shall pay interest on (i) the unpaid
principal amount of each Advance owing to each Lender, payable in arrears on the
dates referred to in clause (a)(i) or (a)(ii) above and on demand, at a rate per
annum equal at all times to 2% per annum above the rate per annum required to be
paid on such Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the
fullest extent permitted by law, the amount of any interest, fee or other amount
payable under the Loan Documents that is not paid when due, from the date such
amount shall be due until such amount shall be paid in full, payable in arrears
on the date such amount shall be paid in full and on demand, at a rate per annum
equal at all times to 2% per annum above the rate per annum required to be paid,
in the case of interest, on the Type of Advance on which such interest
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has accrued pursuant to clause (a)(i) or (a)(ii) above and, in all other cases,
on Base Rate Advances pursuant to clause (a)(i) above.
(c) Notice of Interest Period and Interest Rate. Promptly after
receipt of a Notice of Borrowing pursuant to Section 2.02(a), a notice of
Conversion pursuant to Section 2.08 or a notice of selection of an Interest
Period pursuant to the terms of the definition of "Interest Period", the Paying
Agent shall give notice to the Borrower and each Appropriate Lender of the
applicable Interest Period and the applicable interest rate determined by the
Paying Agent for purposes of clause (a)(i) or (a)(ii) above, and the applicable
rate, if any, furnished by each Reference Bank at the Borrower s request for the
purpose of determining the applicable interest rate under clause (a)(ii) above.
(d) Interest Rate Determination. (i) In the event that the Borrower
requests, in accordance with the definition of "Eurodollar Rate", that the
Eurodollar Rate be based on interest rate quotes received from the Reference
Banks, each Reference Bank agrees to furnish to the Paying Agent timely
information for the purpose of determining each Eurodollar Rate. If any one or
more of the Reference Banks shall not furnish such timely information to the
Paying Agent for the purpose of determining any such interest rate, the Paying
Agent shall determine such interest rate on the basis of timely information
furnished by the remaining Reference Banks.
(ii) If fewer than two Reference Banks are able to furnish timely
information to the Paying Agent for determining the Eurodollar Rate for any
Eurodollar Rate Advances and the Eurodollar Rate cannot otherwise be determined
in accordance with clause (b) of the definition of "Eurodollar Rate", the Paying
Agent shall forthwith notify the Borrower and the Lenders that the interest rate
cannot be determined pursuant to said clause (b) for such Eurodollar Rate
Advances, and, unless the Eurodollar Rate cannot be determined by reference to
clause (a) of the definition of Eurodollar Rate, then
(A) each such Advance will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base Rate Advance (or if
such Advance is then a Base Rate Advance, will continue as a Base Rate
Advance), and
(B) the obligation of the Lenders to make, or to Convert Advances
into, Eurodollar Rate Advances shall be suspended until the Paying Agent
shall notify the Borrower and the Lenders that the circumstances causing
such suspension no longer exist.
SECTION 2.07. Fees. (a) Commitment Fee. The Borrower shall pay to the
Paying Agent for the account of the Lenders a commitment fee, from the date
hereof in the case of each Initial Lender and from the effective date specified
in the Assignment and Acceptance pursuant to which it became a Lender in the
case of each other Lender until the Termination Date (or in the case of the Term
Commitments, until the Term Borrowing is made), payable in arrears
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on the date of the initial Borrowing hereunder, thereafter, in the case of the
Revolving Credit Commitments and Working Capital Commitments, quarterly on the
last day of each fiscal quarter, commencing with the fiscal quarter ending at
September 30, 1999, and on the Termination Date, at a percentage per annum equal
to the Applicable Percentage at such time on the average daily unused portion of
each Appropriate Lender's Term Commitment for the period until the Term
Borrowing is made and on the sum of the average daily Unused Revolving Credit
Commitment of such Lender plus its Pro Rata Share of the average daily
outstanding Swing Line Advances during such quarter plus the average daily
Unused Working Capital Commitment of such Lender; provided, however, that no
commitment fee shall accrue on any of the Commitments of a Defaulting Lender so
long as such Lender shall be a Defaulting Lender.
(b) Agents' Fees. The Borrower shall pay to each Agent for its own
account such fees as may from time to time be agreed between the Borrower and
such Agent.
SECTION 2.08. Conversion of Advances. (a) Optional. The Borrower may
on any Business Day, upon notice given to the Paying Agent not later than 12:00
noon (New York City time) on the third Business Day prior to the date of the
proposed Conversion or continuation, in the case of the Conversion or
continuation of any Advances into or as Eurodollar Rate Advances, and on the
same Business Day, in the case of the Conversion of any Advances into Base Rate
Advances, and subject, in each case, to the provisions of Sections 2.06 and
2.09, Convert (or in the case of Eurodollar Rate Advances, continue) all or any
portion of the Advances of one Type comprising the same Borrowing into Advances
of the other Type; provided, however, that any Conversion of Eurodollar Rate
Advances into Base Rate Advances or continuation of Eurodollar Rate Advances
shall be made only on the last day of an Interest Period for such Eurodollar
Rate Advances, any Conversion of Base Rate Advances into Eurodollar Rate
Advances shall be in an amount not less than the minimum amount specified in
Section 2.02(c), no Conversion of any Advances shall result in more separate
Borrowings than permitted under Section 2.02(c) and each Conversion of Advances
comprising part of the same Borrowing under any Facility shall be made ratably
among the Appropriate Lenders in accordance with their Commitments under such
Facility. Each such notice of Conversion or continuation shall, within the
restrictions specified above, specify (i) the date of such Conversion or
continuation, (ii) the Advances to be Converted or continued and (iii) if such
Conversion or continuation is into Eurodollar Rate Advances, the duration of the
initial Interest Period for such Advances. Each notice of Conversion shall be
irrevocable and binding on the Borrower.
(b) Mandatory. (i) On the date on which the aggregate unpaid principal
amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by
payment or prepayment or otherwise, to less than $5,000,000, such Advances shall
automatically Convert into Base Rate Advances.
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(ii) If the Borrower shall provide a notice of Conversion or
continuation and fail to select the duration of any Interest Period for any
Eurodollar Rate Advances in accordance with the provisions contained in the
definition of "Interest Period" in Section 1.01, the Paying Agent will forthwith
so notify the Borrower and the Appropriate Lenders, whereupon each such
Eurodollar Rate Advance will automatically, on the last day of the then existing
Interest Period therefor, Convert into or continue as a Eurodollar Rate Advance
with an interest period of one month. In addition, if the Borrower shall fail to
provide a timely notice of Conversion or continuation for any Eurodollar Rate
Advance, such Eurodollar Rate Advance will automatically Convert into a Base
Rate Advance.
(iii) Upon the occurrence and during the continuance of any Event of
Default, (x) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance and
(y) the obligation of the Lenders to make, or to Convert Advances into or to
continue Eurodollar Rate Advances as, Eurodollar Rate Advances shall be
suspended during such continuance.
SECTION 2.09. Increased Costs, Etc. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation after the date hereof or (ii) the compliance with any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law), there shall be any increase in the cost to any Lender
Party of agreeing to make or of making, funding or maintaining Eurodollar Rate
Advances (excluding, for purposes of this Section 2.09, any such increased costs
resulting from (x) Taxes or Other Taxes (as to which Section 2.11 shall govern)
and (y) changes in the basis of taxation of overall net income or overall gross
income by the United States or by the foreign jurisdiction or state under the
laws of which such Lender Party is organized or has its Applicable Lending
Office or any political subdivision thereof), then the Borrower shall from time
to time, upon demand by such Lender Party (with a copy of such demand to the
Paying Agent), pay to the Paying Agent for the account of such Lender Party
additional amounts sufficient to compensate such Lender Party for such increased
cost. A certificate as to the amount of such increased cost, submitted to the
Borrower by such Lender Party, shall be conclusive and binding for all purposes,
absent manifest error.
(b) If any Lender Party determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority enacted, promulgated, issued or made after the date
hereof (whether or not having the force of law) affects or would affect the
amount of capital required or expected to be maintained by such Lender Party or
any corporation controlling such Lender Party and that the amount of such
capital is increased by or based upon the existence of such Lender Party's
commitment to lend hereunder and other commitments of such type, then, upon
demand by such Lender Party or such corporation (with a copy of such demand to
the Paying Agent), the Borrower shall pay to the Paying Agent for the account of
such Lender Party, from time to time as specified by such Lender Party,
additional
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amounts sufficient to compensate such Lender Party in the light of such
circumstances, to the extent that such Lender Party reasonably determines such
increase in capital to be allocable to the existence of such Lender Party's
commitment to lend hereunder. A certificate as to such amounts submitted to the
Borrower by such Lender Party shall be conclusive and binding for all purposes,
absent manifest error.
(c) If, with respect to any Eurodollar Rate Advances under any
Facility, Lenders owed at least 50% of the then aggregate unpaid principal
thereof notify the Paying Agent that the Eurodollar Rate for any Interest Period
for such Advances will not adequately reflect the cost to such Lenders of
making, funding or maintaining their Eurodollar Rate Advances for such Interest
Period, the Paying Agent shall forthwith so notify the Borrower and the
Appropriate Lenders, whereupon (i) each such Eurodollar Rate Advance under such
Facility will automatically, on the last day of the then existing Interest
Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the
Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Paying Agent shall notify the Borrower
that such Lenders have determined that the circumstances causing such suspension
no longer exist.
(d) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation after the date hereof shall make it unlawful, or any central bank or
other governmental authority shall assert that it is unlawful, for any Lender or
its Eurodollar Lending Office to perform its obligations hereunder to make
Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate
Advances hereunder, then, on notice thereof and demand therefor by such Lender
to the Borrower through the Paying Agent, (i) each Eurodollar Rate Advance under
each Facility under which such Lender has a Commitment will automatically, upon
such demand, Convert into a Base Rate Advance and (ii) the obligation of the
Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Paying Agent shall notify the Borrower
that such Lender has determined that the circumstances causing such suspension
no longer exist.
(e) All amounts paid hereunder shall be without duplication of any
amounts included within the definition of the term "Eurodollar Rate".
SECTION 2.10. Payments and Computations. (a) The Borrower shall make
each payment hereunder and under the Notes, irrespective of any right of
counterclaim or set-off (except as otherwise provided in Section 2.14), not
later than 12:00 noon (New York City time) on the day when due in U.S. dollars
to the Paying Agent at the Paying Agent's Account in same day funds, with
payments being received by the Paying Agent after such time being deemed to have
been received on the next succeeding Business Day. The Paying Agent will
promptly thereafter cause like funds to be distributed (i) if such payment by
the Borrower is in respect of principal, interest, commitment fees or any other
obligation then payable hereunder and under the
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Notes to more than one Lender Party, to such Lender Parties for the account of
their respective Applicable Lending Offices ratably in accordance with the
amounts of such respective obligations then payable to such Lender Parties and
(ii) if such payment by the Borrower is in respect of any obligation then
payable hereunder to one Lender Party, to such Lender Party for the account of
its Applicable Lending Office, in each case to be applied in accordance with the
terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register pursuant to
Section 8.07(d) or upon the purchase by any Revolving Credit Lender of any Swing
Line Advance pursuant to Section 2.02(b), from and after the effective date of
such Assignment and Acceptance or purchase, as the case may be, the Paying Agent
shall make all payments hereunder and under the Notes in respect of the interest
assigned or purchased thereby to the Lender Party assignee or purchaser
thereunder, and, in the case of an Assignment and Acceptance, the parties to any
such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) The Borrower hereby authorizes each Lender Party and each of its
Affiliates, if and to the extent payment owed to such Lender Party is not made
when due hereunder (after giving effect to any period of grace) or, in the case
of a Lender, under the Note held by such Lender, to charge from time to time, to
the fullest extent permitted by law, against any or all of the Borrower's
accounts with such Lender Party or such Affiliate any amount so due.
(c) All computations of interest based on the Base Rate shall be made
by the Paying Agent on the basis of a year of 365 or 366 days, as the case may
be, and all computations of interest based on the Eurodollar Rate or the Federal
Funds Rate and of fees shall be made by the Paying Agent on the basis of a year
of 360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest or
fees are payable. Each determination by the Paying Agent of an interest rate or
fee hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(d) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or commitment fee, as the
case may be; provided, however, that, if such extension would cause payment of
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(e) Unless the Paying Agent shall have received notice from the
Borrower prior to the date on which any payment is due to any Lender Party
hereunder that the Borrower will not make such payment in full, the Paying Agent
may assume that the Borrower has made such payment in full to the Paying Agent
on such date and the Paying Agent may, in reliance
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upon such assumption, cause to be distributed to each such Lender Party on such
due date an amount equal to the amount then due such Lender Party. If and to the
extent the Borrower shall not have so made such payment in full to the Paying
Agent, each such Lender Party shall repay to the Paying Agent forthwith on
demand such amount distributed to such Lender Party together with interest
thereon, for each day from the date such amount is distributed to such Lender
Party until the date such Lender Party repays such amount to the Paying Agent,
at the Federal Funds Rate.
(f) If the Paying Agent receives funds for application to the
obligations of the Loan Parties under the Loan Documents under circumstances for
which the Loan Documents do not specify the Advances or the Facility to which,
or the manner in which, such funds are to be applied, the Paying Agent shall
distribute such funds to each Lender Party ratably in accordance with such
Lender Party's proportionate share of the principal amount of all outstanding
Advances then due and payable in repayment or prepayment of such of the
outstanding Advances or other obligations owed to such Lender Party and shall
return any unused funds to the Borrower.
SECTION 2.11. Taxes. (a) Any and all payments by the Borrower
hereunder or under the Notes shall be made, in accordance with Section 2.10,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender Party and each Agent,
taxes that are imposed on its overall net income by the United States and taxes
that are imposed on its overall net income (and franchise taxes imposed in lieu
thereof) by the state or foreign jurisdiction under the laws of which such
Lender Party or such Agent, as the case may be, is organized or any political
subdivision thereof and, in the case of each Lender Party, taxes that are
imposed on its overall net income (and franchise taxes imposed in lieu thereof)
by the state or foreign jurisdiction of such Lender Party's Applicable Lending
Office or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities in respect of
payments hereunder or under the Notes being hereinafter referred to as "TAXES").
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Note to any Lender Party or any Agent,
(i) the sum payable by the Borrower shall be increased as may be necessary so
that after the Borrower and the Paying Agent have made all required deductions
(including deductions applicable to additional sums payable under this Section
2.11) such Lender Party or such Agent, as the case may be, receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make all such deductions and (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Notes or from the execution,
delivery or registration of,
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performance under, or otherwise with respect to, this Agreement or the Notes
(hereinafter referred to as "OTHER TAXES").
(c) The Borrower shall indemnify each Lender Party and each Agent for
and hold them harmless against the full amount of Taxes and Other Taxes, and for
the full amount of taxes of any kind imposed by any jurisdiction on amounts
payable under this Section 2.11, imposed on or paid by such Lender Party or such
Agent (as the case may be) and any liability (including penalties, additions to
tax, interest and expenses) arising therefrom or with respect thereto. This
indemnification shall be made within 30 days from the date such Lender Party or
such Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to the Paying Agent, at its address referred to in
Section 8.02, the original or a certified copy of a receipt evidencing such
payment. In the case of any payment hereunder or under the Notes by or on behalf
of the Borrower through an account or branch outside the United States or by or
on behalf of the Borrower by a payor that is not a United States person, if the
Borrower determines that no Taxes are payable in respect thereof, the Borrower
shall furnish, or shall cause such payor to furnish, to the Paying Agent, at
such address, an opinion of counsel acceptable to the Paying Agent stating that
such payment is exempt from Taxes. For purposes of subsections (d) and (e) of
this Section 2.11, the terms "UNITED STATES" and "UNITED STATES PERSON" shall
have the meanings specified in Section 7701 of the Internal Revenue Code.
(e) Each Lender Party organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of this Agreement in the case of each Initial Lender and on the date of
the Assignment and Acceptance pursuant to which it becomes a Lender Party in the
case of each other Lender Party, and from time to time thereafter as requested
in writing by the Borrower (but only so long thereafter as such Lender Party
remains lawfully able to do so), provide each of the Paying Agent and the
Borrower with two original Internal Revenue Service forms 1001 or 4224, as
appropriate, or any successor or other form prescribed by the Internal Revenue
Service, certifying that such Lender Party is exempt from or entitled to a
reduced rate of United States withholding tax on payments pursuant to this
Agreement or the Notes. If the forms provided by a Lender Party at the time such
Lender Party first becomes a party to this Agreement indicate a United States
interest withholding tax rate in excess of zero, withholding tax at such rate
shall be considered excluded from Taxes unless and until such Lender Party
provides the appropriate forms certifying that a lesser rate applies, whereupon
withholding tax at such lesser rate only shall be considered excluded from Taxes
for periods governed by such forms; provided, however, that if, at the effective
date of the Assignment and Acceptance pursuant to which a Lender Party becomes a
party to this Agreement, the Lender Party assignor was entitled to payments
under subsection (a) of this Section 2.11 in respect of United States
withholding tax with respect to interest paid at such date, then, to such
extent, the term Taxes shall include (in addition to withholding taxes that may
be
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imposed in the future or other amounts otherwise includable in Taxes) United
States withholding tax, if any, applicable with respect to the Lender Party
assignee on such date. If any form or document referred to in this subsection
(e) requires the disclosure of information, other than information necessary to
compute the tax payable and information required on the date hereof by Internal
Revenue Service form 1001 or 4224, that the applicable Lender Party reasonably
considers to be confidential, such Lender Party shall give notice thereof to the
Borrower and shall not be obligated to include in such form or document such
confidential information.
(f) For any period with respect to which a Lender Party has failed to
provide the Borrower with the appropriate form described in subsection (e) above
(other than if such failure is due to a change in law occurring after the date
on which a form originally was required to be provided or if such form otherwise
is not required under subsection (e) above), such Lender Party shall not be
entitled to indemnification under subsection (a) or (c) of this Section 2.11
with respect to Taxes imposed by the United States by reason of such failure;
provided, however, that should a Lender Party become subject to Taxes because of
its failure to deliver a form required hereunder, the Borrower shall take such
steps as such Lender Party shall reasonably request to assist such Lender Party
to recover such Taxes.
SECTION 2.12. Sharing of Payments, Etc. If any Lender Party shall
obtain at any time any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise, other than as a result of an
assignment pursuant to Section 8.07) (a) on account of obligations due and
payable to such Lender Party hereunder and under the Notes at such time in
excess of its ratable share (according to the proportion of (i) the amount of
such obligations due and payable to such Lender Party at such time to (ii) the
aggregate amount of the obligations due and payable to all Lender Parties
hereunder and under the Notes at such time) of payments on account of the
obligations due and payable to all Lender Parties hereunder and under the Notes
at such time obtained by all the Lender Parties at such time or (b) on account
of obligations owing (but not due and payable) to such Lender Party hereunder
and under the Notes at such time in excess of its ratable share (according to
the proportion of (i) the amount of such obligations owing to such Lender Party
at such time to (ii) the aggregate amount of the obligations owing (but not due
and payable) to all Lender Parties hereunder and under the Notes at such time)
of payments on account of the obligations owing (but not due and payable) to all
Lender Parties hereunder and under the Notes at such time obtained by all of the
Lender Parties at such time, such Lender Party shall forthwith purchase from the
other Lender Parties such interests or participating interests in the
obligations due and payable or owing to them, as the case may be, as shall be
necessary to cause such purchasing Lender Party to share the excess payment
ratably with each of them; provided, however, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender Party, such
purchase from each other Lender Party shall be rescinded and such other Lender
Party shall repay to the purchasing Lender Party the purchase price to the
extent of such Lender Party's ratable share (according to the proportion of (i)
the purchase price paid to such Lender Party to (ii) the aggregate purchase
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price paid to all Lender Parties) of such recovery together with an amount equal
to such Lender Party's ratable share (according to the proportion of (i) the
amount of such other Lender Party's required repayment to (ii) the total amount
so recovered from the purchasing Lender Party) of any interest or other amount
paid or payable by the purchasing Lender Party in respect of the total amount so
recovered; provided further that, so long as the obligations under the Loan
Documents shall not have been accelerated, any excess payment received by any
Appropriate Lender shall be shared on a pro rata basis only with other
Appropriate Lenders. The Borrower agrees that any Lender Party so purchasing an
interest or participating interest from another Lender Party pursuant to this
Section 2.12 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such interest
or participating interest, as the case may be, as fully as if such Lender Party
were the direct creditor of the Borrower in the amount of such interest or
participating interest, as the case may be.
SECTION 2.13. Use of Proceeds. The proceeds of the Advances shall be
available (and the Borrower agrees that it shall use such proceeds) solely (a)
in the case of the Term Advances (i) in part (to the extent of approximately
$15,500,000) to purchase Qualifying Securities to be liquidated for the sole
purpose of funding capital expenditures of the Borrower and its Subsidiaries
substantially as set forth in the Business Plan delivered to the Paying Agent
from time to time pursuant to Section 5.03(d), and (ii) in part (to the extent
of approximately $34,500,000) to fund a distribution by the Company to Alliance
Resource Holdings, Inc. or such other Affiliate as the Company may elect on the
Effective Date, (b) in the case of the Working Capital Advances, to provide
working capital for the Borrower and its Subsidiaries and to fund cash
distributions to the holders of the MLP Units, and (c) in the case of the
Revolving Credit Advances, for general corporate purposes, including, without
limitation, to finance acquisitions and capital expenditures of the Borrower and
its Subsidiaries substantially as set forth in the Business Plan delivered to
the Paying Agent from time to time pursuant to Section 5.03(d).
SECTION 2.14. Defaulting Lenders. (a) In the event that, at any one
time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting
Lender shall owe a Defaulted Advance to the Borrower except for a Defaulted
Advance that is being contested in good faith by such Defaulting Lender, and
(iii) the Borrower shall be required to make any payment hereunder or under any
other Loan Document to or for the account of such Defaulting Lender, then the
Borrower may, so long as no Default shall occur or be continuing at such time
and to the fullest extent permitted by applicable law, set off and otherwise
apply the obligation of the Borrower to make such payment to or for the account
of such Defaulting Lender against the obligation of such Defaulting Lender to
make such Defaulted Advance. In the event that, on any date, the Borrower shall
so set off and otherwise apply its obligation to make any such payment against
the obligation of such Defaulting Lender to make any such Defaulted Advance on
or prior to such date, the amount so set off and otherwise applied by the
Borrower shall constitute for all purposes of this Agreement and the other Loan
Documents an Advance by such Defaulting Lender made on the date of such setoff
under the Facility pursuant to which such Defaulted Advance was originally
required to have been made pursuant to Section 2.01. Such Advance shall be
considered, for all purposes of this Agreement, to comprise part of the
Borrowing in connection with which such Defaulted
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Advance was originally required to have been made pursuant to Section 2.01, even
if the other Advances comprising such Borrowing shall be Eurodollar Rate
Advances on the date such Advance is deemed to be made pursuant to this
subsection (a). The Borrower shall notify the Paying Agent at any time the
Borrower exercises its right of set-off pursuant to this subsection (a) and
shall set forth in such notice (A) the name of the Defaulting Lender and the
Defaulted Advance required to be made by such Defaulting Lender and (B) the
amount set off and otherwise applied in respect of such Defaulted Advance
pursuant to this subsection (a). Any portion of such payment otherwise required
to be made by the Borrower to or for the account of such Defaulting Lender which
is paid by the Borrower, after giving effect to the amount set off and otherwise
applied by the Borrower pursuant to this subsection (a), shall be applied by the
Paying Agent as specified in subsection (b) or (c) of this Section 2.14.
(b) In the event that, at any one time, (i) any Lender Party shall be
a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount to
any Agent or any of the other Lender Parties and (iii) the Borrower shall make
any payment hereunder or under any other Loan Document to the Paying Agent for
the account of such Defaulting Lender, then the Paying Agent may, on its behalf
or on behalf of such other Agents or such other Lender Parties and to the
fullest extent permitted by applicable law, apply at such time the amount so
paid by the Borrower to or for the account of such Defaulting Lender to the
payment of each such Defaulted Amount to the extent required to pay such
Defaulted Amount. In the event that the Paying Agent shall so apply any such
amount to the payment of any such Defaulted Amount on any date, the amount so
applied by the Paying Agent shall constitute for all purposes of this Agreement
and the other Loan Documents payment, to such extent, of such Defaulted Amount
on such date. Any such amount so applied by the Paying Agent shall be retained
by the Paying Agent or distributed by the Paying Agent to such other Agents or
such other Lender Parties, ratably in accordance with the respective portions of
such Defaulted Amounts payable at such time to the Paying Agent, such other
Agents and such other Lender Parties and, if the amount of such payment made by
the Borrower shall at such time be insufficient to pay all Defaulted Amounts
owing at such time to the Paying Agent, such other Agents and such other Lender
Parties, in the following order of priority:
(i) first, to the Agents for any Defaulted Amounts then owing to them,
in their capacities as such, ratably in accordance with such respective
Defaulted Amounts then owing to the Agents;
(ii) second, to the Swing Line Bank for any Defaulted Amounts then
owing to it, in its capacity as such; and
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(iii) third, to any other Lender Parties for any Defaulted Amounts
then owing to such other Lender Parties, ratably in accordance with such
respective Defaulted Amounts then owing to such other Lender Parties.
Any portion of such amount paid by the Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Paying Agent pursuant to this subsection (b), shall be applied by the Paying
Agent as specified in subsection (c) of this Section 2.14.
(c) In the event that, at any one time (i) any Lender Party shall be a
Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted Advance
or a Defaulted Amount and (iii) the Borrower, any Agent or any other Lender
Party shall be required to pay or distribute any amount hereunder or under any
other Loan Document to or for the account of such Defaulting Lender, then the
Borrower or such Agent or such other Lender Party shall pay such amount to the
Paying Agent to be held by the Paying Agent, to the fullest extent permitted by
applicable law, in escrow or the Paying Agent shall, to the fullest extent
permitted by applicable law, hold in escrow such amount otherwise held by it.
Any funds held by the Paying Agent in escrow under this subsection (c) shall be
deposited by the Paying Agent in an interest bearing account at a bank (the
"ESCROW Bank") selected by the Paying Agent at the time, in the name and under
the control of the Paying Agent, but subject to the provisions of this
subsection (c). The terms applicable to such account, including the rate of
interest payable with respect to the credit balance of such account from time to
time, shall be the Escrow Bank's standard terms applicable to escrow accounts
maintained with it. Any interest credited to such account from time to time
shall be held by the Paying Agent in escrow under, and applied by the Paying
Agent from time to time in accordance with the provisions of, this subsection
(c). The Paying Agent shall, to the fullest extent permitted by applicable law,
apply all funds so held in escrow from time to time to the extent necessary to
make any Advances required to be made by such Defaulting Lender and to pay any
amount payable by such Defaulting Lender hereunder and under the other Loan
Documents to the Paying Agent or any other Lender Party, as and when such
Advances or amounts are required to be made or paid and, if the amount so held
in escrow shall at any time be insufficient to make and pay all such Advances
and amounts required to be made or paid at such time, in the following order of
priority:
(i) first, to the Agents for any amounts then due and payable by such
Defaulting Lender to them hereunder, in their capacities as such, ratably
in accordance with such respective amounts then due and payable to the
Agents;
(ii) second, to the Swing Line Bank for any amounts then due and
payable to it hereunder, in its capacity as such, by such Defaulting
Lender;
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(iii) third, to any other Lender Parties for any amount then due and
payable by such Defaulting Lender to such other Lender Parties hereunder,
ratably in accordance with such respective amounts then due and payable to
such other Lender Parties; and
(iv) fourth, to the Borrower for any Advance then required to be made
by such Defaulting Lender pursuant to a Commitment of such Defaulting
Lender.
In the event that any Lender Party that is a Defaulting Lender shall, at any
time, cease to be a Defaulting Lender, any funds held by the Paying Agent in
escrow at such time with respect to such Lender Party shall be distributed by
the Paying Agent to such Lender Party and applied by such Lender Party to the
obligations owing to such Lender Party at such time under this Agreement and the
other Loan Documents ratably in accordance with the respective amounts of such
obligations outstanding at such time.
(d) The rights and remedies against a Defaulting Lender under this
Section 2.14 are in addition to other rights and remedies that the Borrower may
have against such Defaulting Lender with respect to any Defaulted Advance and
that any Agent or any Lender Party may have against such Defaulting Lender with
respect to any Defaulted Amount.
SECTION 2.15. Evidence of Debt. (a) Each Lender Party shall maintain
in accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from each Advance owing to
such Lender Party from time to time, including the amounts of principal and
interest payable and paid to such Lender from time to time hereunder. The
Borrower agrees that upon notice by any Lender Party to the Borrower (with a
copy of such notice to the Paying Agent) to the effect that a promissory note or
other evidence of indebtedness is required or appropriate in order for such
Lender Party to evidence (whether for purposes of pledge, enforcement or
otherwise) the Advances owing to, or to be made by, such Lender Party, the
Borrower shall promptly execute and deliver to such Lender Party, with a copy to
the Paying Agent, a Working Capital Note, a Term Note and a Revolving Credit
Note, as applicable, in substantially the form of Exhibits A-1, A-2 and A-3
hereto, respectively, payable to the order of such Lender Party in a principal
amount equal to the Working Capital Commitment, the Term Commitment and the
Revolving Credit Commitment, respectively, of such Lender Party. All references
to Notes in the Loan Documents shall mean Notes, if any, to the extent issued
hereunder.
(b) The Register maintained by the Paying Agent pursuant to Section
8.07(d) shall include a control account, and a subsidiary account for each
Lender Party, in which accounts (taken together) shall be recorded (i) the date
and amount of each Borrowing made hereunder, the Type of Advances comprising
such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii)
the terms of each Assignment and Acceptance delivered to and accepted by it,
(iii) the amount of any principal or interest due and payable or to become due
and
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payable from the Borrower to each Lender Party hereunder, and (iv) the amount of
any sum received by the Paying Agent from the Borrower hereunder and each Lender
Party's share thereof.
(c) Entries made in good faith by the Paying Agent in the Register
pursuant to subsection (b) above, and by each Lender Party in its account or
accounts pursuant to subsection (a) above, shall be prima facie evidence of the
amount of principal and interest due and payable or to become due and payable
from the Borrower to, in the case of the Register, each Lender Party and, in the
case of such account or accounts, such Lender Party, under this Agreement,
absent manifest error; provided, however, that the failure of the Paying Agent
or such Lender Party to make an entry, or any finding that an entry is
incorrect, in the Register or such account or accounts shall not limit or
otherwise affect the obligations of the Borrower under this Agreement.
SECTION 2.16. Replacement of Certain Lenders. If any Lender (a
"SUBJECT LENDER") (a) is a Defaulting Lender that owes a Defaulted Advance to
the Borrower, (b) makes demand upon the Borrower for (or if the Borrower is
otherwise required to pay) amounts pursuant to Section 2.09(a) or (b) or Section
2.11 or (c) gives notice pursuant to Section 2.09(d) requiring a Conversion of
such Subject Lender's Eurodollar Rate Advances to Base Rate Advances or
suspending such Lender's obligation to make Advances as, or to Convert or
continue Advances into or as, Eurodollar Rate Advances, the Borrower may, within
90 days after receipt by the Borrower of such demand or notice (or the
occurrence of such other event causing the Borrower to be required to pay such
compensation), as the case may be, give notice (a "REPLACEMENT NOTICE") in
writing to the Paying Agent and such Subject Lender of its intention to replace
such Subject Lender with an Eligible Assignee designated in such Replacement
Notice (a "REPLACEMENT LENDER"). Such Subject Lender shall, subject to the
payment to such Subject Lender of any amounts due pursuant to Sections 2.09(a)
and (b) and Section 2.11 and all other amounts then owing to it under the Loan
Documents assign, in accordance with Section 8.07, all of its Commitments,
Advances, Notes and other rights and obligations under this Agreement and all
other Loan Documents to such proposed Eligible Assignee. Promptly upon the
effective date of an assignment described above, the Borrower shall issue a
replacement Note or Notes, as the case may be, to such Replacement Lender and
such Replacement Lender shall become a "Lender" for all purposes under this
Agreement and the other Loan Documents.
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ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Initial Extension of Credit .
The obligation of each Lender to make an Advance on the occasion of the Initial
Extension of Credit hereunder is subject to the satisfaction of the following
conditions precedent before or concurrently with the Initial Extension of
Credit:
(a) The Paying Agent shall have received on or before the day of the
Initial Extension of Credit the following, each dated such day (unless
otherwise specified), in form and substance satisfactory to the Paying
Agent (unless otherwise specified) and (except for the Notes) in sufficient
copies for each Lender Party:
(i) The Notes payable to the order of the Lenders that have
requested Notes prior to the Effective Date.
(ii) A pledge agreement in substantially the form of Exhibit D
hereto (as amended, the "PLEDGE AGREEMENT"), duly executed by the
Company and AROP, together with:
(A) evidence that the Qualified Securities have been
credited to the Securities Account (as defined in the Pledge
Agreement),
(B) duly executed copies of proper financing statements, to
be filed immediately after the Initial Extension of Credit under
the Uniform Commercial Code of all jurisdictions that the Paying
Agent may deem necessary or desirable in order to perfect and
protect the first priority liens and security interests created
under the Pledge Agreement,
(C) completed requests for information, dated on or before
the date of the Initial Extension of Credit, listing all
effective financing statements on file in the office of the
county clerk of Oklahoma County, Oklahoma that name the Borrower
as debtor, together with copies of such other financing
statements, and
(D) evidence that all action that the Paying Agent may
reasonably deem necessary or desirable in order to perfect and
protect the first priority Liens created under the Pledge
Agreement has been taken.
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(iii) A guaranty in substantially the form of Exhibit E hereto
(together with each other guaranty and guaranty supplement delivered
pursuant to Section 5.01(j), in each case as amended, the "SUBSIDIARY
GUARANTY"), duly executed by each Subsidiary Guarantor.
(iv) Certified copies of the resolutions of or on behalf of each
Loan Party approving the Transaction and each Transaction Document to
which it is or is to be a party and/or authorizing the general partner
or managing member, as applicable, to act on behalf of such limited
partnership or limited liability company, as the case may be, and of
all documents evidencing other necessary action (including, without
limitation, all necessary general partner, managing member or other
similar action) and governmental and other third party approvals and
consents, if any, with respect to the Transaction and each Transaction
Document to which it is or is to be a party.
(v) A copy of a certificate of the Secretary of State of the
jurisdiction of organization or formation of each Loan Party and (if
applicable) each general partner or managing member of each Loan Party
dated reasonably near the date of the Initial Extension of Credit,
certifying (A) as to a true and correct copy of the charter or similar
Constitutive Documents of such Person and each amendment thereto on
file in such Secretary's office and (B) that (1) such amendments are
the only amendments to such Person's charter or Constitutive Documents
on file in such Secretary's office, (2) such Person has paid all
franchise taxes to the date of such certificate and (C) such Person is
duly formed and in good standing or presently subsisting under the
laws of the State of the jurisdiction of its organization.
(vi) A copy of a certificate of the Secretary of State of each
jurisdiction in which any Loan Party or any general partner or
managing member, as applicable, of each Loan Party is required to be
qualified to do business, dated reasonably near the date of the
Initial Extension of Credit, stating that such Person is duly
qualified and in good standing as a foreign corporation, limited
partnership or limited liability company, as applicable, in such State
and has filed all annual reports required to be filed to the date of
such certificate.
(vii) A certificate of each Loan Party or on its behalf by its
managing general partner or managing member, as applicable, of each
Loan Party, signed on behalf of such Person by its President or a Vice
President and its Secretary or any Assistant Secretary (or persons
performing similar functions), dated the date of the Initial Extension
of Credit (the statements made in which certificate shall be true on
and as of the date of the Initial Extension of Credit), certifying as
to
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(A) the absence of any amendments to the Constitutive Documents of
such Person since the date of the Secretary of State's certificate
referred to in Section 3.01(a)(v), (B) a true and correct copy of the
bylaws (or similar Constitutive Documents) as in effect on the date on
which the resolutions referred to in Section 3.01(a)(iv) were adopted
and on the date of the Initial Extension of Credit, (C) the due
organization or formation and good standing or valid existence of such
Person as a corporation, a limited liability company or a limited
partnership, as the case may be, organized or formed under the laws of
the jurisdiction of its organization or formation, and the absence of
any proceeding for the dissolution or liquidation of such Person, (D)
the truth of the representations and warranties contained in the Loan
Documents as though made on and as of the date of the Initial
Extension of Credit and (E) the absence of any event occurring and
continuing, or resulting from the Initial Extension of Credit, that
constitutes a Default.
(viii) A certificate of the Secretary or an Assistant Secretary
of each Loan Party or on its behalf by its managing general partner or
managing member, as applicable certifying the names and true
signatures of the officers or managers, as applicable, of such Person
authorized to sign on its behalf each Transaction Document to which it
is or is to be a party and the other documents to be delivered
hereunder and thereunder.
(ix) Certified copies of each of the Related Documents, duly
executed by or on behalf of the parties thereto and in form and
substance satisfactory to the Lender Parties, together with all
agreements, instruments and other documents delivered in connection
therewith as the Paying Agent shall request.
(x) An assumption agreement in substantially the form of Exhibit
H hereto (the "ASSUMPTION AGREEMENT"), duly executed by AROP.
(xi) A certificate, substantially in the form of Exhibit F hereto
(the "SOLVENCY CERTIFICATE"), attesting to the Solvency of the Loan
Parties before and after giving effect to the Transaction, from the
Chief Financial Officer (or person performing similar functions) of
the Company.
(xii) An environmental assessment report previously delivered to
the Co-Administrative Agents prior to the Effective Date, as to any
hazards, costs or liabilities under Environmental Laws to which any
Loan Party or any of its Subsidiaries may be subject, the amount and
nature of which and the Borrower's plans with respect to which shall
be acceptable to the Lender Parties, together with evidence, in form
and substance satisfactory to the Lender Parties, that all
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applicable Environmental Laws shall have been complied with. To the
extent that either such report or any other information that may
become available to the Lender Parties shall disclose any hazards,
costs or liabilities under Environmental Laws or otherwise that the
Lender Parties deem material, the Lender Parties shall be satisfied
that such hazards, costs or liabilities were adequately reflected in
the Borrower's financial reserves shown on the financial statements
included in the Information Memorandum or that, to the extent not so
reflected, the Borrower has made adequate provision for such hazards,
costs or liabilities.
(xiii) A reasonableness review from Weir International Mining
Consultants with respect to the mine development plans that were
delivered to the Paying Agent prior to the date hereof in form and
substance satisfactory to the Lenders, including, without limitation,
minimum coal reserves, verification of operating and productivity
assumptions, the Gibson County Project, Capital Expenditures,
reclamation and closing costs and revenue projections.
(xiv) A five year Business Plan in form and scope satisfactory to
the Lenders.
(xv) A Notice of Borrowing relating to the Initial Extension of
Credit.
(xvi) Favorable opinions of (i) Andrews & Kurth L.L.P., special
counsel for the Loan Parties, (ii) Crowell & Moring LLP, counsel for
the Loan Parties, (iii) Thomas L. Pearson, Senior Vice President-Law
and Administration and General Counsel of Alliance Resource Holdings,
Inc., and (iv) local counsel with respect to the laws of Illinois,
Indiana, Kentucky, Maryland and West Virginia, in each case, in form
satisfactory to the Co-Administrative Agents.
(xvii) A favorable opinion of Shearman & Sterling, counsel for
the Agents, in form and substance satisfactory to the Agents.
(xviii) An intercreditor agreement in substantially the form of
Exhibit I hereto (as amended, the "INTERCREDITOR AGREEMENT"), duly
executed by the Paying Agent, the noteholders under the Note Purchase
Agreement, the Subsidiary Guarantors and the Company.
(b) The Lenders shall be satisfied with the partnership or limited
liability company structure and capitalization of each Loan Party,
including, without limitation, the terms and conditions of the Constitutive
Documents and each class of Equity Interest in such Loan Party and each
other agreement or instrument relating to such partnership
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structure, legal structure, and capitalization, and the tax status of the
Borrower as being treated as a partnership for tax purposes.
(c) The Lender Parties shall be satisfied that all Existing Debt,
other than Surviving Debt, has been prepaid, redeemed or defeased in full
or otherwise satisfied and extinguished and that all Surviving Debt shall
be on terms and conditions satisfactory to the Lender Parties.
(d) Before giving effect to the Transaction, there shall have occurred
no Material Adverse Change since December 31, 1998.
(e) There shall exist no action, suit, investigation, litigation or
proceeding affecting any Loan Party or any of its Subsidiaries pending or,
to the best knowledge of the Borrower, threatened before any court,
governmental agency or arbitrator that (i) would be reasonably likely to
have a Material Adverse Effect other than the matters satisfactory to the
Paying Agent and described on Schedule 4.01(f) hereto (the "DISCLOSED
LITIGATION") or (ii) purports to affect the legality, validity or
enforceability of any Transaction Document or the consummation of the
Transaction, and there shall have been no adverse change in the status, or
financial effect on any Loan Party or any of its Subsidiaries, of the
Disclosed Litigation from that described on Schedule 4.01(f) hereto.
(f) All governmental and third party consents and approvals necessary
in connection with the Transaction shall have been obtained or shall be in
the process of being obtained so long as it is not anticipated that such
consents and approvals may not be obtained (in each case without the
imposition of any conditions that are not acceptable to the Lender Parties)
and those obtained shall be in effect (other than those the failure to
obtain which would individually or collectively be reasonably likely not to
have a Material Adverse Effect); and no law or regulation shall be
applicable in the judgment of the Lender Parties, in each case that
restrains, prevents or imposes materially adverse conditions upon the
Transaction or the rights of the Loan Parties or their Subsidiaries freely
to transfer or otherwise dispose of, or to create any Lien on, any
Collateral.
(g) The Agents shall have completed a due diligence investigation of
each Loan Party and its Subsidiaries in scope, and with results,
satisfactory to the Lender Parties.
(h) The Borrower shall have paid all accrued fees of the Agents, the
Joint Arrangers and the Lender Parties and all reasonable expenses of the
Agents (including the reasonable fees and expenses of Shearman & Sterling,
counsel to the Agents) to the extent such fees and expenses have been
invoiced at least 24 hours prior to the date hereof or are specifically set
forth in the Fee Letter.
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(i) The Borrower shall have received at least (i) $180,000,000 in
gross proceeds from the sale of the Senior Notes and (ii) $110,000,000 in
Net Cash Proceeds from the sale of the MLP Units.
(j) The MLP Units and the Senior Notes shall have been issued in
accordance with the Transaction Documents.
(k) The Senior Notes shall have received long-term senior unsecured
non-credit enhanced debt ratings of at least BBB- from both Duff & Phelps
Credit Rating Co. and Fitch IBCA, Inc and such rating shall remain in
effect at the time of closing.
(l) The Borrower's and its Subsidiaries' employee benefit plans shall
be, in all material respects, funded in accordance with the minimum
statutory requirements, (ii) no "reportable event" (as defined in ERISA,
but excluding events for which reporting has been waived) shall have
occurred and be continuing as to any such employee benefit plan, and (iii)
no termination of, or withdrawal from, any such employee benefit plan shall
have occurred and be continuing or be contemplated.
(m) The Company and AROP shall have completed each of the transactions
described in the Contribution Agreement (the "CONTRIBUTION TRANSACTIONS")
and no provision of the Contribution Agreement relating to the Contribution
Transactions shall have been waived, modified or supplemented without the
consent of the Co-Administrative Agents.
SECTION 3.02. Conditions Precedent to Each Borrowing. The obligation
of each Appropriate Lender to make an Advance (other than a Swing Line Advance
made by a Revolving Credit Lender pursuant to Section 2.02(b)) on the occasion
of each Borrowing (including the initial Borrowing) and the obligation of the
Swing Line Bank to make a Swing Line Advance on the occasion of each Swing Line
Borrowing, shall be subject to the further conditions precedent that on the date
of such Borrowing (a) the following statements shall be true (and each of the
giving of the applicable Notice of Borrowing or Notice of Swing Line Borrowing
and the acceptance by the Borrower of the proceeds of such Borrowing shall
constitute a representation and warranty by the Borrower that both on the date
of such notice and on the date of such Borrowing such statements are true):
(i) the representations and warranties contained in each Loan Document
are correct in all material respects on and as of such date, before and
after giving effect to such Borrowing and to the application of the
proceeds therefrom, as though made on and as of such date, other than any
such representations or warranties that, by their terms, refer to an
earlier date, in which case as of such earlier date; and
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(ii) no Default has occurred and is continuing, or would result from
such Borrowing or from the application of the proceeds therefrom; and (b)
the Paying Agent shall have received such other approvals, opinions or
documents as any Appropriate Lender Party through the Paying Agent may
reasonably request.
SECTION 3.03. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender Party shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lender Parties unless an
officer of the Paying Agent responsible for the transactions contemplated by the
Loan Documents shall have received notice from such Lender Party prior to the
Initial Extension of Credit specifying its objection thereto and, if the Initial
Extension of Credit consists of a Borrowing, such Lender Party shall not have
made available to the Paying Agent such Lender Party's ratable portion of such
Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) Each Loan Party and each of its Subsidiaries and each general
partner or managing member of each Loan Party and each of its Subsidiaries (i)
is a corporation, limited partnership or limited liability company, as the case
may be, duly organized or formed, validly existing and in good standing or
validly subsisting under the laws of the jurisdiction of its organization or
formation, (ii) is duly qualified and in good standing as a foreign corporation,
limited partnership or limited liability company in each other jurisdiction in
which it owns or leases property or in which the conduct of its business
requires it to so qualify or be licensed and (iii) has all requisite corporate,
limited liability company or partnership power and authority (including, without
limitation, all material governmental licenses, permits and other approvals
other than such licenses, permits and other approvals that are being obtained in
the ordinary course of business) to own or lease and operate its properties and
to carry on its business as now conducted and as proposed to be conducted. All
of the outstanding Capital Stock in the Company and AROP has been validly
issued, will be fully paid (to the extent required under the Partnership
Agreement or the Company's operating agreement) and non-assessable (except as
such non-assessability may be affected by section 17-607 of the Delaware Revised
Uniform Limited Partnership Act, in the case of AROP, or by section 18-607 of
the Delaware Limited Liability Company Act, in the case of a limited liability
company) on the Effective Date and are
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owned by the Persons in the amounts specified on the applicable portion of
Schedule 4.01(a) hereto free and clear of all Liens.
(b) Set forth on Schedule 4.01(b) hereto is a complete and accurate
list of all Subsidiaries of each Loan Party, showing as of the date hereof (as
to each such Subsidiary) the status of each Subsidiary as a Restricted
Subsidiary or Unrestricted Subsidiary, the jurisdiction of its organization, the
number of shares of each class of its Capital Stock authorized, and the number
outstanding, on the date hereof and the percentage of each such class of its
Capital Stock owned (directly or indirectly) by such Loan Party and the number
of shares covered by all outstanding options, warrants, rights of conversion or
purchase and similar rights at the date hereof. All of the outstanding Capital
Stock in each Loan Party's Subsidiaries has been validly issued, will be fully
paid (to the extent required under the Partnership Agreement or by such
Subsidiary's operating agreement, in the case of a limited liability company)
and non-assessable (except as such non-assessability may be affected by section
17-607 of the Delaware Revised Uniform Limited Partnership Act, in the case of
AROP, or by section 18-607 of the Delaware Limited Liability Company Act, in the
case of a limited liability company) on the Effective Date and are owned by such
Loan Party and/or one or more of its Subsidiaries free and clear of all Liens.
(c) The execution, delivery and performance by each Loan Party of each
Transaction Document to which it is or is to be a party, and the consummation of
the Transaction, are within such Loan Party's or such Loan Party's general
partner's or managing member's corporate, partnership or limited liability
company powers, have been duly authorized by all necessary action by or on
behalf of such Loan Party (including, without limitation, all necessary partner,
managing member or other similar action), and do not (i) contravene such Loan
Party's or such Loan Party's general partner's or managing member's Constitutive
Documents, (ii) violate any law, rule, regulation (including, without
limitation, Regulations U and X of the Board of Governors of the Federal Reserve
System), order, writ, judgment, injunction, decree, determination or award,
(iii) conflict with or result in the breach of, or constitute a default or
require any payment to be made under, any contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument binding on or affecting any
Loan Party, any of its Subsidiaries or any of their properties or (iv) except
for the Liens created under the Loan Documents, result in or require the
creation or imposition of any Lien upon or with respect to any of the properties
of any Loan Party or any of its Subsidiaries. No Loan Party or any of its
Subsidiaries is in violation of any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or in breach of any such
contract, loan agreement, indenture, mortgage, deed of trust, lease or other
instrument, the violation or breach of which would be reasonably likely to have
a Material Adverse Effect.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other third
party is required for (i) the
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due execution, delivery, recordation, filing or performance by or on behalf of
any Loan Party or any general partner or managing member of any Loan Party of
any Transaction Document to which it is or is to be a party, or for the
consummation of the Transaction, (ii) the grant by any Loan Party of the Liens
granted by it pursuant to the Pledge Agreement, (iii) except as required to
comply with the requirements of Articles 8 and 9 of the New York Uniform
Commercial Code, the perfection or maintenance of the Liens created under the
Pledge Agreement (including the first priority nature thereof) or (iv) the
exercise by any Agent or any Lender Party of its rights under the Loan Documents
or the remedies in respect of the Collateral pursuant to the Pledge Agreement,
except for the authorizations, approvals, actions, notices and filings listed on
Schedule 4.01(d) hereto, all of which have been duly obtained, taken, given or
made, or are in the process of being obtained and it is not anticipated that
such consents and approvals may not be obtained (in each case without the
imposition of any conditions that are not acceptable to the Lender Parties) and
those obtained are in full force and effect (other than those the failure to
obtain which would not individually or collectively be reasonably likely to have
a Material Adverse Effect).
(e) This Agreement has been, and each other Transaction Document when
delivered hereunder will have been, duly executed and delivered by each Loan
Party party thereto. This Agreement is, and each other Transaction Document when
delivered hereunder will be, the legal, valid and binding obligation of each
Loan Party party thereto, enforceable against such Loan Party in accordance with
its terms.
(f) There is no action, suit, investigation, litigation or proceeding
affecting any Loan Party or any of its Subsidiaries, including any Environmental
Action, pending or to the best knowledge of the Borrower, threatened before any
court, governmental agency or arbitrator that (i) would be reasonably expected
to be adversely determined, and if so determined would be reasonably expected to
have a Material Adverse Effect except as set forth on Schedule 4.01(f) hereto,
or (ii) purports to affect the legality, validity or enforceability of any
Transaction Document or the consummation of the Transaction, and there has been
no material adverse change in the status, or financial effect on any Loan Party
or any of its Subsidiaries, of the Disclosed Litigation from that described on
Schedule 4.01(f) hereto.
(g) The Consolidated balance sheet of Alliance Resource Group as at
December 31, 1998, and the related Consolidated statement of income and
Consolidated statement of cash flows of Alliance Resource Group for the fiscal
year then ended, accompanied by an unqualified opinion of Deloitte & Touche LLP,
independent public accountants, and the Consolidated balance sheet of Alliance
Resource Group as at March 31, 1999, and the related Consolidated statement of
income and Consolidated statement of cash flows of Alliance Resource Group for
the three months then ended, duly certified by the Chief Financial Officer (or
person performing similar functions) of the Company, copies of which have been
furnished to each Lender Party, fairly present, subject, in the case of said
balance sheet as at March 31, 1999,
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and said statements of income and cash flows for the three months then ended, to
year-end audit adjustments, the Consolidated financial condition of Alliance
Resource Group as at such dates and the Consolidated results of operations of
Alliance Resource Group for the periods ended on such dates, all in accordance
with generally accepted accounting principles applied on a consistent basis, and
since December 31, 1998, there has been no Material Adverse Change.
(h) The Consolidated pro forma balance sheet of the MLP and its
Subsidiaries as at March 31, 1999, and the related Consolidated pro forma
statement of income and cash flows of the MLP and its Subsidiaries for the three
months then ended, certified by the Chief Financial Officer (or person
performing similar functions) of the Company, copies of which have been
furnished to each Lender Party, fairly present the Consolidated pro forma
financial condition of the MLP and its Subsidiaries as at such date and the
Consolidated pro forma results of operations of the MLP and its Subsidiaries for
the period ended on such date, in each case giving effect to the Transaction,
all in accordance with GAAP.
(i) The Consolidated and consolidating forecasted balance sheets,
statements of income and statements of cash flows of the Borrower and its
Subsidiaries delivered to the Lender Parties in the Information Memorandum prior
to the Effective Date and pursuant to Section 5.03 were prepared in good faith
on the basis of the assumptions stated therein, which assumptions were fair in
light of the conditions existing at the time of delivery of such forecasts, and
represented, at the time of delivery, the Borrower's best estimate of its future
financial performance.
(j) Neither the Information Memorandum nor any other written
information, exhibit or report furnished by or on behalf of any Loan Party to
any Agent or any Lender Party in connection with the negotiation and syndication
of the Loan Documents or pursuant to the terms of the Loan Documents contained
any untrue statement of a material fact or omitted to state a material fact
necessary to make the statements made therein not misleading in light of the
circumstances under which the same were made.
(k) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying Margin Stock, and no proceeds of any
Advance will be used to purchase or carry any Margin Stock or to extend credit
to others for the purpose of purchasing or carrying any Margin Stock.
(l) Neither the Borrower nor any of its Subsidiaries is an "investment
company", or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company", as such terms are defined in the Investment
Company Act of 1940, as amended. Neither any Loan Party nor any of its
Subsidiaries is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", as such terms are defined in the Public Utility
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65
Holding Company Act of 1935, as amended. Neither the making of any Advances, nor
the application of the proceeds or repayment thereof by the Borrower, nor the
consummation of the other transactions contemplated by the Transaction
Documents, will violate any provision of any such Act or any rule, regulation or
order of the Securities and Exchange Commission thereunder.
(m) Neither the Borrower nor any of its Subsidiaries is a party to any
indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate restriction that would be
reasonably likely to have a Material Adverse Effect.
(n) All actions necessary or desirable to perfect and protect the
security interest in the Collateral created under the Pledge Agreement have been
duly made or taken and are in full force and effect, and the Pledge Agreement
creates in favor of the Paying Agent for the benefit of the Secured Parties a
valid and, together with such filings and other actions, perfected first
priority security interest in the Collateral, securing the payment of the
Secured Obligations, and all filings and other actions necessary or desirable to
perfect and protect such security interest have been duly taken. The Loan
Parties are the legal and beneficial owners of the Collateral free and clear of
any Lien, except for the Liens created under the Pledge Agreement.
(o) Each Loan Party is, individually and together with its
Subsidiaries, Solvent.
(p) (i) Set forth on Schedule 4.01(p) hereto is a complete and
accurate list of all Plans and Multiemployer Plans.
(ii) No ERISA Event has occurred or is reasonably expected to occur
with respect to any Plan which could reasonably be expected to result in a
Material Adverse Effect.
(iii) Schedule B (Actuarial Information) to the most recent annual
report (Form 5500 Series) for each Plan, copies of which have been filed with
the Internal Revenue Service and furnished to the Paying Agent, is complete and
accurate and fairly presents the funding status of such Plan, and since the date
of such Schedule B there has been no change in such funding status which could
reasonably be expected to result in a Material Adverse Effect.
(iv) Neither any Loan Party nor any ERISA Affiliate has incurred or is
reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan
which could reasonably be expected to result in a Material Adverse Effect.
(v) Neither any Loan Party nor any ERISA Affiliate has been notified
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or has been terminated, within the meaning of Title IV of ERISA,
and no such Multiemployer Plan is
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reasonably expected to be in reorganization or to be terminated, within the
meaning of Title IV of ERISA which could reasonably be expected to result in a
Material Adverse Effect.
(q) (i) Except as set forth on Part I of Schedule 4.01(q) hereto, the
operations and properties of each Loan Party and each of its Subsidiaries comply
in all material respects with all applicable Environmental Laws and
Environmental Permits, all past non-compliance with such Environmental Laws and
Environmental Permits has been resolved without ongoing obligations or costs,
and no circumstances exist that would be reasonably likely to (A) form the basis
of an Environmental Action against any Loan Party or any of its Subsidiaries or
any of their properties that could have a Material Adverse Effect or (B) cause
any such property to be subject to any restrictions on ownership, occupancy, use
or transferability under any Environmental Law.
(ii) Except as set forth on Part II of Schedule 4.01(q) hereto, none
of the properties currently or formerly owned or operated by any Loan Party or
any of its Subsidiaries is listed or proposed for listing on the NPL or on the
CERCLIS or any analogous foreign, state or local list or is adjacent to any such
property; there are no and never have been any underground or aboveground
storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons
in which Hazardous Materials are being or have been treated, stored or disposed
on any property currently owned or operated by any Loan Party or any of its
Subsidiaries or, to the best of its knowledge, on any property formerly owned or
operated by any Loan Party or any of its Subsidiaries; there is no asbestos or
asbestos-containing material on any property currently owned or operated by any
Loan Party or any of its Subsidiaries; and Hazardous Materials have not been
released, discharged or disposed of on any property currently or formerly owned
or operated by any Loan Party or any of its Subsidiaries.
(iii) Except as set forth on Part III of Schedule 4.01(q) hereto,
neither any Loan Party nor any of its Subsidiaries is undertaking, and has not
completed, either individually or together with other potentially responsible
parties, any investigation or assessment or remedial or response action relating
to any actual or threatened release, discharge or disposal of Hazardous
Materials at any site, location or operation, either voluntarily or pursuant to
the order of any governmental or regulatory authority or the requirements of any
Environmental Law; and all Hazardous Materials generated, used, treated, handled
or stored at, or transported to or from, any property currently or formerly
owned or operated by any Loan Party or any of its Subsidiaries have been
disposed of in a manner not reasonably expected to result in material liability
to any Loan Party or any of its Subsidiaries.
(r) (i) Each Loan Party and each of its Subsidiaries and Affiliates
has filed, has caused to be filed or has been included in all tax returns
(Federal, state, local and foreign) required to be filed and has paid all taxes
shown thereon to be due, together with applicable interest and penalties.
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(ii) Set forth on Schedule 4.01(r) hereto is a complete and accurate
list, as of the date hereof, of each taxable year of each Loan Party and each of
its Subsidiaries and Affiliates for which Federal income tax returns have been
filed and for which the expiration of the applicable statute of limitations for
assessment or collection has not occurred by reason of extension or otherwise
(an "OPEN YEAR").
(iii) The aggregate unpaid amount, as of the date hereof, of
adjustments to the Federal income tax liability of each Loan Party and each of
its Subsidiaries and Affiliates proposed by the Internal Revenue Service with
respect to Open Years does not exceed $0. No issues have been raised by the
Internal Revenue Service in respect of Open Years that, in the aggregate, would
be reasonably likely to have a Material Adverse Effect.
(iv) The aggregate unpaid amount, as of the date hereof, of
adjustments to the state, local and foreign tax liability of each Loan Party and
its Subsidiaries and Affiliates proposed by all state, local and foreign taxing
authorities (other than amounts arising from adjustments to Federal income tax
returns) does not exceed $0. No issues have been raised by such taxing
authorities that, in the aggregate, would be reasonably likely to have a
Material Adverse Effect.
(v) Each of AROP and MLP will be treated as a partnership for Federal
income tax purposes.
(s) Neither the business nor the properties of the Borrower or any of
its Subsidiaries are affected by any fire, explosion, accident, strike, lockout
or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or
of the public enemy or other casualty (whether or not covered by insurance) that
would be reasonably likely to have a Material Adverse Effect.
(t) Set forth on Schedule 4.01(t) hereto is a complete and accurate
list of all Existing Debt (other than Surviving Debt), showing as of the date
hereof the obligor and the principal amount outstanding thereunder.
(u) Set forth on Schedule 4.01(u) hereto is a complete and accurate
list of all Surviving Debt, showing as of the date hereof the obligor and the
principal amount outstanding thereunder, the maturity date thereof and the
amortization schedule (if any) therefor.
(v) Set forth on Schedule 4.01(v) hereto is a complete and accurate
list of all Liens on the property or assets of the Borrower or any of its
Subsidiaries, showing as of the date hereof the lienholder thereof, the
principal amount of the obligations secured thereby and the property or assets
of the Borrower or such Subsidiary subject thereto.
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(w) Set forth on Schedule 4.01(w) hereto is a complete and accurate
list of all Investments held by the Borrower or any of its Subsidiaries on the
date hereof, showing as of the date hereof the amount, obligor or issuer and
maturity, if any, thereof.
(x) The Borrower has (i) initiated a review and assessment of all
areas within its and each of its Subsidiaries' business and operations that
could be adversely affected by the risk that computer applications used by the
Borrower or any of its Subsidiaries may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999 (the "YEAR 2000 PROBLEM"), (ii) distributed a
questionnaire to each of its suppliers, vendors and customers requesting such
party s plans and timetable for addressing the Year 2000 Problem, (iii)
developed a plan and timetable for addressing the Year 2000 Problem on a timely
basis and no later than November 31, 1999 will have completed such plan, and
(iv) to date, implemented that plan in accordance with such timetable. Based on
the foregoing, the Borrower believes that all computer applications that are
material to its or any of its Subsidiaries' business and operations are
reasonably expected on a timely basis to be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000 ("YEAR
2000 COMPLIANT"), except to the extent that a failure to do so could not
reasonably be expected to have a Material Adverse Effect.
(y) (i) The Borrower and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, for which the failure so to do,
individually or in the aggregate, would reasonably be likely to have a Material
Adverse Effect, without known conflict with the rights of others, (ii) to the
best knowledge of the Borrower, no product or practice of the Borrower or any of
its Subsidiaries infringes in any material respect on any license, permit,
franchise, authorization, patent, copyright, service mark, trademark, trade name
or other right owned by any other Person, and (iii) to the best knowledge of the
Borrower, there is no material violation by any Person of any right of the
Borrower of any of its Subsidiaries with respect to any patent, copyright,
service mark, trademark, trade name or other right owned or used by the Borrower
or any of its Subsidiaries.
(z) To the best knowledge of the Borrower, the Borrower and its
Subsidiaries maintain adequate reserves for future costs associated with any
lung disease claim alleging pneumoconiosis or silicosis or arising out of
exposure or alleged exposure to coal dust or the coal mining environment, and
such reserves are not less than those required by GAAP.
(aa) The Borrower s obligations under this Agreement and the Notes and
each Subsidiary Guarantor s obligations under the Subsidiary Guaranty, will,
upon (a) the execution and delivery of the Notes and the execution and delivery
of such Subsidiary Guaranty, respectively, and (b) the effectiveness of the
Assumption Agreement, rank pari passu, without preference or priority, with all
of the other outstanding unsecured and unsubordinated Debt of the
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Borrower or of such Subsidiary Guarantor, as the case may be (disregarding for
this purpose the Collateral for the Term Advances pledged pursuant to the Pledge
Agreement).
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants . So long as any Advance or any
other monetary obligation of any Loan Party under any Loan Document shall remain
unpaid or any Lender Party shall have any Commitment hereunder, the Borrower
will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable laws,
rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA, except to the extent failure so to
comply, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become delinquent,
(i) all taxes, assessments and governmental charges or levies imposed upon
it or upon its property and (ii) all lawful claims that, if unpaid, might
by law become a Lien upon its property, except to the extent failure to so
pay or discharge, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect; provided, however, that neither
the Borrower nor any of its Subsidiaries shall be required to pay or
discharge any such tax, assessment, charge or claim that is being contested
in good faith and by proper proceedings and as to which appropriate
reserves are being maintained, unless and until any Lien resulting
therefrom attaches to its property and becomes enforceable against its
other creditors.
(c) Compliance with Environmental Laws. Comply, and cause each of its
Subsidiaries and all lessees and other Persons operating or occupying its
properties to comply, in all material respects, with all applicable
Environmental Laws and Environmental Permits; obtain and renew and cause
each of its Subsidiaries to obtain and renew all material Environmental
Permits necessary for its operations and properties; and conduct, and cause
each of its Subsidiaries to conduct, any investigation, study, sampling and
testing, and undertake any cleanup, removal, remedial or other action
necessary to remove and clean up all Hazardous Materials from any of its
properties, in accordance in all material respects, with the requirements
of all Environmental Laws; provided, however, that neither the Borrower nor
any of its Subsidiaries shall be required to undertake any such cleanup,
removal, remedial or other action to the extent that its
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obligation to do so is being contested in good faith and by proper
proceedings and appropriate reserves are being maintained with respect to
such circumstances.
(d) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks
as is usually carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which the Borrower or such
Subsidiary operates, except to the extent failure to maintain such
insurance, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
(e) Preservation of Partnership or Limited Liability Company
Existence, Etc. Preserve and maintain, and cause each of its Subsidiaries
to preserve and maintain, its existence, legal structure, legal name (in
the case of the Borrower), rights (charter and statutory), permits,
licenses, approvals, privileges, franchises and intellectual property;
provided, however, that the Borrower and its Subsidiaries may consummate
any merger or consolidation permitted under Section 5.02(d) and; provided
further that neither the Borrower nor any of its Subsidiaries shall be
required to preserve any right, permit, license, approval, privilege,
franchise or intellectual property if the Board of Directors (or persons
performing similar functions) of or on behalf of the Borrower or such
Subsidiary shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Borrower or such
Subsidiary, as the case may be, and that the loss thereof, individually or
in the aggregate, would not reasonably be expected to have a Material
Adverse Effect.
(f) Visitation Rights. At any reasonable time and from time to time
upon reasonable notice, permit any of the Agents or any of the Lender
Parties, or any agents or representatives thereof, to examine and make
copies of and abstracts from the records and books of account of, and visit
the properties of, the Borrower and any of its Subsidiaries, and to discuss
the affairs, finances and accounts of the Borrower and any of its
Subsidiaries with any of their officers or directors and with their
independent certified public accountants.
(g) Keeping of Books. Keep, and cause each of its Subsidiaries to
keep, proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of
the Borrower and each such Subsidiary in accordance with GAAP.
(h) Maintenance of Properties, Etc. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, all of its properties
that are used or useful in the conduct of its business in good working
order and condition, ordinary wear and tear
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excepted, except to the extent the failure to so maintain or preserve such
properties, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
(i) Covenant to Guarantee Obligations. Upon the formation or
acquisition by the Borrower of any new direct or indirect Restricted
Subsidiary that is a Domestic Subsidiary, the Borrower shall, in each case
at the Borrower's expense (i) within 10 days after such formation or
acquisition, cause each such Restricted Subsidiary, and cause each direct
and indirect parent of such Restricted Subsidiary (if it has not already
done so), to duly execute and deliver to the Paying Agent a guaranty or
guaranty supplement, in form and substance satisfactory to the Paying
Agent, guaranteeing the other Loan Parties' obligations under the Loan
Documents and (ii) at any time and from time to time, promptly execute and
deliver any and all further instruments and documents and take all such
other action as the Paying Agent may deem necessary or desirable in
obtaining the full benefits of such guaranties.
(j) Further Assurances. (i) Promptly upon request by the Paying Agent,
or any Lender Party through the Paying Agent, correct, and cause each of
its Subsidiaries promptly to correct, any material defect or error that may
be discovered in any Loan Document or in the execution, acknowledgment,
filing or recordation thereof, and
(ii) Promptly upon request by the Paying Agent, or any Lender Party
through the Paying Agent, take such action as the Paying Agent, or any
Lender Party through the Paying Agent, may reasonably require from time to
time in order to (A) carry out more effectively the purposes of the Loan
Documents, and (B) perfect and maintain the validity, effectiveness and
priority of the Pledge Agreement and any of the Liens intended to be
created thereunder, and cause each of its Subsidiaries to do so.
(k) Performance of Related Documents. Perform and observe, and cause
each of its Subsidiaries to perform and observe, all of the terms and
provisions of each Related Document to be performed or observed by it,
maintain each such Related Document in full force and effect, enforce such
Related Document in accordance with its terms, take all such action to such
end as may be from time to time requested by the Paying Agent and, upon
request of the Paying Agent, make to each other party to each such Related
Document such demands and requests for information and reports or for
action as any Loan Party or any of its Subsidiaries is entitled to make
under such Related Document, except, in any case, where the failure to do
so, either individually or in the aggregate, would not be reasonably likely
to have a Material Adverse Effect.
(l) Preparation of Environmental Reports. At the request of the Paying
Agent from time to time and upon the occurrence and during the continuance
of an Event of
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Default, provide to the Lender Parties within 60 days after such request,
at the expense of the Borrower, an environmental site assessment report for
any of its or its Subsidiaries' properties described in such request,
prepared by an environmental consulting firm acceptable to the Paying
Agent, indicating the presence or absence of Hazardous Materials and the
estimated cost of any compliance, removal or remedial action in connection
with any Hazardous Materials on such properties; without limiting the
generality of the foregoing, if the Paying Agent determines at any time
that a material risk exists that any such report will not be provided
within the time referred to above, the Paying Agent may retain an
environmental consulting firm to prepare such report at the expense of the
Borrower, and the Borrower hereby grants and agrees to cause any Subsidiary
that owns any property described in such request to grant at the time of
such request to the Paying Agent, the Lender Parties, such firm and any
agents or representatives thereof an irrevocable non-exclusive license,
subject to the rights of tenants, to enter onto their respective properties
to undertake such an assessment.
(m) Compliance with Terms of Leaseholds. Make all payments and
otherwise perform all obligations in respect of all leases of real property
to which the Borrower or any of its Restricted Subsidiaries is a party,
keep such leases in full force and effect and not allow such leases to
lapse or be terminated or any rights to renew such leases to be forfeited
or canceled, notify the Paying Agent of any default by any party with
respect to such leases and cooperate with the Paying Agent in all respects
to cure any such default, and cause each of its Subsidiaries to do so,
except, in any case, where the failure to do so, either individually or in
the aggregate, would not be reasonably likely to have a Material Adverse
Effect.
(n) Maintenance of Controlled Reserve Base. Maintain a controlled
reserve base of sufficient mineable tonnage of coal such that the ratio of
aggregate controlled mineable tons of coal over current annual production
levels of tons of coal per year is greater than 125% of the remaining
duration of the Senior Notes issued pursuant to the Note Purchase
Agreement. For purposes of this Section 5.01(n), a "controlled reserve
base" of coal denotes the aggregate of coal reserves which may be
economically and legally mined by the Borrower or a Restricted Subsidiary
at the time of the reserve determination. In making any determination of
reserves for the purpose of this Section 5.01(n), the Borrower may include
properties ("OPTION PROPERTIES") which may be acquired by the Borrower or a
Restricted Subsidiary under a valid and enforceable option or purchase
contract which is subject to no conditions other than the payment of the
purchase price provided for under such option or contract (the "CONTRACT
PRICE"); provided that to the extent and for so long as the Borrower shall
elect to include Option Properties in any such determination, (x) the
amount equal to the Contract Price could then be incurred as Debt under the
provisions of Section 10.1(a) of the Note Purchase Agreement (the "Notional
Debt") and (y) assuming for all purposes of Sections 10.1(a)
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and 10.4(a)(ii) of the Note Purchase Agreement that an amount equal to all
such Notional Debt was considered to be outstanding.
SECTION 5.02. Negative Covenants . So long as any Advance or any other
monetary obligation of any Loan Party under any Loan Document shall remain
unpaid or any Lender Party shall have any Commitment hereunder, the Borrower
will not, at any time:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit
any of its Restricted Subsidiaries to create, incur, assume or suffer to
exist, any Lien on or with respect to any of its properties of any
character (including, without limitation, accounts) whether now owned or
hereafter acquired, or sign or file or suffer to exist, or permit any of
its Restricted Subsidiaries to sign or file or suffer to exist, under the
Uniform Commercial Code of any jurisdiction, a financing statement that
names the Borrower or any of its Restricted Subsidiaries as debtor, or sign
or suffer to exist, or permit any of its Restricted Subsidiaries to sign or
suffer to exist, any security agreement authorizing any secured party
thereunder to file such financing statement, or assign, or permit any of
its Restricted Subsidiaries to assign, any accounts or other right to
receive income, except:
(i) Liens created under the Loan Documents including Liens on the
Qualifying Securities;
(ii) Permitted Liens;
(iii) other Liens incurred in the ordinary course of business
securing obligations in an amount not to exceed $10,000,000;
(iv) Liens existing on the date hereof and described on Schedule
4.01(v) hereto;
(v) non-recourse Liens upon or in real property or equipment
acquired or held by the Borrower or any of its Restricted Subsidiaries
in the ordinary course of business to secure the purchase price of
such property or equipment or to secure non-recourse, tax-exempt Debt
incurred solely for the purpose of financing the acquisition,
construction or improvement of any such property or equipment to be
subject to such Liens, or Liens existing on any such property or
equipment at the time of acquisition (other than any such Liens
created in contemplation of such acquisition that do not secure the
purchase price), or extensions, renewals or replacements of any of the
foregoing for the same or a lesser amount; provided, however, that no
such Lien shall extend to or cover any property other than the
property or equipment being acquired, constructed or improved, and no
such
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extension, renewal or replacement shall extend to or cover any
property not theretofore subject to the Lien being extended, renewed
or replaced;
(vi) Liens arising in connection with Capital Leases permitted
under Section 5.02(b)(iii)(G); provided that no such Lien shall extend
to or cover any Collateral or assets other than the assets subject to
such Capital Leases;
(vii) the replacement, extension or renewal of any Lien permitted
by clauses (iii) through (vi) above upon or in the same property
theretofore subject thereto or the replacement, extension or renewal
(without increase in the amount or change in any direct or contingent
obligor) of the Debt secured thereby;
(viii) Liens on personal property leased under leases (including
synthetic leases) entered into by the Borrower which are accounted for
as operating leases in accordance with GAAP to the extent not
prohibited under Section 5.02(h);
(ix) easements, exceptions or reservations in any property of the
Borrower or any Restricted Subsidiary granted or reserved for the
purpose of pipelines, roads, the removal of oil, gas, coal or other
minerals, and other like purposes, or for the joint or common use of
real property, facilities and equipment, which are incidental to, and
do not materially interfere with, the ordinary conduct of the business
of the Borrower or any of its Restricted Subsidiaries;
(x) Liens on documents of title and the property covered thereby
securing obligations in respect of letters of credit that are
commercial letters of credit (i.e., obtained for the purpose of paying
all or a portion of the purchase price of such property) to the extent
not prohibited under Section 5.02(b); and
(xi) Liens on property or assets of the Borrower or any of its
Restricted Subsidiaries securing Debt owing to the Borrower or to a
Wholly Owned Restricted Subsidiary in an aggregate principal amount
not to exceed $10,000,000; provided that no promissory note evidencing
such intercompany Debt shall be pledged to any other Person as
security for any Debt or any other obligation of the Borrower or such
Restricted Subsidiary.
(b) Debt. Create, incur, assume or suffer to exist, or permit any of
its Restricted Subsidiaries to create, incur, assume or suffer to exist,
any Debt, except:
(i) in the case of the Borrower, Debt owed to a Wholly Owned
Restricted Subsidiary of the Borrower, and
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(ii) in the case of any Restricted Subsidiary of the Borrower,
Debt owed to the Borrower or to a Wholly Owned Restricted Subsidiary
of the Borrower; and
(iii) in the case of the Borrower and its Restricted
Subsidiaries,
(A) Debt under the Loan Documents,
(B) the Surviving Debt,
(C) Debt under the Note Purchase Agreement evidenced by the
Senior Notes in a principal amount not to exceed $180,000,000
plus, to the extent not otherwise utilized pursuant to clause (H)
of this Section 5.02(b)(iii), an additional $10,000,000,
(D) non-recourse Debt of the Borrower and Restricted
Subsidiaries incurred solely to finance Capital Expenditures for
the development of Greenfield Projects,
(E) non-recourse Debt secured by Liens permitted by Section
5.02(a)(v),
(F) Debt in respect of Swaps incurred in the ordinary course
of business and consistent with prudent business practice with
the aggregate value thereof not to exceed $10,000,000 at any time
outstanding, and
(G) any Debt extending the maturity of, or refunding or
refinancing, in whole or in part, any Surviving Debt or other
Debt permitted under this Section 5.02(b), provided that the
principal amount of such Debt shall not be increased above the
principal amount thereof outstanding immediately prior to such
extension, refunding or refinancing, and the direct and
contingent obligors therefor shall not be changed, as a result of
or in connection with such extension, refunding or refinancing,
provided further that the terms relating to principal amount,
amortization, maturity, collateral (if any) and subordination (if
any), and other material terms taken as a whole, of any such
extending, refunding or refinancing Debt, and of any agreement
entered into and of any instrument issued in connection
therewith, are consistent with prudent business practice and
incurred in the ordinary course of business and, in the case of
the Senior Notes, are on terms no less favorable in any material
respect to the Loan
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Parties or the Lender Parties than the terms of the Senior Notes
being extended, refunded or refinanced.
(H) other unsecured Debt incurred in the ordinary course of
business and Capital Lease Obligations aggregating not more than
$10,000,000 at any time outstanding other than Contingent
Obligations of the Borrower or any Restricted Subsidiary with
respect to any Debt or other obligation of any Unrestricted
Subsidiary; provided, in each case, that the Borrower shall be in
pro forma compliance with the covenants contained in Section
5.04, calculated based on the financial statements most recently
delivered to the Lender Parties pursuant to Section 5.03 and as
though such Debt or Capital Lease Obligations had been incurred
at the beginning of the four-quarter period covered thereby, as
evidenced by a certificate of the Chief Financial Officer (or
person performing similar functions) of the Borrower delivered to
the Paying Agent demonstrating such compliance.
(c) Change in Nature of Business. Make, or permit any of its
Restricted Subsidiaries to make, any material change in the nature of their
businesses, taken as a whole, as carried on at the date hereof.
(d) Mergers, Etc. Merge into or consolidate with any Person or permit
any Person to merge into it or convey, transfer or lease substantially all
of its assets in a single transaction or series of transactions to any
Person, or permit any of its Restricted Subsidiaries to do so, except that:
(i) any Restricted Subsidiary of the Borrower may merge into or
consolidate with any other Wholly Owned Restricted Subsidiary of the
Borrower, provided that, in the case of any such merger or
consolidation, the Person formed by such merger or consolidation shall
be a Wholly Owned Restricted Subsidiary of the Borrower, provided
further that, in the case of any such merger or consolidation to which
a Subsidiary Guarantor is a party, the Person formed by such merger or
consolidation shall be a Subsidiary Guarantor;
(ii) any of the Borrower's Subsidiaries may consolidate with or
merge into the Borrower, provided that the Borrower is the surviving
entity; and
(iii) any of the Restricted Subsidiaries of the Borrower may (A)
merge into or consolidate with, or (B) convey, transfer or lease
substantially all of its assets in compliance with Section 5.02(e)
(other than clause (iv) thereof) in a single transaction or series of
transactions to, any other Person or (C) permit any
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other Person to merge into or consolidate with it; provided, in the
case of any merger or consolidation or conveyance, transfer or lease
of substantially all of its assets, (1) the Person formed by such
consolidation or into which the Restricted Subsidiary shall be merged
or assets shall be conveyed, transferred or leased shall, at the
effective time of such merger or consolidation or transfer or lease be
Solvent and shall have assumed all obligations of such Restricted
Subsidiary under any Subsidiary Guaranty to which such Restricted
Subsidiary is a party in a writing satisfactory in form and substance
to the Required Lenders and (2) the Borrower shall have caused to be
delivered to the Paying Agent an opinion of independent counsel
satisfactory to the Paying Agent to the effect that all agreements or
instruments effecting such assumption are enforceable in accordance
with the terms thereof;
provided, however, that in each case, immediately after giving effect
thereto, (i) no event shall occur and be continuing that constitutes a
Default and (ii) the Borrower shall be in pro forma compliance with the
covenants contained in Section 5.04, as evidenced by a certificate of the
Chief Financial Officer (or persons performing similar functions) of the
Borrower delivered to the Paying Agent demonstrating such compliance.
(e) Sales, Etc., of Assets. Sell, lease, transfer or otherwise dispose
of, or permit any of its Restricted Subsidiaries to sell, lease, transfer
or otherwise dispose of, any assets, or grant any option or other right to
purchase, lease or otherwise acquire any assets other than Inventory to be
sold in the ordinary course of its business, except:
(i) sales of Inventory in the ordinary course of its business;
(ii) sales of assets that are obsolete or no longer used or
useful for fair value in an aggregate amount not to exceed $5,000,000
over the term of the Facilities;
(iii) sales of assets (x) by the Borrower to a Wholly Owned
Restricted Subsidiary, or (y) by a Restricted Subsidiary to the
Borrower or to another Restricted Subsidiary with respect to which the
Borrower shall have at least the same degree of ownership and control
as it had with respect to the Restricted Subsidiary responsible for
the asset sale, transfer or disposition;
(iv) in a transaction authorized by Section 5.02(d); and
(v) sales of other assets with a fair value in an amount not to
exceed $10,000,000 individually or $25,000,000 in the aggregate over
the term of the Facilities; provided, however, that the purchase price
paid to the Borrower or such
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Restricted Subsidiary for such asset shall be no less than the fair
market value of such asset at the time of such sale and such sale
shall be in the best interest of the Borrower or such Restricted
Subsidiary, as determined in good faith by the Board of Directors (or
other person performing such functions) of the Borrower or such
Restricted Subsidiary, as the case may be, and (ii) immediately after
giving effect to such sales of assets, no Default or Event of Default
shall exist;
provided that in the case of sales of assets pursuant to clause (v) above,
the Borrower shall prepay the Advances pursuant to, and on the date and in
the amount and order of priority set forth in, Section 2.05(b)(i), as
specified therein.
(f) Investments in Other Persons. Make or hold, or permit any of its
Restricted Subsidiaries to make or hold, any Investment in any Person,
except:
(i) Investments consisting of property to be used in the ordinary
course of business;
(ii) Investments in accounts receivable arising from the sales of
goods and services in the ordinary course of business;
(iii) equity Investments by the Borrower and its Restricted
Subsidiaries in Wholly Owned Restricted Subsidiaries;
(iv) Investments by the Borrower and its Restricted Subsidiaries
in Cash Equivalents;
(v) Investments existing on the date hereof and described on
Schedule 4.01(w) hereto;
(vi) Investments by the Borrower in Swaps permitted under Section
5.02(b)(iii)(F); and
(vii) other Investments in any other Person; provided that with
respect to Investments made under this clause (vii): (1) any newly
acquired or organized Subsidiary of the Borrower or any of its
Restricted Subsidiaries shall be a Restricted Subsidiary thereof; (2)
immediately before and after giving effect thereto, no Default shall
have occurred and be continuing or would result therefrom; (3) any
company or business acquired or invested in pursuant to this clause
(vii) shall be in the same line of business as the business of the
Borrower or any of its Restricted Subsidiaries; and (4) immediately
after giving effect to the acquisition of a company or business
pursuant to this clause (vii), the Borrower
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shall be in pro forma compliance with the covenants contained in
Section 5.04, calculated based on the financial statements most
recently delivered to the Lender Parties pursuant to Section 5.03 and
as though such acquisition had occurred at the beginning of the
four-quarter period covered thereby, as evidenced by a certificate of
the Chief Financial Officer (or person performing similar functions)
of the Borrower delivered to the Lender Parties demonstrating such
compliance;
(viii) Investments by the Borrower and its Restricted
Subsidiaries in Unrestricted Subsidiaries and in Restricted
Subsidiaries that are not Wholly Owned Subsidiaries in an amount not
to exceed $10,000,000 at any time outstanding; and
(ix) Investments consisting of intercompany Debt permitted under
Section 5.02(b)(i) and (ii).
(g) Restricted Payments. Declare or pay any dividends, purchase,
redeem, retire, defease or otherwise acquire for value any of its Capital
Stock now or hereafter outstanding, return any capital to its stockholders,
partners or members (or the equivalent Persons thereof) as such, make any
distribution of assets, Capital Stock, obligations or securities to its
stockholders, partners or members (or the equivalent Persons thereof) as
such, or permit any of its Restricted Subsidiaries to do any of the
foregoing (each of the foregoing being a "RESTRICTED PAYMENT"), or permit
any of its Restricted Subsidiaries to purchase, redeem, retire, defease or
otherwise acquire for value any Capital Stock in the Borrower or to issue
or sell any Capital Stock therein, except that, so long as no Default or
Event of Default shall have occurred and be continuing at the time of any
action described in clause (i) or (ii) below or would result therefrom:
(i) the Borrower may declare, make or incur a liability to make
any such Restricted Payment; provided that immediately after giving
effect thereto (i) the aggregate amount of Restricted Payments made in
any fiscal quarter of the Borrower shall not exceed Available Cash (as
defined in the MLP Agreement as in effect on the date hereof) for the
immediately preceding fiscal quarter of the Borrower, and (ii)
promptly after each such distribution, the Borrower will provide the
Lender Parties with a report in form satisfactory to the Lender
Parties setting forth the amount of the cash reserve withheld from
distribution that is necessary for the proper conduct of business
(including reserves for future capital expenditures) as set forth in
the most recent Business Plan delivered to the Paying Agent pursuant
to Section 5.03(d); and
(ii) (A) any Wholly Owned Subsidiary of the Borrower may declare,
make or incur a liability to make any Restricted Payment to the
Borrower or any
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other Wholly Owned Subsidiary of the Borrower of which it is a
Subsidiary, (B) any non-Wholly Owned Subsidiary may declare, make or
incur a liability to make any Restricted Payment to its equity
holders, provided that the general partner of such Subsidiary does not
own greater than a 2% Equity Interest in such Subsidiary, and (C) any
Subsidiary of the Borrower may accept capital contributions from its
parent to the extent permitted under Section 5.02(f)(iii).
Notwithstanding the foregoing provisions of this Section 5.02(g), the
Borrower may (i) make a one-time distribution on the Effective Date to
Alliance Resource Holdings, Inc., or such other Affiliate as the Borrower
may elect, in an amount not to exceed $320,000,000, and (ii) use pledged
Qualifying Securities to redeem interests in the Borrower so long as on the
date of such redemption, United States Governmental Securities which comply
with the definition of Qualifying Securities in a like principal amount,
which have been obtained by the Borrower as a capital contribution from an
Affiliate of the Borrower, are substituted for the Qualifying Securities so
used to redeem such interests in the Borrower.
(h) Lease Obligations. Create, incur, assume or suffer to exist, or
permit any of its Restricted Subsidiaries to create, incur, assume or
suffer to exist, any obligations as lessee (excluding for this purpose
obligations as lessee under Capital Leases) (i) for the rental or hire of
real or personal property in connection with any sale and leaseback
transaction, or (ii) for the rental or hire of other real or personal
property of any kind under leases or agreements to lease having an original
term of one year or more that would cause the direct and contingent
liabilities of the Borrower and its Subsidiaries, on a Consolidated basis,
in respect of all such obligations to exceed $10,000,000 payable in any
period of 12 consecutive months.
(i) Amendments of Constitutive Documents. Amend, or permit any of its
Restricted Subsidiaries to amend, its Constitutive Documents (other than
the Partnership Agreement) in any manner that has a Material Adverse
Effect.
(j) Accounting Changes. Make or permit, or permit any of its
Restricted Subsidiaries to make or permit, any change in (i) accounting
policies or reporting practices, except as required by generally accepted
accounting principles, or (ii) Fiscal Year.
(k) Prepayments, Etc., of Debt. (i) Prepay, redeem, purchase, defease
or otherwise satisfy prior to the scheduled maturity thereof in any manner
the Senior Notes for so long as any Term Advances are outstanding, except
mandatory prepayments of principal, and payments of interest, required
under the Note Purchase Agreement or (ii) permit any Subsidiary Guarantor
(as defined in the Note Purchase Agreement) to
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make any payment to or on account of any noteholder under the Note Purchase
Agreement other than a payment made following a demand therefor by such
noteholder pursuant to the Subsidiary Guaranty Agreement (as defined in the
Note Purchase Agreement).
(l) Amendment, Etc., of Related Documents. Amend, modify or change in
any manner any term or provision of the Note Purchase Agreement that would
allow for any scheduled amortization payments to be made on the Senior
Notes prior to the date the Facilities are paid in full.
(m) Partnerships, Etc. Become a general partner in any general or
limited partnership or joint venture, or permit any of its Restricted
Subsidiaries to do so, except that (i) the Company may be a general partner
of AROP and MLP and (ii) AROP and/or any of its Restricted Subsidiaries may
be a general partner in any partnership or joint venture provided such
partnership or such joint venture incurs no Debt or other liability for
which AROP or such Subsidiary is liable as guarantor or a provider of any
other credit support, or by virtue of its status as such general partner or
joint venturer.
(n) Speculative Transactions. Enter into any foreign currency exchange
contracts, interest rate swap arrangements or other derivative contracts or
transactions, other than such contracts, arrangements or transactions
entered into in the ordinary course of business for the purpose of hedging
(i) the interest rate exposure of the Borrower or any of its Restricted
Subsidiaries, (ii) the purchase requirements of the Borrower or any of its
Restricted Subsidiaries with respect to raw materials and inventory and
(iii) the fluctuations in the prices of commodities affecting the Borrower
or any of its Restricted Subsidiaries.
(o) Formation of Subsidiaries. Organize or invest, or permit any
Restricted Subsidiary to organize or invest, in any new Subsidiary except
as permitted under Section 5.02(f)(vii) or 5.02(f)(viii).
(p) Payment Restrictions Affecting Restricted Subsidiaries. Directly
or indirectly, enter into or suffer to exist, or permit any of its
Restricted Subsidiaries to enter into or suffer to exist, any agreement or
arrangement limiting the ability of any of its Subsidiaries to declare or
pay dividends or other distributions in respect of its Capital Stock or
repay or prepay any Debt owed to, make loans or advances to, or otherwise
transfer assets to or invest in, the Borrower or any Subsidiary of the
Borrower (whether through a covenant restricting dividends, loans, asset
transfers or investments, a financial covenant or otherwise), except the
Loan Documents and the Note Purchase Agreement.
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(q) Transactions with Affiliates. Except as set forth on Schedule
5.01(q) hereto, enter into, or permit any of its Restricted Subsidiaries to
enter into, directly or indirectly, any transaction or group of related
transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with
any Affiliate, except in the ordinary course and pursuant to the reasonable
requirements of the Borrower's or such Restricted Subsidiary's business and
upon fair and reasonable terms no less favorable (taken as a whole, as
determined in good faith by the board of directors of the General Partner)
to the Borrower or such Restricted Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate.
(r) Change in Status of Subsidiaries. Change the designation of any
Subsidiary as a Restricted Subsidiary or an Unrestricted Subsidiary except,
so long as no Default or Event of Default shall have occurred and be
continuing, the Borrower may at any time and from time to time, upon not
less than 30 days' prior written notice given to each Lender Party,
designate a previously Restricted Subsidiary as an Unrestricted Subsidiary
or a previously Unrestricted Subsidiary (including a new Subsidiary
designated on the date of its formation or acquisition) which satisfies the
requirements of clauses (i), (ii) and (iii) of the definition of
"Restricted Subsidiary" as a Restricted Subsidiary, provided that
immediately after such designation and after giving effect thereto no
Default or Event of Default shall have occurred and be continuing, and the
Borrower would be permitted, pursuant to the provisions of Section 10.1(a)
of the Note Purchase Agreement to incur at least $1 of additional Debt (as
defined in the Note Purchase Agreement) owing to a Person other than a
Restricted Subsidiary, and provided further that after such designation the
status of such Subsidiary had not been changed more than twice.
SECTION 5.03. Reporting Requirements . So long as any Advance or any
other monetary obligation of any Loan Party under any Loan Document shall remain
unpaid, or any Lender Party shall have any Commitment hereunder, the Borrower
will furnish to the Paying Agent:
(a) Default Notice. As soon as possible and in any event within five
Business Days after the occurrence of each Default or any event,
development or occurrence reasonably likely to have a Material Adverse
Effect continuing on the date of such statement, a statement of the Chief
Financial Officer (or person performing similar functions) of the Borrower
setting forth details of such Default and the action that the Borrower has
taken and proposes to take with respect thereto.
(b) Annual Financials. As soon as available and in any event within
120 days after the end of each Fiscal Year, a copy of the annual audit
report for such year for the
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Borrower and its Subsidiaries, including therein a Consolidated balance
sheet of the Borrower and its Subsidiaries as of the end of such Fiscal
Year and a Consolidated statement of income and a Consolidated statement of
cash flows of the Borrower and its Subsidiaries for such Fiscal Year, in
each case accompanied by an opinion acceptable to the Required Lenders of
Deloitte & Touche LLP or other independent public accountants of recognized
standing acceptable to the Required Lenders, together with (i) a
certificate of such accounting firm to the Lender Parties stating that in
the course of the regular audit of the business of the Borrower and its
Subsidiaries, which audit was conducted by such accounting firm in
accordance with generally accepted auditing standards, such accounting firm
has obtained no knowledge that a Default has occurred and is continuing, or
if, in the opinion of such accounting firm, a Default has occurred and is
continuing, a statement as to the nature thereof, (ii) a schedule in form
satisfactory to the Paying Agent of the computations used by such
accountants in determining, as of the end of such Fiscal Year, compliance
with the covenants contained in Section 5.04, provided that in the event of
any change in GAAP used in the preparation of such financial statements,
the Borrower shall also provide, if necessary for the determination of
compliance with Section 5.04, a statement of reconciliation conforming such
financial statements to GAAP and (iii) a certificate of the Chief Financial
Officer (or person performing similar functions) of the Borrower stating
that no Default has occurred and is continuing or, if a default has
occurred and is continuing, a statement as to the nature thereof and the
action that the Borrower has taken and proposes to take with respect
thereto.
(c) Quarterly Financials. As soon as available and in any event within
60 days after the end of each of the first three quarters of each Fiscal
Year, a Consolidated balance sheet of the Borrower and its Subsidiaries as
of the end of such quarter and a Consolidated statement of income and a
Consolidated statement of cash flows of the Borrower and its Subsidiaries
for the period commencing at the end of the previous fiscal quarter and
ending with the end of such fiscal quarter and a Consolidated statement of
income and a Consolidated statement of cash flows of the Borrower and its
Subsidiaries for the period commencing at the end of the previous Fiscal
Year and ending with the end of such quarter, setting forth in each case in
comparative form the corresponding figures for the corresponding date or
period of the preceding Fiscal Year, all in reasonable detail and duly
certified (subject to normal year-end audit adjustments) by the Chief
Financial Officer (or person performing similar functions) of the Borrower
as having been prepared in accordance with GAAP, together with (i) a
certificate of said officer stating that no Default has occurred and is
continuing or, if a Default has occurred and is continuing, a statement as
to the nature thereof and the action that the Borrower has taken and
proposes to take with respect thereto and (ii) a schedule in form
satisfactory to the Paying Agent of the computations used by the Borrower
in determining compliance with the covenants contained in Section 5.04,
provided that in the event of any change in GAAP used in the preparation of
such financial statements, the Borrower shall also provide, if necessary
for
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the determination of compliance with Section 5.04, a statement of
reconciliation conforming such financial statements to GAAP.
(d) Annual Business Plan. As soon as available and in any event no
later than 120 days after the end of each Fiscal Year, a Business Plan.
(e) Litigation. Promptly after the commencement thereof, notice of all
actions, suits, investigations, litigation and proceedings before any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting any Loan Party or any of
its Subsidiaries, including any Environmental Action, that (i) would be
reasonably expected to have a Material Adverse Effect or (ii) purports to
effect the legality, validity or enforceability of any Transaction Document
or the consummation of the Transaction, and promptly after the occurrence
thereof, notice of any material adverse change in the status or the
financial effect on any Loan Party or any of its Subsidiaries of the
Disclosed Litigation from that described on Schedule 4.01(f) hereto.
(f) Securities Reports. Promptly after the sending or filing thereof,
copies of all proxy statements, financial statements and reports that MLP
or any Loan Party or any of its Subsidiaries sends to its stockholders,
partners or members, and copies of all regular, periodic and special
reports, and all registration statements, that MLP or any Loan Party or any
of its Subsidiaries files with the Securities and Exchange Commission or
any governmental authority that may be substituted therefor, or with any
national securities exchange.
(g) ERISA. (i) ERISA Events and ERISA Reports. (A) Promptly and in any
event within 10 days after any Loan Party or any ERISA Affiliate knows or
has reason to know that any ERISA Event has occurred, a statement of the
Chief Financial Officer (or person performing similar functions) of the
Borrower describing such ERISA Event and the action, if any, that such Loan
Party or such ERISA Affiliate has taken and proposes to take with respect
thereto and (B) on the date any records, documents or other information
must be furnished to the PBGC with respect to any Plan pursuant to Section
4010 of ERISA, a copy of such records, documents and information.
(ii) Plan Terminations. Promptly and in any event within two Business
Days after receipt thereof by any Loan Party or any ERISA Affiliate, copies
of each notice from the PBGC stating its intention to terminate any Plan or
to have a trustee appointed to administer any Plan.
Alliance Credit Agreement
<PAGE> 85
85
(iii) Plan Annual Reports. Promptly and in any event within 30 days
after the filing thereof with the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
with respect to each Plan.
(iv) Multiemployer Plan Notices. Promptly and in any event within five
Business Days after receipt thereof by any Loan Party or any ERISA
Affiliate from the sponsor of a Multiemployer Plan, copies of each notice
concerning (A) the imposition of Withdrawal Liability by any such
Multiemployer Plan, (B) the reorganization or termination, within the
meaning of Title IV of ERISA, of any such Multiemployer Plan or (C) the
amount of liability incurred, or that may be incurred, by such Loan Party
or any ERISA Affiliate in connection with any event described in clause (A)
or (B).
(h) Environmental Conditions. Promptly after the assertion or
occurrence thereof, notice of any material Environmental Action against or
of any noncompliance by any Loan Party or any of its Subsidiaries with any
Environmental Law or Environmental Permit.
(i) Year 2000 Compliance. Promptly after the Borrower's discovery or
determination thereof, notice (in reasonable detail) that any computer
application that is material to its or any of its Subsidiaries' business
and operations will not be Year 2000 Compliant (as defined in Section
4.01(y)), except to the extent that such failure could not reasonably be
expected to have a Material Adverse Effect.
(j) Available Cash. Within 60 days (or in the case of the fourth
fiscal quarter, 120 days) following the end of each fiscal quarter of the
Borrower, a report of Available Cash (as defined in the MLP Agreement),
cash reserves and other related items of the Borrower and its Subsidiaries
in form and substance satisfactory to the Paying Agent to be delivered at
the same time as the compliance certificate of the Borrower delivered
pursuant to Section 5.03(b) or (c), as the case may be.
(k) Coal and Mining Agreements. Promptly after the occurrence thereof,
notice of any material change to any coal sales agreement or contract,
contract mining agreement or coal purchase agreements to which the Borrower
or any of its Subsidiaries is a party.
(l) Rating Agency Reports. Promptly upon receipt thereof, copies of
any statement or report furnished by any rating agency to any Loan Party or
any of its Subsidiaries in connection with the Senior Notes.
(m) Other Information. Such other information respecting the business,
condition (financial or otherwise), operations, performance, properties or
prospects of any
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<PAGE> 86
86
Loan Party or any of its Subsidiaries as any Agent, or any Lender Party
through the Paying Agent, may from time to time reasonably request.
SECTION 5.04. Financial Covenants . So long as any Advance or any
other obligation of any Loan Party under any Loan Document shall remain unpaid
or any Lender Party shall have any Commitment hereunder, the Borrower will:
(a) Consolidated Net Debt to Consolidated Cash Flow Ratio. Maintain at
all times from and after October 1, 1999, a Consolidated Net Debt to
Consolidated Cash Flow Ratio of not more than the amount set forth below
for each period set forth below:
<TABLE>
<CAPTION>
===============================================================
PERIOD RATIO
===============================================================
<S> <C>
October 1, 1999 through December 30, 4.00:1.00
1999
- ---------------------------------------------------------------
December 31, 1999 through March 30, 4.00:1.00
2000
- ---------------------------------------------------------------
March 31, 2000 through June 29, 2000 4.00:1.00
- ---------------------------------------------------------------
June 30, 2000 through September 29, 4.00:1.00
2000
- ---------------------------------------------------------------
September 30, 2000 through December 4.00:1.00
30, 2000
- ---------------------------------------------------------------
December 31, 2000 through March 30, 3.75:1.00
2001
- ---------------------------------------------------------------
March 31, 2001 through June 29, 2001 3.75:1.00
- ---------------------------------------------------------------
June 30, 2001 through September 29, 3.75:1.00
2001
- ---------------------------------------------------------------
September 30, 2001 through December 3.75:1.00
30, 2001
- ---------------------------------------------------------------
December 31, 2001 through March 30, 3.50:1.00
2002
- ---------------------------------------------------------------
March 31, 2002 through June 29, 2002 3.50:1.00
- ---------------------------------------------------------------
June 30, 2002 through September 29, 3.50:1.00
2002
- ---------------------------------------------------------------
September 30, 2002 through December 3.50:1.00
30, 2002
- ---------------------------------------------------------------
December 31, 2002 through March 30, 3.50:1.00
2003
- ---------------------------------------------------------------
March 31, 2003 through June 29, 2003 3.50:1.00
- ---------------------------------------------------------------
June 30, 2003 through September 29, 3.50:1.00
2003
- ---------------------------------------------------------------
September 30, 2003 through 3.50:1.00
- ---------------------------------------------------------------
December 31, 2003 through March 30, 3.50:1.00
2004
- ---------------------------------------------------------------
March 31, 2004 through June 30, 2004 3.50:1.00
- ---------------------------------------------------------------
June 31, 2004 and thereafter 3.50:1.00
===============================================================
</TABLE>
Alliance Credit Agreement
<PAGE> 87
87
(b) Maximum Asset Impairments and Incremental Long-term Liabilities.
Maintain at all times the sum of: (i) cumulative asset writedowns and
impairments plus (ii) the increase in the sum of accrued pneumoconiosis
benefits, workers compensation and reclamation and mine closing liabilities
associated with properties and assets that are owned by the Borrower and
its Restricted Subsidiaries as of the Effective Date of not more than
$35,000,000.
(c) Interest Coverage Ratio. Maintain at all times from and after
October 1, 1999, an Interest Coverage Ratio of not less than the amount set
forth below for each period set forth below:
<TABLE>
<CAPTION>
===============================================================
PERIOD RATIO
===============================================================
<S> <C>
October 1, 1999 through December 30, 2.75:1.00
1999
- ---------------------------------------------------------------
December 31, 1999 through March 30, 2.75:1.00
2000
- ---------------------------------------------------------------
March 31, 2000 through June 29, 2000 2.75:1.00
- ---------------------------------------------------------------
June 30, 2000 through September 29, 2.75:1.00
2000
- ---------------------------------------------------------------
September 30, 2000 through December 2.75:1.00
30, 2000
- ---------------------------------------------------------------
December 31, 2000 through March 30, 2.75:1.00
2001
- ---------------------------------------------------------------
March 31, 2001 through June 29, 2001 2.75:1.00
- ---------------------------------------------------------------
June 30, 2001 through September 29, 2.75:1.00
2001
- ---------------------------------------------------------------
September 30, 2001 through December 2.75:1.00
30, 2001
- ---------------------------------------------------------------
December 31, 2001 through March 30, 3.00:1.00
2002
- ---------------------------------------------------------------
March 31, 2002 through June 29, 2002 3.00:1.00
- ---------------------------------------------------------------
June 30, 2002 through September 29, 3.00:1.00
2002
- ---------------------------------------------------------------
September 30, 2002 through December 3.00:1.00
30, 2002
- ---------------------------------------------------------------
December 31, 2002 through March 30, 3.00:1.00
2003
- ---------------------------------------------------------------
March 31, 2003 through June 29, 2003 3.00:1.00
- ---------------------------------------------------------------
June 30, 2003 through September 29, 3.00:1.00
2003
- ---------------------------------------------------------------
September 30, 2003 through 3.00:1.00
- ---------------------------------------------------------------
December 31, 2003 through March 30, 3.00:1.00
2004
- ---------------------------------------------------------------
March 31, 2004 through June 30, 2004 3.00:1.00
- ---------------------------------------------------------------
June 31, 2004 and thereafter 3.00:1.00
===============================================================
</TABLE>
Alliance Credit Agreement
<PAGE> 88
88
(d) Current Ratio. Maintain at all times a ratio of Consolidated
Current Assets to Consolidated Current Liabilities of the Borrower and its
Restricted Subsidiaries of at least 1.00:1.00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("EVENTS OF DEFAULT") shall occur and be continuing:
(a) (i) the Borrower shall fail to pay any principal of any Advance
when the same shall become due and payable or (ii) the Borrower shall fail
to pay any interest on
Alliance Credit Agreement
<PAGE> 89
89
any Advance, or any Loan Party shall fail to make any other payment under
any Loan Document, in each case under this clause (ii) within five Business
Days after the same becomes due and payable; or
(b) any representation or warranty made in writing by any Loan Party
(or any of its officers) under or in connection with any Loan Document
(including, without limitation, in any certificate or financial information
delivered pursuant thereto) shall prove to have been incorrect in any
material respect when made or any financial projections prepared by or on
behalf of any Loan Party and made available to the Agents or any Lender
Party shall prove not to have been prepared in good faith based upon
assumptions that were reasonable at the time made and at the time made
available to the Agents; or
(c) the Borrower shall fail to perform or observe any term, covenant
or agreement contained in Section 5.01(d) or (e), 5.02, 5.03(a) or 5.04; or
(d) any Loan Party shall fail to perform or observe any other term,
covenant or agreement contained in any Loan Document on its part to be
performed or observed if such failure shall remain unremedied for 30 days
after the earlier of the date on which (i) a Responsible Officer becomes
aware of such failure or (ii) written notice thereof shall have been given
to the Borrower by any Agent or any Lender Party; or
(e) any Loan Party shall fail to pay any principal of, premium or
interest on or any other amount payable in respect of any Debt of such Loan
Party or such Subsidiary (as the case may be) that is outstanding in a
principal amount (or, in the case of any Hedge Agreement, an Agreement
Value) of at least $10,000,000 either individually or in the aggregate (but
excluding Debt outstanding hereunder), when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable
grace period, if any, specified in the agreement or instrument relating to
such Debt; or any other event shall occur or condition shall exist under
any agreement or instrument relating to any such Debt, if the effect of
such event or condition is to accelerate, or to permit the acceleration of,
the maturity of such Debt or otherwise to cause, or to permit the holder
thereof to cause, such Debt to mature; or any such Debt shall be declared
to be due and payable or required to be prepaid or redeemed (other than by
a regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case prior to the stated maturity
thereof; or
(f) any Loan Party or either general partner of the Borrower shall
generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its
Alliance Credit Agreement
<PAGE> 90
90
debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against any Loan
Party or any general partner of the Borrower seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for it or for
any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it) that is being
diligently contested by it in good faith, either such proceeding shall
remain undismissed or unstayed for a period of 60 days or any of the
actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or any substantial part of its
property) shall occur; or any Loan Party or any of its Restricted
Subsidiaries or any general partner of the Borrower shall take any
corporate action to authorize any of the actions set forth above in this
subsection (f); or
(g) any judgments or orders, either individually or in the aggregate,
for the payment of money in excess of $10,000,000 shall be rendered against
any Loan Party and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there shall
be any period of 60 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; provided, however, that any such judgment or order shall
not be an Event of Default under this Section 6.01(g) if and for so long as
(i) the amount of such judgment or order is covered by a valid and binding
policy of insurance between the defendant and the insurer covering payment
thereof and (ii) such insurer, which shall be rated at least "A" by A.M.
Best Company at the time such insurance policy is issued to such Loan
Party, has been notified of, and has not disputed the claim made for
payment of, the amount of such judgment or order; or
(h) any non-monetary judgment or order shall be rendered against any
Loan Party that would reasonably be likely to have a Material Adverse
Effect, and there shall be any period of 60 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(i) any provision of any Loan Document after delivery thereof pursuant
to Section 3.01 or 5.01(j) shall for any reason cease to be valid and
binding on or enforceable against any Loan Party party to it in any
material respect, or any such Loan Party shall so state in writing; or
Alliance Credit Agreement
<PAGE> 91
91
(j) the Pledge Agreement shall for any reason (other than pursuant to
the terms thereof) cease to constitute a valid and perfected first priority
Lien on the Collateral purported to be covered thereby; or
(k) a Change of Control shall occur; or
(l) any ERISA Event shall have occurred with respect to a Plan and the
sum (determined as of the date of occurrence of such ERISA Event) of the
Insufficiency of such Plan and the Insufficiency of any and all other Plans
with respect to which an ERISA Event shall have occurred and then exist (or
the liability of the Loan Parties and the ERISA Affiliates related to such
ERISA Event) exceeds $10,000,000; or
(m) any Loan Party or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan in an amount that, when aggregated
with all other amounts required to be paid to Multiemployer Plans by the
Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined
as of the date of such notification), exceeds $10,000,000 or requires
payments exceeding $2,500,000 per annum; or
(n) any Loan Party or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of
ERISA, and as a result of such reorganization or termination the aggregate
annual contributions of the Loan Parties and the ERISA Affiliates to all
Multiemployer Plans that are then in reorganization or being terminated
have been or will be increased over the amounts contributed to such
Multiemployer Plans for the plan years of such Multiemployer Plans
immediately preceding the plan year in which such reorganization or
termination occurs by an amount exceeding $2,500,000; or
(o) the Borrower shall cancel or terminate or amend or consent to or
accept any cancellation or termination or amendment of the Partnership
Agreement or there shall be a cancellation, termination of, or any
amendment to, the MLP Agreement in any manner that has a material adverse
effect on (i) the business, operations, affairs, financial condition,
assets or properties of the Borrower and its Subsidiaries taken as a whole,
(ii) the rights and remedies of the Agents or the Lender Parties under the
Loan Documents, or (iii) the ability of the Loan Parties to perform their
respective payment and other material obligations under the Loan Documents;
or
(p) an assertion shall be made by any Person in any court proceeding
or by any governmental authority or agency against any Loan Party or any of
its Subsidiaries, of any claims or liabilities, whether accrued, absolute
or contingent, based on or arising under
Alliance Credit Agreement
<PAGE> 92
92
any Environmental Law that is reasonably likely to be determined adversely
to such Loan Party or any of its Subsidiaries, and the amount thereof
(either individually or in the aggregate) is reasonably likely to have a
Material Adverse Effect (insofar as such amount is payable by such Loan
Party or any of its Subsidiaries but after deducting any portion thereof
that is reasonably expected to be paid by other creditworthy Persons
jointly and severally liable therefor);
(q) commencing with any Fiscal Year ending after December 31, 1999,
the Borrower shall fail to maintain a period of 30 consecutive days in such
Fiscal Year during which the average principal amount of Working Capital
Advances outstanding during such 30 day period does not exceed $5,000,000.
then, and in any such event, the Paying Agent (i) shall at the request, or
may with the consent, of the Required Lenders, by notice to the Borrower,
declare the Commitments of each Lender Party and the obligation of each
Lender Party to make Advances (other than Swing Line Advances by a
Revolving Credit Lender pursuant to Section 2.02(b)) to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the
request, or may with the consent, of the Required Lenders, (A) by notice to
the Borrower, declare the Notes, all interest thereon and all other amounts
payable under this Agreement and the other Loan Documents to be forthwith
due and payable, whereupon the Notes, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived by the Borrower; provided, however, that in the event of
an actual or deemed entry of an order for relief with respect to the
Borrower under the Federal Bankruptcy Code, (x) the Commitments of each
Lender Party and the obligation of each Lender Party to make Advances
(other than Swing Line Advances by a Revolving Credit Lender pursuant to
Section 2.02(b)) shall automatically be terminated and (y) the Notes, all
such interest and all such amounts shall automatically become and be due
and payable, without presentment, demand, protest or any notice of any
kind, all of which are hereby expressly waived by the Borrower.
ARTICLE VII
THE AGENTS
SECTION 7.01. Authorization and Action. (a) Each Lender Party (in its
capacities as a Lender and a Swing Line Bank (if applicable)) hereby appoints
and authorizes each Agent to take such action as agent on its behalf and to
exercise such powers and discretion under this Agreement and the other Loan
Documents as are delegated to such Agent by the terms hereof and thereof,
together with such powers and discretion as are reasonably incidental thereto.
As to any matters not expressly provided for by the Loan Documents (including,
without
Alliance Credit Agreement
<PAGE> 93
93
limitation, enforcement or collection of the Notes), no Agent shall be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lender Parties and all other holders of
Notes; provided, however, that no Agent shall be required to take any action
that exposes such Agent to personal liability or that is contrary to this
Agreement or applicable law. Each Agent agrees to give to each Lender Party
prompt notice of each notice given to it by the Borrower pursuant to the terms
of this Agreement.
(b) The Documentation Agent shall have no powers or discretion under
this Agreement or any of the other Loan Documents and each of the Lender Parties
hereby acknowledges that the Documentation Agent has no liability under this
Agreement or under any of the Loan Documents.
SECTION 7.02. Agents' Reliance, Etc. Neither any Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with the Loan
Documents, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, each Agent: (a) may treat
the payee of any Note as the holder thereof until, in the case of the Paying
Agent, the Paying Agent receives and accepts an Assignment and Acceptance
entered into by the Lender Party that is the payee of such Note, as assignor,
and an Eligible Assignee, as assignee, or, in the case of any other Agent, such
Agent has received notice from the Paying Agent that it has received and
accepted such Assignment and Acceptance, in each case as provided in Section
8.07; (b) may consult with legal counsel (including counsel for any Loan Party),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes no
warranty or representation to any Lender Party and shall not be responsible to
any Lender Party for any statements, warranties or representations (whether
written or oral) made in or in connection with the Loan Documents; (d) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of any Loan Document on the part of
any Loan Party or to inspect the property (including the books and records) of
any Loan Party; (e) shall not be responsible to any Lender Party for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of, or the perfection or priority of any lien or security interest created or
purported to be created under or in connection with, any Loan Document or any
other instrument or document furnished pursuant thereto; and (f) shall incur no
liability under or in respect of any Loan Document by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier)
reasonably believed by it to be genuine and signed or sent by the proper party
or parties.
Alliance Credit Agreement
<PAGE> 94
94
SECTION 7.03. Chase, Citicorp and Affiliates. With respect to its
Commitments, the Advances made by it and the Notes issued to it, Chase and
Citicorp shall have the same rights and powers under the Loan Documents as any
other Lender Party and may exercise the same as though it were not an Agent; and
the term "Lender Party" or "Lender Parties" shall, unless otherwise expressly
indicated, include Chase and Citicorp in their respective individual capacities.
Chase and Citicorp and their respective affiliates may accept deposits from,
lend money to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, any Loan
Party, any of its Subsidiaries and any Person that may do business with or own
securities of any Loan Party or any such Subsidiary, all as if Chase and
Citicorp were not Agents and without any duty to account therefor to the Lender
Parties.
SECTION 7.04. Lender Party Credit Decision. Each Lender Party
acknowledges that it has, independently and without reliance upon any Agent or
any other Lender Party and based on the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender Party also acknowledges that it will, independently and
without reliance upon any Agent or any other Lender Party and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement.
SECTION 7.05. Indemnification. (a) Each Lender Party severally agrees
to indemnify each Agent (to the extent not promptly reimbursed by the Borrower)
from and against such Lender Party's ratable share (determined as provided
below) of any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against such
Agent in any way relating to or arising out of the Loan Documents or any action
taken or omitted by such Agent under the Loan Documents; provided, however, that
no Lender Party shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Agent's gross negligence, willful
misconduct or unlawful acts as found in a final, non-appealable judgment by a
court of competent jurisdiction. Without limitation of the foregoing, each
Lender Party agrees to reimburse each Agent promptly upon demand for its ratable
share of any costs and expenses (including, without limitation, fees and
expenses of counsel) payable by the Borrower under Section 8.04, to the extent
that such Agent is not promptly reimbursed for such costs and expenses by the
Borrower.
(b) For purposes of this Section 7.05, the Lender Parties' respective
ratable shares of any amount shall be determined, at any time, according to the
sum of (i) the aggregate principal amount of the Advances outstanding at such
time and owing to the respective Lender Parties, (ii) the aggregate unused
portions of their Term Commitments at such time, (iii) their
Alliance Credit Agreement
<PAGE> 95
95
respective Unused Working Capital Commitments at such time and (iv) their
respective Unused Revolving Credit Commitments at such time; provided that the
aggregate principal amount of Swing Line Advances owing to the Swing Line Bank
shall be considered to be owed to the Revolving Credit Lenders ratably in
accordance with their respective Revolving Credit Commitments. The failure of
any Lender Party to reimburse any Agent promptly upon demand for its ratable
share of any amount required to be paid by the Lender Parties to such Agent as
provided herein shall not relieve any other Lender Party of its obligation
hereunder to reimburse such Agent for its ratable share of such amount, but no
Lender Party shall be responsible for the failure of any other Lender Party to
reimburse such Agent for such other Lender Party's ratable share of such amount.
Without prejudice to the survival of any other agreement of any Lender Party
hereunder, the agreement and obligations of each Lender Party contained in this
Section 7.05 shall survive the payment in full of principal, interest and all
other amounts payable hereunder and under the other Loan Documents.
SECTION 7.06. Successor Agents. Any Agent may resign as to any or all
of the Facilities at any time by giving not less than 30 days' prior written
notice thereof to the Lender Parties and the Borrower and may be removed as to
all of the Facilities at any time with or without cause by the Required Lenders.
Upon any such resignation or removal, the Required Lenders shall have the right
to appoint a successor Agent as to such of the Facilities as to which such Agent
has resigned or been removed. If no successor Agent with, so long as no Default
shall have occurred and be continuing, the approval of the Borrower (which
approval shall not be unreasonably withheld or delayed) shall have been so
appointed by the Required Lenders, and shall have accepted such appointment,
within 30 days after the retiring Agent's giving of notice of resignation or the
Required Lenders' removal of the retiring Agent, then the retiring Agent may, on
behalf of the Lender Parties, appoint a successor Agent with, so long as no
Default shall have occurred and be continuing, the approval of the Borrower
(which approval shall not be unreasonably withheld or delayed), which successor
Agent shall be a commercial bank organized under the laws of the United States
or of any State thereof and having a combined capital and surplus of at least
$250,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent as to less than all of the Facilities and, in the case of a
successor Paying Agent, upon the execution and filing or recording of such
financing statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Required Lenders may
request, in order to continue the perfection of the Liens granted or purported
to be granted by the Pledge Agreement, such successor Agent shall succeed to and
become vested with all the rights, powers, discretion, privileges and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations under the Loan Documents. If within 45 days after written notice
is given of the retiring Agent's resignation or removal under this Section 7.06
no successor Agent shall have been appointed and shall have accepted such
appointment, then on such 45th day (a) the retiring Agent's resignation or
removal shall become effective, (b) the retiring Agent shall thereupon be
discharged from its duties and obligations under the Loan Documents and (c)
provided no Default has occurred and is
Alliance Credit Agreement
<PAGE> 96
96
continuing, the Borrower may appoint a successor Agent or if no successor Agent
is appointed by the Borrower at such time, the Required Lenders shall thereafter
perform all duties of the retiring Agent under the Loan Documents until such
time, if any, as the Required Lenders appoint a successor Agent as provided
above. After any retiring Agent's resignation or removal hereunder as Agent as
to any or all of the Facilities shall have become effective, the provisions of
this Article VII shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent as to such Facilities under this Agreement.
SECTION 7.07. Intercreditor Agreement . Each Lender and each Agent
hereby authorizes the Paying Agent to execute and deliver the Intercreditor
Agreement on its behalf and consents and agrees to be bound by the terms and
provisions of the Intercreditor Agreement to the same extent and with the same
effect as if such Lender or such Agent had executed and delivered the same as
one of the original parties thereto as a Lender or Agent, as the case may be, in
respect of this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. Except as otherwise contemplated by
Section 8.07 and the Subsidiary Guaranty, no amendment or waiver of any
provision of this Agreement or the Notes or any other Loan Document, nor consent
to any departure by any Loan Party therefrom, shall in any event be effective
unless the same shall be in writing and signed (or, in the case of the Pledge
Agreement or the Subsidiary Guaranty, consented to) by the Required Lenders, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that (a) no
amendment, waiver or consent shall, unless in writing and signed by all of the
Lenders (other than any Lender Party that is, at such time, a Defaulting Lender,
except for clause (v) hereof), do any of the following at any time: (i) waive
any of the conditions specified in Section 3.01 or, in the case of the Initial
Extension of Credit, Section 3.02, (ii) change the number of Lenders or the
percentage of (x) the Commitments or (y) the aggregate unpaid principal amount
of the Advances, (iii) reduce or limit the obligations of any Subsidiary
Guarantor under Section 1 of the Subsidiary Guaranty issued by it or release
such Subsidiary Guarantor or otherwise limit such Subsidiary Guarantor's
liability with respect to the obligations owing to the Agents and the Lender
Parties, (iv) amend Section 2.12, or (v) amend this Section 8.01, and (b) no
amendment, waiver or consent shall, unless in writing and signed by the Required
Lenders and each Lender that has a Commitment under the Term Facility, Revolving
Credit Facility or Working Capital Facility if such Lender is directly affected
by such amendment, waiver or consent, (i) increase the Commitments of such
Lender, (ii) reduce the principal of, or interest on, the Notes held by such
Lender or any fees or other amounts payable hereunder to such Lender, (iii)
postpone any date fixed for any payment of
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principal of, or interest on, the Notes held by such Lender or any fees or other
amounts payable hereunder to such Lender, (iv) change the order of application
of any prepayment set forth in Section 2.05 in any manner that materially
affects such Lender, (v) other than as permitted under the Pledge Agreement,
release all or substantially all of the Collateral in any transaction or series
of related transactions or permit the creation, incurrence, assumption or
existence of any Lien on the Collateral in any transaction or series of related
transactions to secure any obligations other than obligations owing to the
Secured Parties under the Loan Documents; provided further that no amendment,
waiver or consent shall, unless in writing and signed by the Swing Line Bank in
addition to the Lenders required above to take such action, affect the rights or
obligations of the Swing Line Bank under this Agreement; and provided further
that no amendment, waiver or consent shall, unless in writing and signed by an
Agent in addition to the Lenders required above to take such action, affect the
rights or duties of such Agent under this Agreement or the other Loan Documents.
SECTION 8.02. Notices, Etc. Except as otherwise provided in Section
2.02, all notices and other communications provided for hereunder shall be in
writing (including telecopy communication confirmed by mail or delivery) and
mailed, telecopied, or delivered, if to the Borrower, at its address at 1717
South Boulder Avenue, Tulsa, Oklahoma 74119, Attention: Michael L. Greenwood,
telephone (918) 295-7622, telecopier (918) 295-7361; if to any Initial Lender,
at its Domestic Lending Office specified opposite its name on Schedule I hereto;
if to any other Lender at its Domestic Lending Office specified in the
Assignment and Acceptance pursuant to which it became a Lender Party; if to
Chase as Paying Agent or Co-Administrative Agent, at its address at 270 Park
Avenue, 23rd Floor, New York, New York 10017, Attention: Peter S. Predun,
telephone (212) 270-7005, telecopier (212) 270-4724; and if to Citicorp as
Co-Administrative Agent, at its address at 399 Park Avenue, 11th Floor, New
York, New York, 10022, Attention: Larry Farley, telephone (212) 559-1189,
telecopier (212) 583-7185; or, as to any party, at such other telecopy number or
address as shall be designated by such party in a written notice to the other
parties. All such notices and other communications shall, when mailed,
telecopied or delivered, be effective when deposited in the mails, or
transmitted by telecopier, respectively, except that notices and communications
to any Agent pursuant to Article II, III or VII shall not be effective until
received by such Agent. Delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Agreement or the Notes or of any
Exhibit hereto to be executed and delivered hereunder shall be effective as
delivery of an original executed counterpart thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any
Lender Party or any Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
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SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on
demand (i) all reasonable costs and expenses of each Agent, the Joint Arrangers
and their Affiliates in connection with the preparation, execution, delivery,
administration, modification and amendment of the Loan Documents (including,
without limitation, (A) all reasonable due diligence, collateral review,
syndication, transportation, computer, duplication, appraisal, audit, insurance,
consultant, search, filing and recording fees and expenses and (B) the
reasonable fees and expenses of one firm of counsel to the Agents with respect
thereto, with respect to advising such Agents as to their rights and
responsibilities, or the perfection, protection or preservation of rights or
interests, under the Loan Documents, with respect to negotiations with any Loan
Party or with other creditors of any Loan Party or any of its Subsidiaries
arising out of any Default or any events or circumstances that may give rise to
a Default and with respect to presenting claims in or otherwise participating in
or monitoring any bankruptcy, insolvency or other similar proceeding involving
creditors' rights generally and any proceeding ancillary thereto) and (ii) all
costs and expenses of each Agent and each Lender Party in connection with the
enforcement of the Loan Documents after an Event of Default, whether in any
action, suit or litigation, or any bankruptcy, insolvency or other similar
proceeding affecting creditors' rights generally (including, without limitation,
the reasonable fees and expenses of counsel for the Paying Agent and each Lender
Party with respect thereto). Notwithstanding anything to the contrary in the
foregoing, the Borrower will not be obligated to pay any allocated overhead
costs of the Agents, the Joint Arrangers, and their Affiliates.
(b) The Borrower agrees to indemnify, defend and save and hold
harmless SBHC, each Agent, each Joint Arranger, each Lender Party and each of
their Affiliates and their respective officers, directors, employees, agents and
advisors (each, an "INDEMNIFIED PARTY") from and against, and shall pay on
demand, any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel, but
excluding allocated overhead cost of SBHC, the Agents, the Joint Arrangers and
the Lender Parties and their Affiliates) that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or in
connection with or by reason of (including, without limitation, in connection
with any investigation, litigation or proceeding or preparation of a defense in
connection therewith) (i) the Facilities, the actual or proposed use of the
proceeds of the Advances, the Transaction Documents or any of the transactions
contemplated thereby, or (ii) the actual or alleged presence of Hazardous
Materials on any property of any Loan Party or any of its Subsidiaries or any
Environmental Action relating in any way to any Loan Party or any of its
Subsidiaries, except to the extent such claim, damage, loss, liability or
expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence,
willful misconduct or unlawful acts. In the case of an investigation, litigation
or other proceeding to which the indemnity in this Section 8.04(b) applies, such
indemnity shall be effective whether or not such investigation, litigation or
proceeding is brought by any Loan Party, its directors, shareholders or
creditors or an Indemnified Party, whether or not any Indemnified Party is
otherwise a party thereto and whether
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or not the Transaction is consummated. The Borrower also agrees not to assert
any claim against SBHC, any Agent, any Joint Arranger, any Lender Party or any
of their Affiliates, or any of their respective officers, directors, employees,
agents and advisors, on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to the
Facilities, the actual or proposed use of the proceeds of the Advances, the
Transaction Documents or any of the transactions contemplated by the Transaction
Documents.
(c) (i) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance is made by the Borrower to or for the account of a
Lender Party other than on the last day of the Interest Period for such Advance,
as a result of (x) a payment or Conversion pursuant to Section 2.05, 2.08(b)(i)
or 2.09(d), (y) acceleration of the maturity of the Notes pursuant to Section
6.01 or for any other reason, or by an Eligible Assignee to a Lender Party other
than on the last day of the Interest Period for such Advance upon an assignment
of rights and obligations under this Agreement pursuant to Section 8.07 as a
result of a demand by the Borrower pursuant to Section 8.07(a), (z) if the
Borrower fails to make any payment or prepayment of an Advance for which a
notice of prepayment has been given or that is otherwise required to be made,
whether pursuant to Section 2.03, 2.05 or 6.01 or otherwise, or (ii) the
Borrower fails to fulfill the applicable conditions set forth in Article III on
or before the date specified in any Notice of Borrowing for such Borrowing
delivered pursuant to Section 2.02, the Borrower shall, upon demand by such
Lender Party (with a copy of such demand to the Paying Agent), pay to the Paying
Agent for the account of such Lender Party any amounts required to compensate
such Lender Party for any additional losses, costs or expenses that it may
reasonably incur as a result of such payment or Conversion or such failure to
pay or prepay or borrow, as the case may be, including, without limitation, any
loss (including loss of anticipated profits), cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by any
Lender Party to fund or maintain such Advance, all of which losses, costs and
expenses shall be an amount equal to the excess, if any, of (A) the amount of
interest that would have accrued on the principal amount of such Advance had
such event not occurred at the Eurodollar Rate that would have been applicable
to such Advance for the period from the date of such event to the last day of
the then current Interest Period therefor (or, in the case of a failure to
borrow or Convert, for the period that would have been the Interest Period for
such Loan), over (B) the amount of interest that would accrue on such principal
amount for such period at the interest rate which such Lender would bid, were it
to bid at the commencement of such period, for dollar deposits of a comparable
amount and period from other banks in the eurodollar market. A certificate of
any Lender setting forth any amount or amounts that such Lender is entitled to
receive pursuant to this Section, and the basis therefor, shall be delivered to
the Borrower and shall be conclusive and binding for all purposes, absent
manifest error.
(d) If any Loan Party fails to pay when due any costs, expenses or
other amounts payable by it under any Loan Document, including, without
limitation, reasonable fees
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and expenses of counsel and indemnities, such amount may be paid on behalf of
such Loan Party by the Paying Agent or any Lender Party, in its sole discretion.
(e) Without prejudice to the survival of any other agreement of any
Loan Party hereunder or under any other Loan Document, the agreements and
obligations of the Borrower contained in Sections 2.09 and 2.11 and this Section
8.04 shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under any of the other Loan Documents.
SECTION 8.05. Right of Setoff. Upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the Paying Agent
to declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Agent and each Lender Party and each of their respective Affiliates is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and otherwise apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Agent, such Lender Party or such
Affiliate to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under the Loan
Documents, irrespective of whether such Agent or such Lender Party shall have
made any demand under this Agreement or such Note or Notes and although such
obligations may be unmatured. Each Agent and each Lender Party agrees promptly
to notify the Borrower after any such set-off and application; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Agent and each Lender Party and
their respective Affiliates under this Section are in addition to other rights
and remedies (including, without limitation, other rights of set-off) that such
Agent, such Lender Party and their respective Affiliates may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and each Agent and the Paying
Agent shall have been notified by each Initial Lender that such Initial Lender
has executed it and thereafter shall be binding upon and inure to the benefit of
the Borrower, each Agent and each Lender Party and their respective successors
and assigns, except that the Borrower shall not have the right to assign its
rights hereunder or any interest herein without the prior written consent of the
Lender Parties.
SECTION 8.07. Assignments and Participations. (a) Any Lender (i) may
(and in the case of clause (B) below, shall) assign to one or more Eligible
Assignees all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment or
Commitments, the Advances owing to it and the Note or Notes held by it);
provided that (A) except, in the case of an assignment to an Eligible Assignee
that is an Affiliate of a Lender, each of the Paying Agent and, unless a Default
shall have occurred and be continuing at the time such assignment is effected,
the Borrower must give their prior consent to
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such assignment (which consent shall not be unreasonably withheld or delayed)
and (B) if the assignment is demanded by the Borrower pursuant to Section 2.16,
no Default shall have occurred and be continuing at the time of such demand and
such assignment and the Borrower shall have given at least five Business Days'
notice of such demand to the applicable Lender and the Paying Agent; provided,
however, that (i) each such assignment shall be of a uniform, and not a varying,
percentage of all rights and obligations under and in respect of one or more of
the Facilities, (ii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an Affiliate of any Lender
or an assignment of all of a Lender's rights and obligations under this
Agreement, the aggregate amount of the Commitments being assigned to such
Eligible Assignee pursuant to such assignment (determined as of the date of the
Assignment and Acceptance with respect to such assignment) shall in no event be
less than the lesser of $5,000,000 and 5% of the aggregate amount (or such
lesser amount as shall be approved by the Paying Agent and, so long as no
Default shall have occurred and be continuing at the time of effectiveness of
such assignment, the Borrower) of the Commitment being assigned, (iii) each such
assignment shall be to an Eligible Assignee, (iv) each such assignment made as a
result of a demand by the Borrower pursuant to Section 2.16 shall be arranged by
the Borrower after consultation with the Paying Agent and shall be either an
assignment of all of the rights and obligations of the assigning Lender under
this Agreement or an assignment of a portion of such rights and obligations made
concurrently with another such assignment or other such assignments that
together cover all of the rights and obligations of the assigning Lender under
this Agreement, (v) no Lender shall be obligated to make any such assignment
(whether as a result of a demand by the Borrower pursuant to Section 2.16 or
otherwise) unless and until such Lender shall have received one or more payments
from either the Borrower or one or more Eligible Assignees in an aggregate
amount at least equal to the aggregate outstanding principal amount of the
Advances owing to such Lender, together with accrued interest thereon to the
date of payment of such principal amount and all other amounts payable to such
Lender under this Agreement, and (vi) the parties to each such assignment shall
execute and deliver to the Paying Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with any Note or Notes subject
to such assignment and a processing and recordation fee of $3,500; provided,
however, the Borrower shall have no liability for the payment of such fee except
that for each such assignment made as a result of a demand by the Borrower
pursuant to Section 2.16, the Borrower shall pay to the Paying Agent the
applicable processing and recordation fee.
(b) Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in such Assignment and Acceptance, (i) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (ii) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights (other than its rights under Sections 2.09, 2.11 and 8.04
to the extent any claim thereunder relates to an event arising prior to such
assignment) and be released from its obligations under
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this Agreement (and, in the case of an Assignment and Acceptance covering all of
the remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance, each
Lender Party assignor thereunder and each assignee thereunder confirm to and
agree with each other and the other parties thereto and hereto as follows: (i)
other than as provided in such Assignment and Acceptance, such assigning Lender
Party makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with any Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any Lien created or purported to be created under or in connection
with, any Loan Document or any other instrument or document furnished pursuant
thereto; (ii) such assigning Lender Party makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Loan Party or the performance or observance by any Loan Party of any of its
obligations under any Loan Document or any other instrument or document
furnished pursuant thereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 4.01 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon any Agent, such assigning Lender Party or any other Lender
Party and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes each Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
the Loan Documents as are delegated to such Agent by the terms hereof and
thereof, together with such powers and discretion as are reasonably incidental
thereto; and (vii) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Agreement are
required to be performed by it as a Lender.
(d) The Paying Agent shall maintain at its address referred to in
Section 8.02 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the
Lender Parties and the Commitment under each Facility of, and principal amount
of the Advances owing under each Facility to, each Lender Party from time to
time (the "REGISTER"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the Agents
and the Lender Parties may treat each Person whose name is recorded in the
Register as a Lender Party hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Agent or any
Lender Party at any reasonable time and from time to time upon reasonable prior
notice.
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(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee, together with any Note or Notes subject
to such assignment, the Paying Agent shall, if such Assignment and Acceptance
has been completed and is in substantially the form of Exhibit C hereto, (i)
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Borrower and
each other Agent. In the case of any assignment by a Lender, within five
Business Days after its receipt of such notice, the Borrower, at its own
expense, shall, if new Notes are requested by the applicable assignee and/or
assignor, execute and deliver to the Paying Agent in exchange for the
surrendered Note or Notes a new Note to the order of such Eligible Assignee in
an amount equal to the Commitment assumed by it under each Facility pursuant to
such Assignment and Acceptance and, if any assigning Lender has retained a
Commitment hereunder under such Facility, a new Note to the order of such
assigning Lender in an amount equal to the Commitment retained by it hereunder.
Such new Note or Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note or Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of Exhibit A-1, A-2 or A-3 hereto, as the case may be.
(f) Each Lender Party may sell participations to one or more Persons
(other than any Loan Party or any of its Affiliates) in or to all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it and
the Note or Notes (if any) held by it); provided, however, that (i) such Lender
Party's obligations under this Agreement (including, without limitation, its
Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender Party shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrower, the Agents and the other Lender
Parties shall continue to deal solely and directly with such Lender Party in
connection with such Lender Party's rights and obligations under this Agreement
and (v) no participant under any such participation shall have any right to
approve any amendment or waiver of any provision of any Loan Document, or any
consent to any departure by any Loan Party therefrom, except to the extent that
such amendment, waiver or consent would reduce the principal of, or interest on,
the Notes or any fees or other amounts payable hereunder, in each case to the
extent subject to such participation, postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, in each case to the extent subject to such participation, or release
any Subsidiary Guarantor or all or substantially all of the Collateral.
(g) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender
Party by or on behalf of the Borrower; provided, however, that, prior to any
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve
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the confidentiality of any Confidential Information received by it from such
Lender Party in accordance with Section 8.09.
(h) Notwithstanding any other provision set forth in this Agreement,
any Lender Party may at any time pledge or assign all or any portion of its
rights under this Agreement (including, without limitation, the Advances owing
to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal Reserve
System; provided that no such pledge or assignment shall release a Lender Party
from any of its obligations hereunder or substitute any such pledgee or assignee
for such Lender Party as a party hereto.
SECTION 8.08. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of an original executed
counterpart of this Agreement.
SECTION 8.09. Confidentiality. Neither any Agent nor any Lender Party
shall disclose any Confidential Information to any Person without the consent of
the Borrower, other than (a) to such Agent's or such Lender Party's Affiliates
and their officers, directors, employees, agents and advisors and to actual or
prospective Eligible Assignees and participants and swap counterparties, and
then only on a confidential basis, (b) as required by any law, rule or
regulation or judicial process, (c) as requested or required by any state,
Federal or foreign authority or examiner regulating such Lender Party, (d) to
any rating agency when required by it, provided that, prior to any such
disclosure, such rating agency shall undertake to preserve the confidentiality
of any Confidential Information relating to the Loan Parties received by it from
such Lender Party on the same basis as applicable to a Lender Party under this
Section 8.09, and (e) as may be reasonably necessary in enforcing its rights
hereunder and under the other Loan Documents.
SECTION 8.10. Release of Collateral. Upon the sale, lease, transfer
or other disposition of any item of Collateral of any Loan Party in accordance
with the terms of the Loan Documents, the Collateral Agent will, at the
Borrower's expense, execute and deliver to such Loan Party such documents as
such Loan Party may reasonably request to evidence the release of such item of
Collateral from the assignment and security interest granted under the Pledge
Agreement in accordance with the terms of the Loan Documents.
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or Federal court of the
United States of America sitting
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in New York County, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or any of the other Loan
Documents to which it is a party, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in any such New York State court or, to the fullest extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding, to the extent permitted by
law, shall be conclusive and may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law. Nothing in this Agreement
shall affect any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement or any of the other Loan Documents in the
courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any of the other Loan
Documents to which it is a party in any New York State or Federal court. Each of
the parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
SECTION 8.12. Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 8.13. Non-Recourse to the General Partner and Associated
Persons. Upon the effectiveness of the Assumption Agreement, each Agent and
each Lender Party agrees on behalf of itself and its successors, assigns and
legal representatives, that neither the General Partner nor any Person (other
than the Loan Parties or the Special General Partner) which is a partner,
shareholder, member, owner, officer, director, supervisor, trustee or other
principal (collectively, "ASSOCIATED PERSONS") of the Borrower or of the General
Partner or of a Subsidiary Guarantor, or any of their respective successors or
assigns, shall have any personal liability for the payment or performance of any
of the Borrower s obligations hereunder or under any of the Notes and no
monetary or other judgment shall be sought or enforced against the General
Partner or any of such Associated Persons or any of their respective successors
or assigns. Notwithstanding the foregoing, neither any Agent nor any Lender
Party shall be deemed barred by this Section 8.13 from asserting any claim
against any Person based upon an allegation of fraud or misrepresentation.
SECTION 8.14. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENTS
AND THE LENDER PARTIES IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO
Alliance Credit Agreement
<PAGE> 106
106
ANY OF THE LOAN DOCUMENTS, THE ADVANCES OR THE ACTIONS OF ANY AGENT OR ANY
LENDER PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
ALLIANCE RESOURCE GP, LLC
By: ALLIANCE RESOURCE HOLDINGS, INC.,
its sole member
By /s/ MICHAEL L. GREENWOOD
---------------------------------------
Title: Chief Financial Officer
THE CHASE MANHATTAN BANK,
as Paying Agent and Co-Administrative
Agent
By /s/ PETER S. PRODUN
---------------------------------------
Title: Vice President
CITICORP USA, INC., as Co-Administrative
Agent
By /s/ LARRY FARLEY
---------------------------------------
Title: Vice President
Alliance Credit Agreement
<PAGE> 107
DEUTSCHE BANK AG, NEW YORK
BRANCH
as Documentation Agent
By /s/ PAUL L. HARINSTEIN
---------------------------------------
Title: Managing Director
By /s/ CATHY RUHLAND
---------------------------------------
Title: Vice President
INITIAL LENDERS
CITICORP USA, INC.
By /s/ LARRY FARLEY
---------------------------------------
Title: Vice President
THE CHASE MANHATTAN BANK
By /s/ PETER S. PREDUN
---------------------------------------
Title: Vice President
BANKBOSTON, N.A.
By /s/ CHRISTOPHER HOLMGREN
---------------------------------------
Title: Director
Alliance Credit Agreement
<PAGE> 108
BANK OF MONTREAL
By /s/ IAN M. PLESTER
---------------------------------------
Title: Director
BANK OF OKLAHOMA, N.A.
By /s/ ROBERT D. MATTAX
---------------------------------------
Title: Senior Vice President
DEUTSCHE BANK AG,
NEW YORK BRANCH
By /s/ PAUL L. HARINSTEIN
---------------------------------------
Title: Managing Director
By /s/ CATHY RUHLAND
---------------------------------------
Title: Vice President
THE FUJI BANK, LIMITED
By /s/ RAYMOND VENTURA
---------------------------------------
Title: Vice President and Manager
Alliance Credit Agreement
<PAGE> 109
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
===============================================================================================================================
Working Revolving Domestic Eurodollar
Term Capital Credit Lending Lending
Name of Initial Lender Commitment Commitment Commitment Office Office
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
The Chase Manhattan $8,250,000 $4,125,000 $4,125,000 1 Chase Manhattan Plaza 1 Chase Manhattan Plaza
Bank New York, NY 10081 New York, NY 10081
Attn: Anne Bowles, Attn: Anne Bowles,
Maxine Pinnok Maxine Pinnok
Tel: 212-552-7260 Tel: 212-552-7260
Fax: 212-552-7500 Fax: 212-552-7500
- -------------------------------------------------------------------------------------------------------------------------------
Citicorp USA, Inc. $8,250,000 $4,125,000 $4,125,000 Citibank, N.A. Citibank, N.A.
Two Penn's Way Two Penn's Way
Suite 200 Suite 200
New Castle, Delaware 19720 New Castle, Delaware 19720
Attn: Maureen Prytula Attn: Maureen Prytula
Tel: 302-894-6089 Tel: 302-894-6089
Fax: 302-894-6120 Fax: 302-894-6120
- -------------------------------------------------------------------------------------------------------------------------------
BankBoston, N.A. $7,000,000 $3,500,000 $3,500,000 100 Federal Street 100 Federal Street
Boston, Mass 02110 Boston, Mass 02110
Attn: Leah Hardy Attn: Leah Hardy
Tel: 617-434-4655 Tel: 617-434-4655
Fax: 617-434-9820 Fax: 617-434-9820
- -------------------------------------------------------------------------------------------------------------------------------
Bank of Montreal $7,000,000 $3,500,000 $3,500,000 115 S. LaSalle St. 115 S. LaSalle St. 111-11C
111-11C Chicago, IL 60603
Chicago, IL 60603 Attn: Josie Nichols
Attn: Josie Nichols Tel: 312-750-3748
Tel: 312-750-3748 Fax: 312-750-4304
Fax: 312-750-4304
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Alliance Credit Agreement
<PAGE> 110
<TABLE>
<CAPTION>
===============================================================================================================================
Working Revolving Domestic Eurodollar
Term Capital Credit Lending Lending
Name of Initial Lender Commitment Commitment Commitment Office Office
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
Bank of Oklahoma, N.A. $4,250,000 $2,125,000 $2,125,000 One Williams Center One Williams Center
Tulsa, OK 74172 Tulsa, OK 74172
Attn: Debbie Andrews Attn: Debbie Andrews
Tel: 918-588-6672 Tel: 918-588-6672
Fax: 918-295-0400 Fax: 918-295-0400
- -------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, $8,250,000 $4,125,000 $4,125,000 New York Branch Cayman Island Branch
31 West 52nd Street 31 West 52nd Street
New York, NY 10019 New York, NY 10019
Attn: Joseph Gyurindak Attn: Joseph Gyurindak
Tel: 212-469-4107 Tel: 212-469-4107
Fax: 212-469-4139 Fax: 212-469-4139
- -------------------------------------------------------------------------------------------------------------------------------
The Fuji Bank, Limited $7,000,000 $3,500,000 $3,500,000 New York Branch New York Branch
Two World Trade Center Two World Trade Center
New York, NY 10048 New York, NY 10048
Attn: Tina Catapano Attn: Tina Catapano
Tel: 212-898-2099 Tel: 212-898-2099
Fax: 212-488-8216 Fax: 212-488-8216
- -------------------------------------------------------------------------------------------------------------------------------
Total: $50,000,000 $25,000,000 $25,000,000
===============================================================================================================================
</TABLE>
Alliance Credit Agreement
<PAGE> 111
EXHIBIT I
FORM OF INTERCREDITOR AGREEMENT
Please see attached.
Alliance Credit Agreement
<PAGE> 112
EXHIBIT G
[Intentionally Deleted]
Alliance Credit Agreement
<PAGE> 113
$100,000,000
CREDIT AGREEMENT
Dated as of August 16, 1999
Among
ALLIANCE RESOURCE GP, LLC
as Borrower
and
THE INITIAL LENDERS AND
SWING LINE BANK NAMED HEREIN
as Initial Lenders and Swing Line Bank
and
THE CHASE MANHATTAN BANK
as Paying Agent
and
THE CHASE MANHATTAN BANK and CITICORP USA, INC.
as Co-Administrative Agents
and
DEUTSCHE BANK AG, NEW YORK BRANCH,
as Documentation Agent
and
CHASE SECURITIES, INC. AND SALOMON SMITH BARNEY INC.
as Joint Advisors, Joint Lead Arrangers and Joint Book Managers
Alliance Credit Agreement
<PAGE> 114
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01. Certain Defined Terms .............................................. 2
1.02. Computation of Time Periods; Other Definitional Provisions ......... 33
1.03. Accounting Terms ................................................... 33
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
2.01. The Advances ....................................................... 33
2.02. Making the Advances ................................................ 34
2.03. Repayment of Advances .............................................. 37
2.04. Termination or Reduction of the Commitments ........................ 38
2.05. Prepayments ........................................................ 38
2.06. Interest ........................................................... 40
2.07. Fees ............................................................... 41
2.08. Conversion of Advances ............................................. 42
2.09. Increased Costs, Etc. .............................................. 43
2.10. Payments and Computations .......................................... 44
2.11. Taxes .............................................................. 46
2.12. Sharing of Payments, Etc. .......................................... 48
2.13. Use of Proceeds .................................................... 48
2.14. Defaulting Lenders ................................................. 49
2.15. Evidence of Debt ................................................... 51
2.16. Replacement of Certain Lenders ..................................... 52
ARTICLE III
CONDITIONS OF LENDING
3.01. Conditions Precedent to Initial Extension of Credit ................ 53
3.02. Conditions Precedent to Each Borrowing ............................. 58
3.03. Determinations Under Section 3.01 .................................. 59
</TABLE>
Alliance Credit Agreement
<PAGE> 115
<TABLE>
<CAPTION>
SECTION ii PAGE
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
<S> <C> <C>
4.01. Representations and Warranties of the Borrower ..................... 59
ARTICLE V
COVENANTS OF THE BORROWER
5.01. Affirmative Covenants .............................................. 67
5.02. Negative Covenants ................................................. 71
5.03. Reporting Requirements ............................................. 80
5.04. Financial Covenants ................................................ 83
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default .................................................. 86
ARTICLE VII
THE AGENTS
7.01. Authorization and Action ........................................... 90
7.02. Agents' Reliance, Etc. ............................................. 90
7.03. Chase, Citicorp and Affiliates ..................................... 91
7.04. Lender Party Credit Decision ....................................... 91
7.05. Indemnification .................................................... 91
7.06. Successor Agents ................................................... 92
7.07. Intercreditor Agreement ............................................ 93
ARTICLE VIII
MISCELLANEOUS
8.01. Amendments, Etc. ................................................... 93
8.02. Notices, Etc. ...................................................... 94
8.03. No Waiver; Remedies ................................................ 95
</TABLE>
Alliance Credit Agreement
<PAGE> 116
iii
<TABLE>
<S> <C> <C>
8.04. Costs and Expenses ................................................. 95
8.05. Right of Set-off ................................................... 97
8.06. Binding Effect ..................................................... 97
8.07. Assignments and Participations ..................................... 97
8.08. Execution in Counterparts .......................................... 101
8.09. Confidentiality .................................................... 101
8.10. Release of Collateral .............................................. 101
8.11. Jurisdiction, Etc. ................................................. 101
8.12. Governing Law ...................................................... 102
8.13. Non-Recourse to the General Partner and Associated Persons ......... 102
8.14. WAIVER OF JURY TRIAL ............................................... 103
SCHEDULES
Schedule I - Commitments and Applicable Lending Offices
Schedule II - Subsidiary Guarantors
Schedule 4.01(a) - Capital Stock
Schedule 4.01(b) - Subsidiaries
Schedule 4.01(d) - Authorizations, Approvals, Actions, Notices and Filings
Schedule 4.01(f) - Disclosed Litigation
Schedule 4.01(p) - Plans, Multiemployer Plans and Welfare Plans
Schedule 4.01(q) - Environmental Disclosure
Schedule 4.01(r) - Open Years
Schedule 4.01(t) - Existing Debt
Schedule 4.01(u) - Surviving Debt
Schedule 4.01(v) - Liens
Schedule 4.01(w) - Investments
Schedule 5.01(q) - Transactions with Affiliates
EXHIBITS
Exhibit A-1 - Form of Working Capital Note
Exhibit A-2 - Form of Term Note
Exhibit A-3 - Form of Revolving Credit Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Pledge Agreement
Exhibit E - Form of Subsidiary Guaranty
Exhibit F - Form of Solvency Certificate
Exhibit G - [Intentionally Deleted]
Exhibit H - Form of Assumption Agreement
Exhibit I - Form of Intercreditor Agreement
</TABLE>
Alliance Credit Agreement
<PAGE> 1
EXHIBIT 10.2
Conformed Execution Copy
See Conforming Note at page 45.
===============================================================================
ALLIANCE RESOURCE GP, LLC
-----------------
NOTE PURCHASE AGREEMENT
-----------------
DATED AS OF AUGUST 16, 1999
Re: $180,000,000 8.31% Senior Notes due August 20, 2014
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C>
SECTION 1. AUTHORIZATION OF NOTES; GUARANTEE..............................................................................1
Section 1.1. Authorization of Notes....................................................................................1
Section 1.2. Guarantee of Notes........................................................................................1
SECTION 2. SALE AND PURCHASE OF NOTES.....................................................................................1
SECTION 3. CLOSING........................................................................................................1
SECTION 4. CONDITIONS TO CLOSING..........................................................................................2
Section 4.1. Representations and Warranties............................................................................2
Section 4.2. Performance; No Default...................................................................................2
Section 4.3. Compliance Certificates...................................................................................2
Section 4.4. Opinions of Counsel.......................................................................................3
Section 4.5. Original Subsidiary Guaranty Agreement....................................................................3
Section 4.6. Intercreditor Agreement...................................................................................3
Section 4.7. Purchase Permitted by Applicable Law, Etc.................................................................4
Section 4.8. Related Transactions......................................................................................4
Section 4.9. Payment of Special Counsel Fees...........................................................................4
Section 4.10. Private Placement Number.................................................................................4
Section 4.11. Changes in Structure.....................................................................................4
Section 4.12. Rating...................................................................................................5
Section 4.13. Proceedings and Document.................................................................................5
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................................5
Section 5.1. Formation; Power and Authority; Ownership.................................................................5
Section 5.2. Authorization, Etc........................................................................................5
Section 5.3. Disclosure................................................................................................6
Section 5.4. Formation and Ownership of Subsidiaries; Affiliates.......................................................6
Section 5.5. Financial Statements......................................................................................7
Section 5.6. Compliance with Laws, Other Instruments, Etc..............................................................7
Section 5.7. Governmental Authorizations, Etc..........................................................................8
Section 5.8. Litigation; Observance of Agreements, Statutes and Orders.................................................8
Section 5.9. Taxes.....................................................................................................8
Section 5.10. Title to Property; Leases................................................................................8
Section 5.11. Licenses, Permits, Etc...................................................................................9
Section 5.12. Compliance with ERISA....................................................................................9
Section 5.13. Private Offering by the Company.........................................................................10
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
Section 5.14. Use of Proceeds; Margin Regulations.....................................................................10
Section 5.15. Existing Debt; Future Liens.............................................................................10
Section 5.16. Foreign Assets Control Regulations, Etc.................................................................11
Section 5.17. Status under Certain Statutes...........................................................................11
Section 5.18. Environmental Matters...................................................................................11
Section 5.19. Pari Passu Ranking......................................................................................11
Section 5.20. Solvency................................................................................................12
Section 5.21. Year 2000...............................................................................................12
SECTION 6. REPRESENTATIONS OF THE PURCHASER..............................................................................12
Section 6.1. Purchase for Investment..................................................................................12
Section 6.2. Source of Funds..........................................................................................12
SECTION 7. INFORMATION AS TO COMPANY; STATUS OF SUBSIDIARIES.............................................................14
Section 7.1. Financial and Business Information.......................................................................14
Section 7.2. Officer's Certificate....................................................................................17
Section 7.3. Inspection...............................................................................................17
Section 7.4. Change in Status of Subsidiaries.........................................................................18
SECTION 8. PREPAYMENT OF THE NOTES.......................................................................................18
Section 8.1. Required Prepayments.....................................................................................18
Section 8.2. Optional Prepayments with Make-Whole Amount..............................................................18
Section 8.3. Prepayment Out of Proceeds of Transfer...................................................................18
Section 8.4. Allocation of Partial Prepayments........................................................................19
Section 8.5. Maturity; Surrender, Etc.................................................................................19
Section 8.6. Purchase of Notes........................................................................................19
Section 8.7. Make-Whole Amount........................................................................................19
SECTION 9. AFFIRMATIVE COVENANTS.........................................................................................21
Section 9.1. Compliance with Law......................................................................................21
Section 9.2. Insurance................................................................................................21
Section 9.3. Maintenance of Properties................................................................................21
Section 9.4. Payment of Taxes.........................................................................................21
Section 9.5. Existence, Etc...........................................................................................22
Section 9.6. Ranking: Covenant to Secure Notes Equally................................................................22
SECTION 10. NEGATIVE COVENANTS...........................................................................................22
Section 10.1. Incurrence of Debt, Transfer of Qualifying Securities...................................................22
Section 10.2. Priority Debt...........................................................................................24
Section 10.3. Liens...................................................................................................24
Section 10.4. Restricted Payments.....................................................................................26
Section 10.5. Restrictions on Dividends of Subsidiaries, Etc..........................................................26
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
Section 10.6. Mergers and Consolidations.............................................................................26
Section 10.7. Transfer of Assets.....................................................................................27
Section 10.8. Mining Restrictions....................................................................................29
Section 10.9. Restricted Investments.................................................................................29
Section 10.10. Subsidiary Guaranty Agreement..........................................................................29
Section 10.11. Nature of Business.....................................................................................30
Section 10.12. Transactions with Affiliates...........................................................................30
SECTION 11. EVENTS OF DEFAULT..........................................................................................30
SECTION 12. REMEDIES ON DEFAULT, ETC...................................................................................33
Section 12.1. Acceleration...........................................................................................33
Section 12.2. Other Remedies.........................................................................................33
Section 12.3. Rescission.............................................................................................33
Section 12.4. No Waivers or Election of Remedies, Expenses, Etc......................................................34
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES..............................................................34
Section 13.1. Registration of Notes..................................................................................34
Section 13.2. Transfer and Exchange of Notes.........................................................................34
Section 13.3. Replacement of Notes...................................................................................34
Section 13.4. Name of Company........................................................................................35
SECTION 14. PAYMENTS ON NOTES...........................................................................................35
Section 14.1. Place of Payment.......................................................................................35
Section 14.2. Home Office Payment....................................................................................35
SECTION 15. EXPENSES, ETC...............................................................................................36
Section 15.1. Transaction Expenses...................................................................................36
Section 15.2. Survival...............................................................................................36
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT................................................36
SECTION 17. AMENDMENT AND WAIVER........................................................................................36
Section 17.1. Requirements...........................................................................................36
Section 17.2. Solicitation of Holders of Notes.......................................................................37
Section 17.3. Binding Effect, Etc....................................................................................37
Section 17.4. Notes Held by Company, Etc.............................................................................37
SECTION 18. NOTICES.....................................................................................................38
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
SECTION 19. REPRODUCTION OF DOCUMENTS...................................................................................38
SECTION 20. CONFIDENTIAL INFORMATION....................................................................................39
SECTION 21. SUBSTITUTION OF PURCHASER...................................................................................40
SECTION 22. MISCELLANEOUS...............................................................................................40
Section 22.1. Successors and Assigns.................................................................................40
Section 22.2. Payments Due on Non-Business Days......................................................................40
Section 22.3. Severability...........................................................................................40
Section 22.4. Construction...........................................................................................40
Section 22.5. Counterparts...........................................................................................40
Section 22.6. Governing Law..........................................................................................40
Section 22.7. Recourse Only to the Company and the Subsidiary Guarantors; Non- Recourse to the General
Partner and Associated Persons........................................................................................40
</TABLE>
<TABLE>
<S> <C> <C>
Schedule A -- Information Relating To Purchasers
Schedule B -- Defined Terms
Schedule 4.8(d) -- Assumption Conditions
Schedule 5.1 -- Ownership of Company
Schedule 5.3 -- Disclosure Materials
Schedule 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary Equity
Interests
Schedule 5.5 -- Financial Statements
Schedule 5.8 -- Certain Litigation
Schedule 5.11 -- Licenses, Permits, etc.
Schedule 5.14 -- Use of Proceeds
Schedule 5.15 -- Existing Indebtedness and Liens
Exhibit 1 -- Form of Note
Exhibit 4.3(d) -- Form of Solvency Certificate
Exhibit 4.4(a) -- Form of Opinion of Special Counsel for the Company and the Original
Subsidiary Guarantors
Exhibit 4.4(b) -- Form of Opinion of Counsel for the Company and the Original
Subsidiary Guarantors
Exhibit 4.4(c) -- Form of Opinion of Counsel for the Company and the Original Subsidiary
Guarantors
Exhibit 4.4(d) -- Form of Opinion of Special Counsel for the Purchasers
Exhibit 4.5 -- Form of Subsidiary Guaranty Agreement
Exhibit 4.6 -- Form of Intercreditor Agreement
Exhibit 20 -- Form of Confidentiality Letter
</TABLE>
-iv-
<PAGE> 6
ALLIANCE RESOURCE GP, LLC
$180,000,000 8.31% Senior Notes due August 20, 2014
Dated as of August 16, 1999
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
ALLIANCE RESOURCE GP, LLC, a Delaware limited liability company, agrees
with each of the Purchasers listed in the attached Schedule A as follows:
SECTION 1. AUTHORIZATION OF NOTES; GUARANTEE.
Section 1.1. Authorization of Notes. The Company (as defined in
Schedule B) will authorize the issue and sale of $180,000,000 aggregate
principal amount of its 8.31% Senior Notes due August 20, 2014 (the "Notes",
such term to include any such notes delivered in substitution or exchange
therefor, or in subsequent substitutions or exchanges, pursuant to Section 13 of
this Agreement). The Notes shall be substantially in the form set out in Exhibit
1, with such changes therefrom, if any, as prescribed in Section 13.4 or as may
be approved by each Purchaser and the Company. Certain capitalized terms used in
this Agreement are defined in Schedule B; references to a "Schedule" or an
"Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached
to this Agreement.
Section 1.2. Guarantee of Notes. The obligations of the Company under
and pursuant to this Agreement and the Notes are to be fully and unconditionally
guaranteed by each of the Subsidiary Guarantors pursuant to a Subsidiary
Guaranty Agreement.
SECTION 2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to each purchaser listed in Schedule A (individually, a
"Purchaser" and collectively, the "Purchasers") and each Purchaser will purchase
from the Company, at the Closing provided for in Section 3, Notes in the
respective aggregate principal amount specified opposite such Purchaser's name
in Schedule A at the purchase price of 100% of the principal amount thereof. The
obligations of each Purchaser hereunder are several and not joint obligations
and each Purchaser shall have no obligation and no liability to any Person for
the performance or nonperformance by any other Purchaser hereunder.
SECTION 3. CLOSING.
The sale and purchase of the Notes to be purchased by each Purchaser
shall occur at the offices of Willkie Farr & Gallagher, 787 Seventh Avenue, New
York, NY 10019 (or at such other location in New York City acceptable to the
Purchasers and the Company) at 10:00 A.M. New York City time, at a closing (the
"Closing") on August 20, 1999. At the Closing the Company will deliver to each
Purchaser the Notes to be purchased by such Purchaser in the form of a single
Note (or such greater number of
<PAGE> 7
Alliance Resource GP, LLC Note Purchase Agreement
Notes, in denominations of at least $1,000,000, as such Purchaser may request
and as shall be reflected in Schedule A) dated the date of the Closing and
registered in such Purchaser's name (or in the name of such Purchaser's nominee,
as so reflected), against delivery by such Purchaser to the Company of
immediately available funds in the amount of the purchase price therefor by wire
transfer of immediately available funds for the account of Alliance Resource GP,
LLC, account no. 208325748 at Bank of Oklahoma, N.A., Tulsa, OK 74101 (ABA #
103900036). If at the Closing the Company shall fail to tender such Notes to any
Purchaser as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to any Purchaser's
satisfaction, such Purchaser shall, at such Purchaser's election, be relieved of
all further obligations under this Agreement, without thereby waiving any rights
such Purchaser may have by reason of such failure or such nonfulfillment.
SECTION 4. CONDITIONS TO CLOSING.
The obligation of each Purchaser to purchase and pay for the Notes to be
sold to such Purchaser at the Closing is subject to the fulfillment to such
Purchaser's satisfaction, prior to or at the Closing, of the following
conditions:
Section 4.1. Representations and Warranties. The representations and
warranties of the Company in Section 5 of this Agreement, and the
representations and warranties of the Original Subsidiary Guarantors in the
Original Subsidiary Guaranty Agreement, shall be correct when made and at the
time of the Closing (except to the extent the same relate to an earlier date, in
which case they shall have been correct in all Material respects as of such
earlier date).
Section 4.2. Performance; No Default. The Company and the Original
Subsidiary Guarantors shall have performed and complied with all agreements and
conditions contained in this Agreement and in the Original Subsidiary Guaranty
Agreement required to be performed or complied with by them prior to or at the
Closing, and after giving effect to the issue and sale of the Notes (and the
application of the proceeds thereof as contemplated by Schedule 5.14), no
Default or Event of Default shall have occurred and be continuing. Except for
the Restructuring Transactions, neither the Company nor any Restricted
Subsidiary shall have entered into any transaction since the date of the
Memorandum that would have been prohibited by Section 10.1, 10.3, 10.6, 10.7 or
10.10 hereof had such Section applied since such date.
Section 4.3. Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered to such
Purchaser an Officer's Certificate, dated the date of the Closing, certifying
that the conditions specified in Sections 4.1, 4.2, 4.11 and 4.12 have been
fulfilled.
(b) Secretarial Certificate. The Company shall have delivered to such
Purchaser a certificate by Alliance Coal Corporation, owner of the sole member
interest in the Company, certifying on behalf of the Company or the Original
Subsidiary Guarantors, as the case may be, as to the resolutions attached
thereto and other proceedings relating to the authorization, execution and
delivery of the Notes, this Agreement and the Original Subsidiary Guaranty
Agreement.
-2-
<PAGE> 8
Alliance Resource GP, LLC Note Purchase Agreement
(c) ERISA Certificate. If such Purchaser shall have made any of the
written disclosures referred to in Section 6.2(b), (c) or (e), such Purchaser
shall have received the certificate from the Company described in the last
paragraph of Section 6.2 and such certificate shall state that (i) the Company
is neither a "party in interest" nor a "disqualified person" (as defined in
Section 4975(e)(2) of the Code), with respect to any plan identified pursuant to
Section 6.2(b) or (e) or (ii) with respect to any plan, identified pursuant to
Section 6.2(c), neither the Company nor any "affiliate" (as defined in Section
V(c) of the QPAM Exemption) has, at such time or during the immediately
preceding one year, exercised the authority to appoint or terminate the QPAM as
manager of the assets of any plan identified in writing pursuant to Section
6.2(c) or to negotiate the terms of said QPAM's management agreement on behalf
of any such identified plans.
(d) Solvency Certificate. The Company shall have delivered to such
Purchaser a certificate from a Senior Financial Officer substantially in the
form of Exhibit 4.3(d) hereto attesting to the Solvency of the Company and the
Original Subsidiary Guarantors after giving effect to the execution and delivery
of the Notes, this Agreement, the Original Subsidiary Guaranty Agreement
(including without limitation the subrogation and contribution provisions
thereof) and the Assumption Agreement and the consummation of the transactions
contemplated herein and therein.
Section 4.4. Opinions of Counsel. Such Purchaser shall have received
opinions in form and substance satisfactory to such Purchaser, dated the date of
the Closing (a) from Andrews & Kurth L.L.P., special counsel for the Company and
the Original Subsidiary Guarantors, covering the matters set forth in Exhibit
4.4(a) and covering such other matters incident to the transactions contemplated
hereby as such Purchaser or such Purchaser's special counsel may reasonably
request (and the Company hereby instructs its counsel to deliver such opinion to
such Purchaser), (b) from Crowell & Moring LLP, counsel for the Company and the
Original Subsidiary Guarantors, covering the matters set forth in Exhibit 4.4(b)
and covering such other matters incident to the transactions contemplated hereby
as such Purchaser or such Purchaser's special counsel may reasonably request
(and the Company hereby instructs its counsel to deliver such opinion to such
Purchaser), (c) from Thomas L. Pearson, Esq., counsel for the Company and the
Original Subsidiary Guarantors covering the matters set forth in Exhibit 4.4(c)
and covering such other matters incident to the transactions contemplated hereby
as such Purchaser or such Purchaser's special counsel may reasonably request
(and the Company hereby instructs such counsel to deliver such opinion to such
Purchaser), (d) from Willkie Farr & Gallagher, the Purchasers' special counsel
in connection with such transactions, covering the matters set forth in Exhibit
4.4(d) and covering such other matters incident to such transactions as such
Purchaser may reasonably request and (e) from local counsel with respect to the
laws of Illinois, Indiana, Kentucky, Maryland, Oklahoma and West Virginia
covering such matters incident to the transactions contemplated hereby as such
Purchaser or such Purchaser's special counsel may reasonably request (and the
Company hereby instructs its counsel to deliver such opinions to such
Purchaser).
Section 4.5. Original Subsidiary Guaranty Agreement. Such Purchaser
shall have received a counterpart original of the Subsidiary Guaranty Agreement,
duly executed and delivered by each Original Subsidiary Guarantor, in the form
of Exhibit 4.5 (the "Original Subsidiary Guaranty Agreement ") and said Original
Subsidiary Guaranty Agreement shall be in full force and effect.
Section 4.6. Intercreditor Agreement. Such Purchaser shall have
received a counterpart original of the Intercreditor Agreement, duly executed
and delivered by each Purchaser, each Original
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Alliance Resource GP, LLC Note Purchase Agreement
Subsidiary Guarantor, the Company and The Chase Manhattan Bank as Paying Agent
under the Bank Facility in the form of Exhibit 4.6 and said Intercreditor
Agreement shall be in full force and effect.
Section 4.7. Purchase Permitted by Applicable Law, Etc. On the date of
the Closing each purchase of Notes shall (a) be permitted by the laws and
regulations of each jurisdiction to which each Purchaser is subject, without
recourse to provisions (such as Section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (b) not violate any applicable
law or regulation (including, without limitation, Regulation T, U or X of the
Board of Governors of the Federal Reserve System) and (c) not subject any
Purchaser to any tax, penalty or liability under or pursuant to any applicable
law or regulation, which law or regulation was not in effect on the date hereof.
If requested by any Purchaser, such Purchaser shall have received an Officer's
Certificate certifying as to such matters of fact as such Purchaser may
reasonably specify to enable such Purchaser to determine whether such purchase
is so permitted as specified in clause (a) of the preceding sentence.
Section 4.8. Related Transactions. The Company shall
(a) together with the Transferee Company, have completed each of the
transactions described in the Contribution Agreement (the "Contribution
Transactions") and no provision of the Contribution Agreement relating to the
consummation of the Contribution Transactions shall have been waived, modified
or supplemented without such Purchaser's consent;
(b) have executed and delivered the Bank Facility in the form of
Agreement previously furnished to such Purchaser providing for borrowings of not
less than $100,000,000 and the same shall be in full force and effect and no
default shall exist thereunder;
(c) have consummated the sale of the entire principal amount of the
Notes scheduled to be sold on the date of Closing pursuant to this Agreement;
(d) together with the Transferee Company, have fulfilled each of the
conditions described in Schedule 4.8(d) (the "Assumption Conditions"); and
(e) have made arrangements satisfactory to such Purchaser and its
special counsel for the satisfaction and discharge of the Liens listed on
Schedule 5.15 that are indicated on such Schedule as being released at the time
of Closing.
Section 4.9. Payment of Special Counsel Fees. Without limiting the
provisions of Section 15.1, the Company shall have paid on or before the Closing
the fees, charges and disbursements of the Purchasers' special counsel referred
to in Section 4.4(d) to the extent reflected in a statement of such counsel
rendered to the Company at least one Business Day prior to the Closing.
Section 4.10. Private Placement Number. A Private Placement Number
issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the
Securities Valuation Office of the National Association of Insurance
Commissioners) shall have been obtained for the Notes.
Section 4.11. Changes in Structure. Except for the Restructuring
Transactions, neither the Company nor either Original Subsidiary Guarantor shall
have changed its jurisdiction of formation, been a
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party to any merger or consolidation or, except as contemplated by the
Assumption Agreement (and the Assumption Agreement as defined in the Bank
Facility), succeeded to all or any substantial part of the liabilities of any
other entity, at any time since the date of the Memorandum.
Section 4.12. Rating. Prior to the date of Closing, the Notes shall
have received a rating of BBB- or better from either Fitch Investors Service,
Inc. or Duff & Phelps Credit Rating Co. and such rating shall remain in effect
at the time of Closing.
Section 4.13 Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be satisfactory to such
Purchaser and such Purchaser's special counsel, and such Purchaser and such
Purchaser's special counsel shall have received all such counterpart originals
or certified or other copies of such documents as such Purchaser or such
Purchaser's special counsel may reasonably request.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
Section 5.1. Formation; Power and Authority; Ownership. The Company is
a limited liability company duly formed and validly existing under the laws of
the State of Delaware, and is duly licensed or qualified as a foreign limited
liability company in each jurisdiction in which such qualification is required
by law, other than those jurisdictions as to which the failure to be so
qualified could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. The Company has the power and authority to own
or hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Notes and to perform the provisions hereof and
thereof. The name of each Person holding an equity interest in the Company
(including a description of the nature of such interest) is set forth on
Schedule 5. 1.
Section 5.2. Authorization, Etc.
(a) Authorization by the Company. This Agreement and the Notes have
been duly authorized by all necessary action on behalf of the Company, and this
Agreement constitutes, and upon execution and delivery thereof each Note will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as may be limited by
(i) applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and (ii)
general principles of equity (regardless of whether considered in a proceeding
in equity or at law).
(b) Authorization by Original Subsidiary Guarantors. The Original
Subsidiary Guaranty Agreement has been duly authorized by all necessary action
on behalf of the applicable Original Subsidiary Guarantor, and the Original
Subsidiary Guaranty Agreement constitutes a legal valid and binding obligation
of the applicable Original Subsidiary Guarantor enforceable against such
Original Subsidiary Guarantor in accordance with its terms, except as may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (regardless of whether considered in a
proceeding in equity or at law).
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Section 5.3. Disclosure. The Company, through its agents, Salomon Smith
Barney Inc. and Lehman Brothers Inc., has delivered to each Purchaser a copy of
a Private Placement Memorandum, dated June 16, 1999 (collectively, including its
appendices and the Registration Statement, the "Memorandum"), relating to the
transactions contemplated hereby. The Memorandum describes, in all material
respects, the general nature of the business and principal properties of the
Company and its Restricted Subsidiaries. Except as disclosed in Schedule 5.3,
this Agreement, the Memorandum (other than the Pro Forma Financial Statements,
which are the subject of the representation in Section 5.5(b)) and the
documents, certificates or other writings delivered to each Purchaser by or on
behalf of the Company in connection with the transactions contemplated hereby
and the financial statements listed in Schedule 5.5, taken as a whole, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as disclosed in the Memorandum
or as expressly described in Schedule 4.8(d), Schedule 5.3, or in one of the
documents, certificates or other writings identified therein, or in the
financial statements listed in Schedule 5.5, since the date of the Memorandum,
there has been no change in the financial condition, operations, business,
properties or prospects of the Company or any of its Restricted Subsidiaries as
contemplated in the Pro Forma Financial Statements except changes that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. There is no fact known to the Company that could
reasonably be expected to have a Material Adverse Effect that has not been set
forth herein or in the Memorandum or in the other documents, certificates and
other writings delivered to each Purchaser by or on behalf of the Company
specifically for use in connection with the transactions contemplated hereby.
After giving effect to the execution and delivery of the Notes, this Agreement,
the Original Subsidiary Guaranty Agreement and the Assumption Agreement and the
consummation of the transactions contemplated herein and therein of the Company
and the Original Subsidiary Guarantors will be Solvent.
Section 5.4. Formation and Ownership of Subsidiaries; Affiliates. (a)
Schedule 5.4 contains (except as noted therein) complete and correct lists (i)
of the Company's Subsidiaries, showing, as to each Subsidiary, its status
(whether a Restricted or Unrestricted Subsidiary), whether such Subsidiary is an
Original Subsidiary Guarantor, the correct name thereof, the jurisdiction of its
organization or formation, and the percentage of each class of its Capital Stock
outstanding owned by the Company and each other Subsidiary, and (ii) of the
Company's Affiliates, other than Subsidiaries.
(b) All of the outstanding shares of Capital Stock of each Subsidiary
shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have
been validly issued, will be fully paid (to the extent required under the
Partnership Agreement or by the Subsidiary's operating agreement, in the case of
a limited liability company) and nonassessable (except as such non-assessability
may be affected by the Delaware Revised Uniform Limited Partnership Act in the
case of the Transferee Company, or by Section 18-607 of the Delaware Limited
Liability Company Act, in the case of a limited liability company) and owned by
the Company or another Subsidiary free and clear of any Lien (except as
otherwise disclosed in Schedule 5.4).
(c) Each Restricted Subsidiary identified in Schedule 5.4 is a limited
liability company duly formed and validly existing under the laws of its
jurisdiction of formation, and is duly qualified as a foreign limited liability
company in each jurisdiction in which such qualification is required by law,
other than those jurisdictions as to which the failure to be so qualified could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Restricted Subsidiary
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Alliance Resource GP, LLC Note Purchase Agreement
has the power and authority to own or hold under lease the properties it
purports to own or hold under lease and to transact the business it transacts
and proposes to transact.
(d) No Restricted Subsidiary is a party to, or otherwise subject to,
any legal restriction or any agreement (other than this Agreement, the Bank
Facility, the other agreements listed on Schedule 5.4 and customary limitations
imposed by limited liability company law statutes) restricting the ability of
such Restricted Subsidiary to make any distributions of profits to the Company
or any of its Restricted Subsidiaries that owns outstanding shares of Capital
Stock or of such Restricted Subsidiary.
Section 5.5. Financial Statements. (a) The Company has delivered to
each Purchaser copies of the consolidated and combined financial statements of
the Company and its Subsidiaries, and their predecessor entities, listed on
Schedule 5.5 (all of which are also set forth in the Registration Statement).
All of said financial statements (including in each case the related schedules
and notes) fairly present in all material respects the consolidated (or
combined, as the case may be) financial position of the entities being reported
upon as of the respective dates specified in such statements and the
consolidated (or combined, as the case mey be) results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments).
(b) The Pro Forma Financial Statements, consisting of the unaudited pro
forma financial statements of the MLP as of and for the three months ended March
31, 1999 and for the year ended December 31, 1998 set forth in the Registration
Statement comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and the published rules and
regulations thereunder and the assumptions on which the pro forma adjustments
reflected in such Pro Forma Financial Statements are based provide a reasonable
basis for presenting the significant effects of the transactions contemplated by
such Pro Forma Financial Statements and such pro forma adjustments give
appropriate effect to such assumptions and are properly applied in such Pro
Forma Financial Statements.
Section 5.6. Compliance with Laws, Other Instruments, Etc. Neither the
execution, delivery and performance by the Company of this Agreement and the
Notes nor the execution, delivery and performance of the Original Subsidiary
Guaranty Agreement by the Original Subsidiary Guarantors will (a) contravene,
result in any breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of the Company or any Restricted
Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, articles of formation, partnership agreement, corporate
charter, by-laws, operating agreement or any other agreement or instrument to
which the Company or any Restricted Subsidiary is bound or by which the Company
or any Restricted Subsidiary or any of their respective properties may be bound
or affected, (b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Restricted
Subsidiary or (c) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or any
Restricted Subsidiary, except in the cases of clauses (a), (b) and (c) such
contraventions, breaches, defaults, conflicts and violations which could not
reasonably be expected to have a Material Adverse Effect.
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Section 5.7. Governmental Authorizations, Etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with (a) the execution, delivery or
performance by the Company of this Agreement or the Notes (except as required by
law in connection with the offer, issue, sale and delivery by the MLP of its
limited partnership units ("MLP Unit Consents") all of which have been obtained
or completed except for such MLP Unit Consents the failure to obtain which could
not reasonably be expected to have a Material Adverse Effect), or (b) the
execution, delivery or performance of the Original Subsidiary Guaranty Agreement
by the Original Subsidiary Guarantors.
Section 5.8. Litigation; Observance of Agreements, Statutes and Orders.
(a) Except as disclosed in Schedule 5.8, there are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Subsidiary or any property of the Company or any
Subsidiary in any court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any term
of any agreement or instrument to which it is a party or by which it is bound,
or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 5.9. Taxes. The predecessor entities of the Company and its
Subsidiaries have filed all tax returns that are required to have been filed in
any jurisdiction, and have paid all taxes shown to be due and payable on such
returns and all other taxes and assessments levied upon them or their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
except for any taxes and assessments (a) the amount of which is not individually
or in the aggregate Material or (b) the amount, applicability or validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which the Company or any such Subsidiary, as the case may be,
has established adequate reserves in accordance with GAAP. The Company knows of
no basis for any other tax or assessment that could reasonably be expected to
have a Material Adverse Effect. The charges, accruals and reserves on the books
of the Company and its Restricted Subsidiaries in respect of Federal, state or
other taxes for all fiscal periods are adequate.
Section 5.10. Title to Property; Leases. The Company and its Restricted
Subsidiaries have good and sufficient title to their respective properties that
individually or in the aggregate are Material, including all such properties
reflected in the balance sheet contained in the Pro Forma Financial Statements
or purported to have been acquired by the Company or any Restricted Subsidiary
after the date of said Pro Forma Financial Statements (except as sold or
otherwise disposed of in the ordinary course of business), in each case free and
clear of Liens that individually or in the aggregate would have a Material
Adverse Effect. All leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects. All properties of the Company and its Restricted Subsidiaries (whether
owned with a freehold or leasehold interest) that are used in the conduct of
their respective businesses and that are individually or in the aggregate,
Material, are in a sufficient state of repair and condition to enable such
businesses, taken as a whole, to be carried on effectively.
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Alliance Resource GP, LLC Note Purchase Agreement
Section 5.11. Licenses, Permits, Etc.
(a) The Company and its Restricted Subsidiaries own or
possess, without known conflict with the rights of others, all
licenses, permits, franchises, authorizations, patents, copyrights,
service marks, trademarks and trade names, or rights thereto
(collectively, "Licenses") necessary for the operation of their
respective businesses (other than those Licenses as to which the
failure to own or possess them could not reasonably be expected to have
a Material Adverse Effect) and the same are in full force and effect,
except that the Company and its Restricted Subsidiaries are in the
process of obtaining certain mining and environmental Licenses as
described in Schedule 5.11, all of which are anticipated to be obtained
in due course without the imposition of onerous conditions (other than
Licenses which if not obtained or if subject to any such conditions,
would not individually or collectively be reasonably likely to have a
Material Adverse Effect).
(b) To the best knowledge of the Company, no product or
practice of the Company or any of its Restricted Subsidiaries infringes
in any Material respect any license, permit, franchise, authorization,
patent, copyright, service mark, trademark, trade name or other right
owned by any other Person.
(c) To the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Restricted Subsidiaries with respect to any patent, copyright, service
mark, trademark, trade name or other right owned or used by the Company
or any of its Restricted Subsidiaries.
Section 5.12. Compliance with ERISA. (a) The Company and each ERISA
Affiliate have operated and administered each Plan in compliance with all
applicable laws except for such instances of noncompliance as have not resulted
in and could not reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability pursuant
to Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in Section 3 of ERISA), and no
event, transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or any
ERISA Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions
or to Section 401(a)(29) or 412 of the Code, other than such liabilities or
Liens as would not be individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities by more than $10,000,000 in the aggregate
for all Plans. The term "benefit liabilities" has the meaning specified in
Section 4001 of ERISA and the terms "current value " and "present value " have
the meanings specified in Section 3 of ERISA.
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(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
Section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected post-retirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B of
the Code) of the Company and its Restricted Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of Section 406 of ERISA or in connection with which a tax could
be imposed pursuant to Section 4975(c)(1)(A)(D) of the Code. The representation
by the Company in the first sentence of this Section 5.12(e) is made in reliance
upon and subject to the accuracy of each Purchaser's representation in Section
6.2 as to the sources of the funds to be used to pay the purchase price of the
Notes to be purchased by such Purchaser.
Section 5.13. Private Offering by the Company. Neither the Company nor
Salomon Smith Barney Inc. or Lehman Brothers Inc., the sole Persons acting on
its behalf in the offering of the Notes, has offered the Notes or any similar
securities for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with, any Person other
than the Purchasers and not more than 90 other institutional investors, each of
which has been offered a portion of the Notes at a private sale for investment.
Neither the Company nor anyone authorized to act on its behalf has taken, or
will take, any action that would subject the issuance or sale of the Notes to
the registration requirements of Section 5 of the Securities Act. For purposes
of this Section 5.13 and Section 6.1 only, each reference to the Notes shall be
deemed to include a reference to the Original Subsidiary Guaranty Agreement.
Section 5.14. Use of Proceeds; Margin Regulations. The Company will
apply the proceeds of the sale of the Notes as set forth in Schedule 5.14. No
part of the proceeds from the sale of the Notes hereunder will be used, directly
or indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
(12 CFR 221), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). Margin stock does not
constitute more than 25% of the value of the consolidated assets of the Company
and its Restricted Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 25% of the value of such
assets. As used in this Section, the terms "margin stock" and "purpose of buying
or carrying" shall have the meanings assigned to them in said Regulation U.
Section 5.15. Existing Debt; Future Liens. (a) Schedule 5.15 sets forth
a complete and correct list of all outstanding Debt of the Company and its
Restricted Subsidiaries as of the date of Closing. Neither the Company nor any
Restricted Subsidiary is in default and no waiver of default is currently in
effect, in the payment of any principal or interest on any Debt of the Company
or such Restricted Subsidiary and no event or condition exists with respect to
any Debt of the Company or any Restricted Subsidiary that would permit (or that
with notice or the lapse of time, or both, would permit) one or
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Alliance Resource GP, LLC Note Purchase Agreement
more Persons to cause such Debt to become due and payable before its stated
maturity or before its regularly scheduled dates of payment.
(b) Neither the Company nor any Restricted Subsidiary has agreed or
consented to cause or permit in the future (upon the happening of a contingency
or otherwise) any of its property, whether now owned or hereafter acquired, to
be subject to a Lien not permitted by Section 10.3.
Section 5.16. Foreign Assets Control Regulations, Etc. Neither the sale
of the Notes by the Company hereunder nor its use of the proceeds thereof will
violate the Trading with the Enemy Act, as amended, or any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) or any enabling legislation or executive order
relating thereto.
Section 5.17. Status under Certain Statutes. Neither the Company nor
any Restricted Subsidiary is an "investment company" registered or required to
be registered under the Investment Company Act of 1940, as amended, or is
subject to regulation under the Public Utility Holding Company Act of 1935, as
amended, or the Federal Power Act, as amended.
Section 5.18. Environmental Matters. Neither the Company nor any
Subsidiary has knowledge of any claim or has received any notice of any claim,
and no proceeding has been instituted raising any claim against the Company or
any of its Subsidiaries or any of their respective real properties now or
formerly owned, leased or operated by any of them or other assets, alleging any
damage to the environment or violation of any Environmental Laws, except, in
each case, such as could not reasonably be expected to result in a Material
Adverse Effect.
(a) Neither the Company nor any Restricted Subsidiary has
knowledge of any facts which would give rise to any claim, public or
private, of violation of Environmental Laws or damage to the
environment emanating from, occurring on or in any way related to real
properties now or formerly owned, leased or operated by any of them or
to other assets or their use, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect.
(b) Neither the Company nor any of its Restricted Subsidiaries
has stored any Hazardous Materials on real properties now or formerly
owned, leased or operated by any of them or has disposed of any
Hazardous Materials in a manner contrary to any Environmental Laws in
each case in any manner that could reasonably be expected to result in
a Material Adverse Effect.
(c) All buildings on all real properties now owned, leased or
operated by the Company or any of its Restricted Subsidiaries are in
compliance with applicable Environmental Laws, except where failure to
comply could not reasonably be expected to result in a Material Adverse
Effect.
Section 5.19. Pari Passu Ranking. The Company's obligations under the
Notes, and this Agreement, and each Original Subsidiary Guarantor's obligations
under the Subsidiary Guaranty Agreement, will, upon (a) issuance of the Notes
and the execution and delivery of the Subsidiary Guaranty Agreement,
respectively, and (b) the effectiveness of the Assumption Agreement, rank at
least
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pari passu, without preference or priority, with all of the outstanding
unsecured and unsubordinated Debt of the Company or of such Original Subsidiary
Guarantor, as the case may be.
Section 5.20. Solvency. The Company is not, and upon giving effect to
the issuance of the Notes, will not be, and the Original Subsidiary Guarantors
are not, and upon giving effect to the execution and delivery of the Subsidiary
Guaranty Agreement (including without limitation the subrogation and
contribution provisions thereof), will not be, "insolvent" as said term is
defined in the United States Bankruptcy Code 11, U.S.C. ss. 101 (32) (A) or (B)
(as applicable) and its obligations are not, and will not be, in default as to
"principal or interest", as said terms are used in Section 1405(c) of the New
York State Insurance Law.
Section 5.21. Year 2000. The Company has (i) initiated a review and
assessment of all areas within its and each of its Subsidiaries' business and
operations that could be adversely affected by the risk that computer
applications used by the Company or any of its Subsidiaries may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999 (the "Year 2000 Problem"), (ii)
distributed a questionnaire to each of its suppliers, vendors and customers
requesting such party's plans and timetable for addressing the Year 2000
Problem, (iii) developed a plan and timetable for addressing the Year 2000
Problem on a timely basis and no later than November 30, 1999 will have
completed such plan, and (iv) to date, implemented that plan in accordance with
such timetable. Based on the foregoing, the Company believes that all computer
applications that are material to its or any of its Subsidiaries' business and
operations are reasonably expected on a timely basis to be able to perform
properly date-sensitive functions for all dates before and after January 1, 2000
("Year 2000 Compliant"), except to the extent that a failure to do so could not
reasonably be expected to have a Material Adverse Effect.
SECTION 6. REPRESENTATIONS OF THE PURCHASER.
Section 6.1. Purchase for Investment. Each Purchaser represents that it
is purchasing the Notes for its own account or for one or more separate accounts
maintained by it or for the account of one or more pension or trust funds with
respect to which it has the requisite investment discretion and not with a view
to the distribution thereof, provided that the disposition of such Purchaser's
or such pension or trust funds' property shall at all times be within such
Purchaser's or such pension or trust funds' control. Each Purchaser understands
that the Notes have not been registered under the Securities Act and may be
resold only if registered pursuant to the provisions of the Securities Act or if
an exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to so register the Notes or to qualify an indenture in
respect thereof under the Trust Indenture Act of 1939.
Section 6.2. Source of Funds. Each Purchaser represents that at least
one of the following statements is an accurate representation as to each source
of funds (a "Source") to be used by it to pay the purchase price of the Notes to
be purchased by it hereunder:
(a) the Source is an "insurance company general account"
within the meaning of Department of Labor Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no employee
benefit plan, treating as a single plan, all plans maintained by the
same employer or employee organization, with respect to which the
amount of the general account
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Alliance Resource GP, LLC Note Purchase Agreement
reserves and liabilities for all contracts held by or on behalf of such
plan, exceeds ten percent (10%) of the total reserves and liabilities
of such general account (exclusive of separate account liabilities)
plus surplus, as set forth in the NAIC Annual Statement for such
Purchaser most recently filed with such Purchaser's state of domicile;
or
(b) the Source is either (i) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January 29,
1990), or (ii) a bank collective investment fund, within the meaning of
the PTE 91-38 (issued July 12, 1991) and, except as such Purchaser has
disclosed to the Company in writing pursuant to this paragraph (b), no
employee benefit plan or group of plans maintained by the same employer
or employee organization beneficially owns more than 10% of all assets
allocated to such pooled separate account or collective investment
fund; or
(c) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan's assets that
are included in such investment fund, when combined with the assets of
all other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(I) of
the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client
assets managed by such QPAM, the conditions of Part I(c) and (g) of the
QPAM Exemption are satisfied, neither the QPAM nor a person controlling
or controlled by the QPAM (applying the definition of "control" in
Section V(e) of the QPAM Exemption) owns a 5% or more interest in the
Company and (i) the identity of such QPAM and (ii) the names of all
employee benefit plans whose assets are included in such investment
fund have been disclosed to the Company in writing pursuant to this
paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (e);
(f) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA; or
(g) the Source is an insurance company separate account
maintained solely in connection with the fixed contractual obligations
of the insurance company under which the amounts payable, or credited,
to any employee benefit plan (or its related trust) and to any
participant or beneficiary of such plan (including any annuitant) are
not affected in any manner by the investment performance of the
separate account.
If any Purchaser or any subsequent transferee of the Notes shall furnish to the
Company any written disclosure pursuant to paragraph (b), (c) or (e) above, the
Company shall deliver on the date of Closing or on the date of transfer, as
applicable, a certificate, which shall state whether (i) it is a party in
interest or a "disqualified person" (as defined in Section 4975(e)(2) of the
Code), with respect to any plan identified pursuant to paragraphs (b) or (e)
above, or (ii) with respect to any plan, identified pursuant to
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Alliance Resource GP, LLC Note Purchase Agreement
paragraph (c) above, whether it or any "affiliate" (as defined in Section V(c)
of the QPAM Exemption) has at such time, and during the immediately preceding
one year, exercised the authority to appoint or terminate said QPAM as manager
of any plan identified in writing pursuant to paragraph (c) above or to
negotiate the terms of said QPAM's management agreement on behalf of any such
identified plan. As used in this Section 6.2, the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
SECTION 7. INFORMATION AS TO COMPANY; STATUS OF SUBSIDIARIES.
Section 7.1. Financial and Business Information. The Company shall
deliver to each holder of Notes that is an Institutional Investor:
(a) Quarterly Statements - within 60 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the last
quarterly fiscal period of each such fiscal year), duplicate copies of,
(i) an unaudited consolidated balance sheet of the Company and
its Restricted Subsidiaries as at the end of such quarter, and
(ii) unaudited consolidated statements of income, changes in
partners' equity and cash flows of the Company and its Restricted
Subsidiaries, for such quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending with such quarter,
setting forth (commencing with the fiscal quarter ending December 31, 2000) in
each case in comparative form the figures for the corresponding periods in the
previous fiscal year, all in reasonable detail, prepared in accordance with GAAP
applicable to quarterly financial statements generally, and certified by a
Senior Financial Officer as fairly presenting, in all material respects, the
financial position of the entities being reported on and their results of
operations and cash flows, subject to changes resulting from normal, recurring
year-end adjustments, provided that delivery within the time period specified
above of copies of the MLP's Quarterly Report on Form 10-Q prepared in
compliance with the requirements therefor and filed with the Securities and
Exchange Commission shall, so long as the only material operating entity and
other assets held by the MLP are, and the only material liabilities of the MLP
are liabilities of, the Company (including for this purpose the Company's
Subsidiaries) be deemed to satisfy the requirements of this Section 7.1(a);
(b) Annual Statements - within 120 days after the end of each fiscal
year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Restricted Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in partners'
equity and cash flows of the Company and its Restricted Subsidiaries,
for such year,
setting forth (commencing with the fiscal year ending December 31, 2001) in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail, prepared in accordance with GAAP, and accompanied by
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Alliance Resource GP, LLC Note Purchase Agreement
(A) a report thereon of independent certified public
accountants of recognized national standing, which report shall state
that such financial statements present fairly, in all material
respects, the financial position of the entities being reported upon
and their results of operations and cash flows and have been prepared
in conformity with GAAP, and that the examination of such accountants
in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such
audit provides a reasonable basis for such report in the circumstances,
and
(B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making their
audit, they have become aware of any financial condition or event that
then constitutes a Default or an Event of Default, and, if they are
aware that any such condition or event then exists, specifying the
nature and period of the existence thereof (it being understood that
such accountants shall not be liable, directly or indirectly, for any
failure to obtain knowledge of any Default or Event of Default unless
such accountants should have obtained knowledge thereof in making an
audit in accordance with generally accepted auditing standards or did
not make such an audit),
provided that the delivery within the time period specified above of the MLP's
Annual Report on Form 10-K for such fiscal year (together with the Company's
annual report to shareholders, if any, prepared pursuant to Rule l4a-3 under the
Exchange Act) prepared in accordance with the requirements therefor and filed
with the Securities and Exchange Commission, together with the accountant's
certificate described in clause (B) above, shall, so long as the only material
operating entity and other assets held by the MLP are, and the only material
liabilities of the MLP are liabilities of, the Company (including for this
purpose the Company's Subsidiaries) be deemed to satisfy the requirements of
this Section 7.1(b);
(c) SEC and Other Reports -- promptly upon their becoming available,
one copy of each regular or periodic report, each registration statement
(without exhibits except as expressly requested by such holder), and each
prospectus and all amendments thereto filed by the MLP, the Company or any
Restricted Subsidiary with the Securities and Exchange Commission and of all
press releases and other statements made available generally by the MLP, the
Company or any Restricted Subsidiary to unitholders of the MLP concerning
developments that are Material;
(d) Notice of Default or Event of Default -- promptly, and in any event
within five Business Days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given any
notice or taken any action with respect to a claimed default hereunder or that
any Person has given any notice or taken any action with respect to a claimed
default of the type referred to in Section 11 (f), a written notice specifying
the nature and period of existence thereof and what action the Company is taking
or proposes to take with respect thereto;
(e) Actions, Proceedings -- promptly after a Responsible Officer of the
Company becoming aware of the commencement thereof, notice of any action or
proceeding relating to the Company or any Restricted Subsidiary in any court or
before any Governmental Authority or arbitration board or tribunal as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect.
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Alliance Resource GP, LLC Note Purchase Agreement
(f) ERISA Matters -- promptly, and in any event within five Business
Days after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if any, that the
Company or an ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event, as defined
in section 4043(b) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in
effect on the date hereof, or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties or assets of
the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA
or such penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then existing,
could reasonably be expected to have a Material Adverse Effect;
(g) Notices from Governmental Authority -- promptly, and in any event
within 30 days of receipt thereof, copies of any notice to the Company or any
Subsidiary from any Federal or state Governmental Authority relating to any
order, ruling, statute or other law or regulation that could reasonably be
expected to have a Material Adverse Effect;
(h) Rule 144A -- promptly upon the request of any holder of Notes, such
financial and other information as such holder may reasonably determine to be
necessary in order to permit compliance with the information requirements of
Rule 144A under the Securities Act in connection with the resale of Notes,
except at such times as the Company is subject to the reporting requirements of
section 13 or 15(d) of the Exchange Act;
(i) Year 2000 Compliance -- promptly after the Company's discovery or
determination thereof, notice (in reasonable detail) that any computer
application that is material to its or to any of its Subsidiaries' business and
operations will not be Year 2000 Compliant (as defined in Section 5.21), except
to the extent that such failure could not reasonably be expected to have a
Material Adverse Effect; and
(j) Requested Information -- with reasonable promptness, such other
data and information relating to the business, operations, affairs, financial
condition, assets or properties of the Company or any of its Subsidiaries, the
ability of the Company to perform its obligations hereunder and under the Notes,
or the ability of any Subsidiary Guarantor to perform its obligations under the
Subsidiary Guaranty Agreement, as from time to time may be reasonably requested
by any such holder of Notes.
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Alliance Resource GP, LLC Note Purchase Agreement
Section 7.2. Officer's Certificate. Each set of financial statements
delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b)
hereof shall be accompanied by a certificate of a Senior Financial Officer
setting forth:
(a) Covenant Compliance -- any information (including detailed
calculations where applicable) required to establish whether the Company was in
compliance with the requirements of Section 10.1 through Section 10.9,
inclusive, 10.11 and 10.12 hereof during the quarterly or annual period covered
by the statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum amount,
ratio or percentage, as the case may be, permissible under the terms of such
Sections, and the calculation of the amount, ratio or percentage then in
existence and specifying those adjustments in any items abstracted from such
financial statements necessary to reflect the adjustments to GAAP provided for
in this Agreement); and
(b) Event of Default -- a statement that such officer has reviewed the
relevant terms hereof and has made, or caused to be made, under his or her
supervision, a review of the transactions and conditions of the Company and its
Restricted Subsidiaries from the beginning of the quarterly or annual period
covered by the statements then being furnished to the date of the certificate
and that such review has not disclosed the existence during such period of any
condition or event that constitutes a Default or an Event of Default or, if any
such condition or event existed or exists (including, without limitation, any
such event or condition resulting from the failure of the Company or any
Restricted Subsidiary to comply with any Environmental Law), specifying the
nature and period of existence thereof and what action, if any, shall have been
taken or is proposed to be taken with respect thereto.
Section 7.3. Inspection. The Company shall permit the representatives
of each holder of Notes that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists, at the
expense of such holder and upon reasonable prior notice to the Company, to visit
the principal executive office of the Company, to discuss the affairs, finances
and accounts of the Company and its Restricted Subsidiaries with the Company's
officers, and (with the consent of the Company, which consent will not be
unreasonably withheld and with an opportunity for one or more Responsible
Officers to be present, it being understood that the failure of such Responsible
Officers to be present shall not preclude the representatives of such holder
from proceeding with such meeting) its independent public accountants, and (with
the consent of the Company, which consent will not be unreasonably withheld) to
visit the other offices and properties of the Company and each Restricted
Subsidiary, all at such reasonable times and as often as may be reasonably
requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at the
expense of the Company, to visit and inspect any of the offices or properties of
the Company or any Restricted Subsidiary, to examine all their respective books
of account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers and independent public accountants (and by this
provision the Company authorizes said accountants to discuss the affairs,
finances and accounts of the Company and its Restricted Subsidiaries so long as
one or more Responsible Officers has an opportunity to be present, it being
understood that the failure of such Responsible Officers to be present shall not
preclude the representatives of such holder from proceeding with such meeting),
all at such times and as often as may be requested.
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Alliance Resource GP, LLC Note Purchase Agreement
Section 7.4. Change in Status of Subsidiaries. (a) So long as no
Default or Event of Default shall have occurred and be continuing, the Company
may at any time and from time to time, upon not less than 30 days' prior written
notice given to each holder of a Note, designate a previously Restricted
Subsidiary as an Unrestricted Subsidiary or a previously Unrestricted Subsidiary
(including a new Subsidiary designated on the date of its formation or
acquisition) which satisfies the requirements of clauses (i), (ii) and (iii) of
the definition of "Restricted Subsidiary" as a Restricted Subsidiary, provided
that immediately after such designation and after giving effect thereto no
Default or Event of Default shall have occurred and be continuing, and the
Company would be permitted, pursuant to the provisions of Section 10.1(a) to
incur at least $1 of additional Debt owing to a Person other than a Restricted
Subsidiary, and provided further that after such designation the status of such
Subsidiary had not been changed more than twice.
(b) Any notice of designation pursuant to this Section 7.4 shall be
accompanied by a certificate signed by a Responsible Officer of the Company
stating that the provisions of this Section 7.4 have been complied with in
connection with such designation and setting forth the name of each other
Subsidiary (if any) which has or will become a Restricted Subsidiary or an
Unrestricted Subsidiary, as the case may be, as a result of such designation.
SECTION 8. PREPAYMENT OF THE NOTES.
Section 8.1. Required Prepayments. On August 20, 2005 and on each
August 20 thereafter to and including August 20, 2013, the Company will prepay
$18,000,000 principal amount (or such lesser principal amount as shall then be
outstanding) of the Notes at par and without payment of the Make-Whole Amount or
any premium, provided that upon any partial prepayment of the Notes pursuant to
Section 8.2 or Section 8.3 the principal amount of each required prepayment of
the Notes becoming due under this Section 8.1 on and after the date of such
prepayment shall be reduced in the same proportion as the aggregate unpaid
principal amount of the Notes is reduced as a result of such prepayment.
Section 8.2. Optional Prepayments with Make-Whole Amount. The Company
may, at its option, upon notice as provided below, prepay at any time all, or
from time to time any part of, the Notes, at 100% of the principal amount so
prepaid, together with interest accrued thereon to the date of such prepayment,
plus any applicable Make-Whole Amount determined for the prepayment date with
respect to such principal amount. The Company will give each holder of Notes
written notice of each optional prepayment under this Section 8.2 not less than
30 days and not more than 60 days prior to the date fixed for such prepayment.
Each such notice shall specify such date, the aggregate principal amount of the
Notes to be prepaid on such date, the principal amount of each Note held by such
holder to be prepaid, and the interest to be paid on the prepayment date with
respect to such principal amount being prepaid, and shall be accompanied by a
certificate of a Senior Financial Officer as to the estimated Make-Whole Amount
due in connection with such prepayment (calculated as if the date of such notice
were the date of the prepayment), setting forth the details of such computation.
Two Business Days prior to such prepayment, the Company shall deliver to each
holder of Notes a certificate of a Senior Financial Officer specifying the
calculation of such Make-Whole Amount as of the specified prepayment date.
Section 8.3. Prepayment Out of Proceeds of Transfer. In the event that
the Company shall elect to apply all or any portion of the proceeds of any
Transfer of assets to the repayment or prepayment of unsubordinated Debt of the
Company or a Restricted Subsidiary as contemplated in Section 10.7(B),
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Alliance Resource GP, LLC Note Purchase Agreement
the Company will give written notice ("Company Notice") of such election to all
holders of the Notes. The Company Notice shall (i) describe the facts and
circumstances of such sales, leases or other dispositions in reasonable detail,
(ii) set forth the aggregate amount of such proceeds (the "Designated Proceeds")
which it intends to apply to the prepayment or repayment of unsubordinated Debt,
(iii) contain an offer by the Company to prepay on a stated date (the
"Prepayment Date"), which shall be a Business Day not more than 60 days and not
less than 30 days after such Company Notice, an amount equal to (x) the
principal amount of the Notes held by each holder which bears the same
relationship to the aggregate amount of such Designated Proceeds as the
aggregate principal amount of all Notes held by such holder bears to the
aggregate principal amount of all then outstanding Debt (including the Notes)
with respect to which a portion of such Designated Proceeds is to be applied,
plus (y) interest on the principal amount of Notes to be prepaid to the
Prepayment Date, but without any Make-Whole Amount (showing in such offer the
amount of interest which would be paid on such Prepayment Date), and (iv)
request each holder to notify the Company in writing by a stated date, which
date shall be not less than 15 days after such holder's receipt of the Company
Notice, of its acceptance or rejection of such prepayment offer. If a holder
does not notify the Company as provided in subclause (iv) above, then such
holder shall be deemed to have rejected such offer.
Section 8.4. Allocation of Partial Prepayments. In the case of each
partial prepayment of the Notes pursuant to Section 8.1 or Section 8.2, the
principal amount of the Notes to be prepaid shall be allocated among all of the
Notes at the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof not theretofore called for
prepayment. Partial prepayments of the Notes pursuant to Section 8.3 shall be
allocated as therein provided.
Section 8.5. Maturity; Surrender, Etc. In the case of each prepayment
of Notes pursuant to this Section 8, the principal amount of each Note to be
prepaid shall mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued to such date
and the applicable Make-Whole Amount, if any. From and after such date, unless
the Company shall fail to pay such principal amount when so due and payable,
together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue. Any Note paid or prepaid in full
shall be surrendered to the Company and canceled and shall not be reissued, and
no Note shall be issued in lieu of any prepaid principal amount of any Note.
Section 8.6. Purchase of Notes. The Company will not and will not
permit any Subsidiary or Affiliate controlled by the Company or any Subsidiary
to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of
the outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement. The Company will promptly cancel
all Notes acquired by it, any Subsidiary or any Affiliate controlled by the
Company or any Subsidiary and no Notes may be delivered in substitution or
exchange for any such Notes.
Section 8.7. Make-Whole Amount. The term "Make-Whole Amount" means,
with respect to any Note, an amount equal to the excess, if any, of the
Discounted Value of the Remaining Scheduled Payments with respect to the Called
Principal of such Note over the amount of such Called Principal, provided that
the Make-Whole Amount may in no event be less than zero. For the purposes of
determining the Make-Whole Amount, the following terms have the following
meanings:
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Alliance Resource GP, LLC Note Purchase Agreement
"Called Principal" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section 8.2 or
has become or is declared to be immediately due and payable pursuant to
Section 12.1, as the context requires.
"Discounted Value" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with generally accepted financial practice and
at a discount factor (applied on the same periodic basis as that on
which interest on the Notes is payable) equal to the Reinvestment Yield
with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called
Principal of any Note, 0.50% over the yield to maturity implied by (i)
the yields reported, as of 10:00 A.M. (New York City time) on the
second Business Day preceding the Settlement Date with respect to such
Called Principal, on the display designated as "Page 678" on the
Telerate (or such other display as may replace Page 678 on the
Telerate) for actively traded U.S. Treasury securities having a
maturity equal to the Remaining Average Life of such Called Principal
as of such Settlement Date, or (ii) if such yields are not reported as
of such time or the yields reported as of such time are not
ascertainable, the Treasury Constant Maturity Series Yields reported,
for the latest day for which such yields have been so reported as of
the second Business Day preceding the Settlement Date with respect to
such Called Principal, in Federal Reserve Statistical Release H. 15
(519) (or any comparable successor publication) for actively traded
U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement
Date. Such implied yield will be determined, if necessary, by (a)
converting U.S. Treasury bill quotations to bond-equivalent yields in
accordance with accepted financial practice and (b) interpolating
linearly between (1) the actively traded U.S. Treasury security with
the maturity closest to and greater than the Remaining Average Life and
(2) the actively traded U.S. Treasury security with the maturity
closest to and less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Note Purchase Agreement Called
Principal into (ii) the sum of the products obtained by multiplying (a)
the principal component of each Remaining Scheduled Payment with
respect to such Called Principal by (b) the number of years (calculated
to the nearest one-twelfth year) that will elapse between the
Settlement Date with respect to such Called Principal and the scheduled
due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments are due to be
made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2 or 12.1.
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Alliance Resource GP, LLC Note Purchase Agreement
"Settlement Date" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 8.2 or has become or is declared to be immediately
due and payable pursuant to Section 12. 1, as the context requires.
SECTION 9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
Section 9.1. Compliance with Law. The Company will, and will cause each
of its Subsidiaries to, comply with all laws, ordinances or governmental rules
or regulations to which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 9.2. Insurance. The Company will, and will cause each of its
Restricted Subsidiaries to, maintain, with financially sound and reputable
insurers, insurance with respect to their respective Material properties and
businesses against such casualties and contingencies, of such types, on such
terms and in such amounts (including deductibles, co-insurance and self
insurance, if adequate reserves are maintained with respect thereto) as is
customary (with respect to such types, terms, amounts and reserves) in the case
of entities of established reputations engaged in the same or a similar business
and similarly situated and consistent with the existing practices of the Company
and its Restricted Subsidiaries as of the date hereof.
Section 9.3. Maintenance of Properties. The Company will, and will
cause each of its Restricted Subsidiaries to, maintain and keep, or cause to be
maintained and kept, their respective properties in good repair, working order
and condition (other than ordinary wear and tear), so that the business carried
on in connection therewith may be properly conducted at all times, provided that
this Section shall not prevent the Company or any Restricted Subsidiary from
discontinuing the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
reasonably concluded that such discontinuance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Section 9.4. Payment of Taxes. The Company will, and will cause each of
its Subsidiaries to, file all tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental charges, or levies
imposed on them or any of their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent and all claims for which sums have become due and payable
that have or might become a Lien on properties or assets of the Company or any
Subsidiary, provided that neither the Company nor any Subsidiary need pay any
such tax or assessment or claims if (i) the amount, applicability or validity
thereof is contested by the Company or such Subsidiary on a timely basis in good
faith and in appropriate proceedings, and the Company or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the
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Company or such Subsidiary or (ii) the nonpayment of all such taxes and
assessments in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
Section 9.5. Existence, Etc. The Company will at all times preserve and
keep in full force and effect its existence as a limited liability company or
limited partnership, as the case may be. Subject to and except as permitted by
Sections 10.6 and 10.7, the Company will at all times preserve and keep in full
force and effect the corporate, limited liability company or partnership
existence, as the case may be, of each of its Restricted Subsidiaries and all
rights and franchises of the Company and its Restricted Subsidiaries unless, in
the good faith judgment of the Company, the termination of or failure to
preserve and keep in fun force and effect such existence, right or franchise
could not, individually or in the aggregate, have a Material Adverse Effect.
Section 9.6. Ranking; Covenant to Secure Notes Equally. The Company
will ensure that, at all times, all liabilities of the Company under the Notes
will rank in right of payment either pari passu or senior to all other Debt of
the Company except for Debt which is preferred as a result of being secured as
permitted by Section 10.3 (but then only to the extent of such security). The
Company will, if it or any Restricted Subsidiary shall create or assume any Lien
upon any of its property or assets, whether now owned or hereafter acquired,
other than Liens permitted by the provisions of Section 10.3 (unless prior,
written consent to the creation or assumption thereof shall have been obtained
pursuant to Section 17), make or cause to be made effective provision whereby
the Notes will be secured by such Lien equally and ratably with any and all
other Debt thereby secured so long as any such other Debt shall be so secured.
SECTION 10. Negative Covenants.
The Company covenants that so long as any of the Notes are outstanding:
Section 10.1. Incurrence of Debt, Transfer of Qualifying Securities.
The Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, create, incur, assume, guarantee, or otherwise become directly or
indirectly liable with respect to, any Debt other than:
(a) Debt of the Company or any Restricted Subsidiary if, on the date
the Company or such Restricted Subsidiary becomes liable with respect to any
such Debt, and immediately after giving effect thereto and the concurrent
retirement of any other Debt (the "Determination Date"):
(i) no Default or Event of Default exists; and
(ii) any such Debt of a Restricted Subsidiary is permitted
pursuant to Section 10.2; and
(iii) if the Determination Date is prior to December 31, 1999,
the aggregate outstanding principal amount of Debt of the Company and
its Restricted Subsidiaries does not exceed $230,000,000; and
(iv) (A) if the Determination Date is on or after December 31,
1999 and prior to September 30, 2000, the ratio of Consolidated Cash
Flow for the period of such number of consecutive complete fiscal
quarters of the Company as shall have elapsed following Closing and
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ending on, or most recently ended prior to, the Determination Date to
Consolidated Interest Expense for such period is not less than 2.25 to
1, or
(B) if the Determination Date is on or after
September 30, 2000, the ratio of Consolidated Cash Flow for
the period of four consecutive fiscal quarters of the Company
ending on, or most recently ended prior to, the Determination
Date to Consolidated Interest Expense for such period is not
less than 2.25 to 1; and
(v) (A) if the Determination Date is on or after December 31,
1999 and prior to September 30, 2000, the ratio of Consolidated Net
Debt on the Determination Date to Consolidated Cash Flow for the period
of such number of consecutive complete fiscal quarters of the Company
as shall have elapsed following Closing and ending on, or most recently
ended prior to, the Determination Date is not greater than 4 to 1, or
(B) if the Determination Date is on or after September 30,
2000, the ratio of Consolidated Net Debt on the Determination Date to
Consolidated Cash Flow for the period of four consecutive fiscal
quarters of the Company ending on, or most recently ended prior to, the
Determination Date is not greater than 4 to 1;
provided, however, that in making the calculations required by the foregoing
Sections 10.1(a)(iv)(A) and 10.1(a)(v)(A) with respect to any period ending
prior to September 30, 2000 and thus containing fewer than four consecutive
complete fiscal quarters, the applicable amounts of Consolidated Cash Flow and
Consolidated Interest Expense shall be determined by calculating the respective
amounts thereof for such period and multiplying the result so obtained by a
fraction whose numerator is 4 and whose denominator is the number of consecutive
complete fiscal quarters in such period); provided, further, that
notwithstanding the foregoing provisions of this Section 10.1, if any
Determination Date shall fall on or after the last day of any fiscal quarter of
the Company but prior to the earlier of the date on which financial statements
for the period in question are delivered or are required to be delivered as
specified in Section 7.1, then, (x) if the last day of such fiscal quarter is
December 31, 1999, Section 10.1(a)(iii) (and not Section 10.1(a)(iv) or (v))
shall apply, and (y) if the last day of such fiscal quarter is any subsequent
date, Sections 10.1(a)(iv) and (v) shall apply and computations shall be made
using financial information from the Company's fiscal quarter that ended on the
last day of the Company's then second most recently ended fiscal quarter; and
(b) Debt of the Company or any Restricted Subsidiary, in addition to
the Debt permitted pursuant to the provisions of clause (a) of this Section
10.1, (I) owing to the Company, (II) subordinated to the Notes in a manner
satisfactory to the Required Holders and owing to a Subsidiary Guarantor or a
Wholly-Owned Restricted Subsidiary or (III) Debt consisting of obligations of
Subsidiary Guarantors under (x) the Subsidiary Guaranty Agreement or (y) the
Bank Facility Guaranties which are executed and remain outstanding in conformity
with the provisions of Section 10.10.
For the purposes of this Section 10.1,
(i) any Person becoming a Restricted Subsidiary after the date
hereof shall be deemed to have incurred all of its then outstanding
Debt at the time it becomes a Restricted Subsidiary,
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and any Person Refinancing any Debt shall be deemed to have incurred
such Debt at the time of such Refinancing; and
(ii) any Transfer of any Qualifying Securities (other than the
Transfer thereof to the pledgee in satisfaction of the Debt secured
thereby) shall be deemed to constitute the incurrence of a principal
amount of Debt of the Company equal to the aggregate principal amount
of the Qualifying Securities so Transferred and the Company will not
permit such Transfer unless the Company would, on the date of such
Transfer, be permitted under the provisions of Section 10.1(a) to incur
at least $1 of additional Debt owing to a Person other than a
Restricted Subsidiary.
Section 10.2. Priority Debt. The Company will not at any time permit
the sum of (x) the aggregate unpaid principal amount of all Consolidated
Adjusted Restricted Subsidiary Debt, plus (y) the aggregate unpaid principal
amount of all Debt of the Company secured by Liens pursuant to the provisions of
Section 10.3(k) to exceed 15% of Consolidated Total Assets determined as of the
end of the then most recently completed fiscal quarter of the Company.
Section 10.3. Liens. The Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly create, incur, assume or
permit to exist (upon the happening of a contingency or otherwise) any Lien on
or with respect to any property or asset (including, without limitation, any
document or instrument in respect of goods or accounts receivable) of the
Company or any such Restricted Subsidiary, whether now owned or held or
hereafter acquired, or any income or profits therefrom, or assign or otherwise
convey any right to receive income or profits, except:
(a) Liens for property taxes, assessments or other governmental charges
which are not yet due and payable and delinquent or the validity of which is
being contested in good faith in compliance with Section 9.4;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other similar Liens, in each case, incurred in the
ordinary course of business for sums not yet due and payable or the amount,
applicability or validity thereof is being contested by the Company or such
Restricted Subsidiary on a timely basis in good faith and by appropriate
proceedings, and the Company or a Restricted Subsidiary has established adequate
reserves therefor in accordance with GAAP on the books of the Company or such
Restricted Subsidiary;
(c) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business (i) in connection with workers'
compensation, unemployment insurance and other types of social security or
retirement benefits, or (ii) to secure (or to obtain letters of credit that
secure) the performance of tenders, statutory obligations, surety bonds, appeal
bonds, bids, leases (other than Capital Leases), performance bonds, purchase,
construction or sales contracts and other similar obligations, in each case not
incurred or made in connection with the borrowing of money, the obtaining of
advances or credit or the payment of the deferred purchase price of property;
(d) any attachments or judgment Liens for the payment of money in an
aggregate amount not to exceed $10,000,000, provided that the execution or other
enforcement of such Liens is effectively stayed and the claims secured thereby
are contested by the Company or such Restricted Subsidiary on a
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timely basis in good faith and by appropriate proceedings, and the Company or a
Restricted Subsidiary has established adequate reserves therefor in accordance
with GAAP on the books of the Company or such Restricted Subsidiary;
(e) leases or subleases granted to others, zoning restrictions,
easements, licenses, reservations, provisions, covenants, conditions, waivers,
restrictions on the use of property or irregularities of title (and with respect
to leasehold interests, mortgages, obligations, liens and other encumbrances
incurred, created, assumed or permitted to exist and arising by, through or
under a landlord or owner of the leased property, with or without consent of the
lessee), and not interfering with, the ordinary conduct of the business of the
Company or any of its Restricted Subsidiaries, provided that such Liens do not,
in the aggregate, materially detract from the value of such property or impair
the use of such property;
(f) Liens on property or assets of the Company or any of its Restricted
Subsidiaries securing Debt owing to the Company or to a Wholly-Owned Restricted
Subsidiary or a Subsidiary Guarantor;
(g) Liens on personal property leased under leases (including synthetic
leases) entered into by the Company which are accounted for as operating leases
in accordance with GAAP;
(h) at any time before December 31, 2001, Liens on Qualifying
Securities securing that portion of Debt incurred to purchase or carry the
Qualifying Securities and any continuing Lien after such date under the Pledge
Agreement executed pursuant to the Bank Facility on the date of Closing, but
only to the extent that such Lien continues as a result of a default under the
Bank Facility (a "Bank Default") that constitutes an Event of Default hereunder
(and upon the occurrence of any such Event of Default hereunder the same shall
continue as an Event of Default until waived by the Required Holders without
regard to whether the Bank Default is cured or waived);
(i) easements, exceptions or reservations in any property of the
Company or any Restricted Subsidiary granted or reserved for the purpose of
pipelines, roads, the removal of oil, gas, coal or other minerals, and other
like purposes, or for the joint or common use of real property, facilities and
equipment, which are incidental to, and do not materially interfere with, the
ordinary conduct of the business of the Company or any of its Restricted
Subsidiaries;
(j) Liens on documents of title and the property covered thereby
securing obligations in respect of letters of credit that are commercial letters
of credit (i.e., obtained for the purpose of paying all or a portion of the
purchase price of such property);
(k) other Liens securing Debt not otherwise permitted by paragraphs (a)
through (j), provided that on the date any such Lien is created, incurred or
assumed and immediately after giving effect to the incurrence of any related
Debt and the concurrent retirement of any other Debt, the Company is in
compliance with the provisions of Section 10.2; and
(l) Liens reflected in Schedule 5.15 securing Debt of the Company and
its Restricted Subsidiaries on the date of Closing, but only until the time of
Closing in the case of the Debt and/or Liens referenced in items 1, 3, 5 and 14
of such Schedule.
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Alliance Resource GP, LLC Note Purchase Agreement
For the purposes of this Section 10.3, any Person becoming a Restricted
Subsidiary after the date of this Agreement shall be deemed to have incurred all
of its then outstanding Liens at the time it becomes a Restricted Subsidiary.
Section 10.4. Restricted Payments.
(a) Limitation. The Company will not, and will not permit any of its
Restricted Subsidiaries to, at any time, declare or make, or incur any liability
to declare or make, any Restricted Payment except for the Restructuring Payment;
provided that, from and after the fulfillment of all of the Assumption
Conditions, the Company may make one Restricted Payment in each fiscal quarter
of the Company if:
(i) the amount of such Restricted Payment would not exceed the
Available Cash for the immediately preceding fiscal quarter of the
Company;
(ii) before and after giving effect to such Restricted
Payment, the ratio of Consolidated Net Debt on the date of declaration
thereof to Consolidated Cash Flow for the period of the lesser of (A)
four consecutive complete fiscal quarters of the Company most recently
ended or (B) such number of consecutive complete fiscal quarters of the
Company as shall have elapsed following Closing and ending on, or most
recently ended prior to, such declaration is not greater than 4.25 to
1; provided, however, that in making the calculations required by the
foregoing provisions of this Section 10.4(a)(ii) with respect to any
period ending prior to September 30, 2000 and thus containing fewer
than four consecutive complete fiscal quarters, the applicable amounts
of Consolidated Cash Flow and Consolidated Interest Expense shall be
determined by calculating the respective amounts thereof for such
period and multiplying the result so obtained by a fraction whose
numerator is 4 and whose denominator is the number of consecutive
complete fiscal quarters in such period; and
(iii) no Default or Event of Default would exist before or
after such Restricted Payment.
(b) Time of Payment. Each Restricted Payment shall be made within 60
days of declaration thereof, and, notwithstanding any other provision of this
Section 10.4 if the payment would have been permitted as of the date of such
declaration, such payment shall be permitted if made during such 60-day period.
Section 10.5. Restrictions on Dividends of Subsidiaries, Etc. Except
for the Bank Facility and this Agreement, the Company will not, and will not
permit any of its Restricted Subsidiaries to, enter into any agreement which
would restrict any Restricted Subsidiary's ability or right to pay dividends to,
or make advances to or Investments in, the Company or, if such Restricted
Subsidiary is not directly owned by the Company, the "parent" Subsidiary of such
Restricted Subsidiary.
Section 10.6. Mergers and Consolidations. The Company will not, and
will not permit any Restricted Subsidiary to, consolidate with or be a party to
a merger with any other Person or convey, transfer or lease substantially all of
its assets in a single transaction or series of transactions to any Person;
provided, however, that the Company or any Restricted Subsidiary may consolidate
or merge with, or convey, transfer or lease substantially all of its assets to,
any other Person so long as (i) the surviving
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entity (if not the Company or such Restricted Subsidiary) or the transferee or
lessee is a solvent partnership, limited liability company or corporation
organized and existing under the laws of the United States of America or any
State thereof, (ii) (a) in the case of the Company, if the Company is not the
surviving entity, or it shall convey, transfer or lease its assets to another
Person, the surviving entity, transferee or lessee expressly assumes in writing
the Company's obligations under the Notes and this Agreement, and (b) in the
case of a Restricted Subsidiary, if such Restricted Subsidiary is not the
surviving entity, or it shall convey, transfer or lease its assets to another
Person, the surviving entity, transferee or lessee shall be, or upon
consummation of such transaction, become, a Restricted Subsidiary with respect
to which the Company shall have at least the same degree of ownership and
control as it had with respect to such disappearing Restricted Subsidiary and,
in the case of a Restricted Subsidiary which is a Subsidiary Guarantor, such
surviving entity, transferee or lessee shall expressly assume, in writing, the
obligations of such disappearing Subsidiary Guarantor in respect of its
Subsidiary Guaranty Agreement, and (c) in the case of either clause (a) or (b)
above, the Company shall have caused to be delivered to each holder of Notes an
opinion of independent counsel satisfactory to such holders to the effect that
all agreements or instruments effecting such assumptions are enforceable in
accordance with their terms and comply with the terms thereof, (iii) at the time
of such consolidation, merger, conveyance, transfer or lease and after giving
effect thereto, no Default or Event of Default shall have occurred and be
continuing, and (iv) the Company or the surviving entity or transferee of a
transaction involving the Company would be permitted by the provisions of
Section 10.1 (a) to incur at least $1 of additional Debt owing to a Person other
than a Restricted Subsidiary. Upon consummation of any such conveyance or
transfer (other than by way of lease) of substantially all of the assets of the
Company or any successor Person, the transferor shall be released from its
obligations hereunder and under the Notes, but no such lease shall have the
effect of releasing the Company or any other Person that shall have become such
in the manner prescribed in this Section 10.6 from its liability hereunder or
under the Notes.
Section 10.7. Transfer of Assets. The Company will not, and will not
permit any Restricted Subsidiary to, Transfer assets (except assets Transferred
for Fair Market Value in the ordinary course of business); provided that the
foregoing restrictions do not apply to:
(1) the Transfer of assets (x) by the Company to a
Wholly-Owned Restricted Subsidiary, or (y) by a Restricted Subsidiary
to the Company or to another Restricted Subsidiary with respect to
which the Company shall have at least the same degree of ownership and
control as it had with respect to the transferring Restricted
Subsidiary, or (z) constituting Capital Stock of an Unrestricted
Subsidiary; or
(2) the Transfer of assets for cash or other property to a
Person or Persons if all of the following conditions are met:
(i) such assets (valued at net book value at the time of such
Transfer) do not, together with all other assets of the Company and its
Restricted Subsidiaries previously Transferred (valued at net book
value at the time of their Transfer) (other than in the ordinary course
of business) within 365 days immediately preceding the date of such
Transfer, exceed 10% of Consolidated Total Assets (determined as of the
last day of the fiscal year of the Company ending on, or most recently
ended prior to, such Transfer);
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(ii) in the opinion of the board of directors of the Company,
such Transfer is for Fair Market Value and is in the best interests of
the Company; and
(iii) immediately after giving effect to such Transfer, and
the application of the proceeds thereof, no Default or Event of Default
would exist.
Computations under this Section 10.7 shall include all issues or sales
of any Capital Stock of any class (including as Capital Stock for the purposes
of this Section 10.7, any warrants, rights or options to purchase or otherwise
acquire shares or similar equity interests or other Securities exchangeable for
or convertible into shares or similar equity interests) of any Restricted
Subsidiary to any Person other than the Company or a Wholly-Owned Restricted
Subsidiary, except Capital Stock issued or sold for the purpose of qualifying
directors, or except Capital Stock issued or sold in satisfaction of the validly
pre-existing preemptive rights of minority shareholders or interest holders in
connection with the simultaneous issuance of shares to the Company and/or
Restricted Subsidiaries whereby the Company and/or such Restricted Subsidiaries
maintain their same proportionate interest in such Restricted Subsidiary.
Computations under this Section 10.7 shall not include any Transfer of
assets for Fair Market Value, to the extent that all or any portion of an amount
equal to such Fair Market Value is applied, within 365 days after the date of
such transaction, to:
(A) the purchase, acquisition or construction of
similar assets which are to be used in the business of the
Company and its Restricted Subsidiaries and are not subject to
Liens not permitted pursuant to Section 10.3; or
(B) the repayment or prepayment of Qualified Debt;
provided that the Company has, on or prior to the application
of any such proceeds to the repayment or prepayment of any
other Qualified Debt, offered to repay or prepay the Notes,
pro rata with all other Qualified Debt then being repaid or
prepaid (with any such repayment or prepayment of the Notes to
be made in accordance with the terms of Section 8.3).
For purposes of this Section 10.7 the term "Qualified Debt" shall mean
unsubordinated Debt of the Company or a Restricted Subsidiary other than
(i) unsubordinated Debt owing to the Company or to any
Affiliate or Restricted Subsidiary; and
(ii) unsubordinated Debt in respect of any revolving credit or
similar credit facility providing the Company or any Restricted
Subsidiary with the right to obtain loans or other extensions of credit
from time to time, except to the extent that in connection with payment
of such unsubordinated Debt the availability of credit under such
credit facility is permanently reduced by an amount not less than the
amount of the proceeds applied to the payment of such unsubordinated
Debt; provided, however, that if any such revolving credit or similar
facility also contains a term (or other similar) facility such term (or
other similar facility) shall constitute Qualified Debt.
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Section 10.8. Mining Restrictions. The Company will maintain a
controlled reserve base of sufficient mineable tonnage of coal such that the
ratio of aggregate controlled mineable tons of coal over current annual
production levels is greater than 125% of the remaining term of the Notes. For
purposes of this Section 10.8, a "controlled reserve base" of coal denotes the
aggregate of coal reserves which may be economically and legally mined by the
Company or a Restricted Subsidiary at the time of the controlled reserve base
determination. In making any determination of reserves for the purposes of this
Section 10.8, the Company may include properties ("Option Properties") which may
be acquired by the Company or a Restricted Subsidiary under a valid and
enforceable option or purchase contract which is subject to no conditions other
than the payment of the purchase price provided for under such option or
contract (the "Contract Price"), provided that to the extent and for as long as
the Company shall elect to include Option Properties in any such determination
(x) an amount equal to the Contract Price could then be incurred as Debt under
the provisions of Section 10.1(a) ("Notional Debt") and (y) for all purposes of
Sections 10.1(a) and 10.4(a)(ii) an amount equal to all such Notional Debt shall
be considered to be outstanding Debt.
Section 10.9. Restricted Investments. The Company will not, and will
not permit any Restricted Subsidiary to, make any Investments other than
Permitted Investments.
In valuing any Investments for the purpose of applying the limitations
set forth in this Section 10.9 such Investments shall be taken at the original
cost thereof, without allowance for any subsequent write-offs or appreciation or
depreciation thereof, but less any amount repaid or recovered on account of
capital or principal.
For purposes of this Section 10.9, at any time when a Person becomes a
Restricted Subsidiary, all Investments of such Person at such time shall be
deemed to have been made by such Person, as a Restricted Subsidiary, at such
time.
Section 10.10. Subsidiary Guaranty Agreement. The Company will not
permit any Restricted Subsidiary which is not at the time a Subsidiary Guarantor
to be or become obligated with respect to any Guarantee of Debt of the Company
under the Bank Facility ("Bank Facility Guarantees") unless, concurrently with,
or prior to, becoming liable with respect to such Bank Facility Guarantee, such
Restricted Subsidiary (a "New Guarantor") shall have (x) executed and delivered
a Subsidiary Guaranty Supplement to the Subsidiary Guaranty Agreement thereby
becoming a party thereto and a Consent and Agreement to the Intercreditor
Agreement as provided therein, (y) provided to each of the holders of Notes
copies of such Subsidiary Guaranty Supplement and Consent and Agreement and a
legal opinion with respect thereto substantially in the form of the opinion
contemplated in Exhibit 4.4(b) with respect to such New Guarantor and the
Subsidiary Guaranty Agreement and (z) demonstrated to the satisfaction of the
Required Holders that such New Guarantor is Solvent. All Bank Facility
Guarantees will be in form and substance substantially identical to the
Subsidiary Guaranty Agreement (with only such changes as are necessary to
properly reflect the parties and Debt involved) and the beneficiaries of such
Bank Facility Guaranties shall have become parties to the Intercreditor
Agreement in the manner provided for therein. The Company will not permit any
Subsidiary Guarantor to make any payments on or in respect of any Debt of the
Company guaranteed by such Subsidiary Guarantor except following and as a
consequence of a default under the Bank Facility and a demand made under the
Bank Facility Guarantees.
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Section 10.11. Nature of Business. Neither the Company nor any
Restricted Subsidiary will engage in any business if, as a result, the general
nature of the business in which the Company and its Restricted Subsidiaries,
taken as a whole, would then be engaged would be substantially changed from the
general nature of the business in which the Company and its Restricted
Subsidiaries, taken as a whole, are engaged on the date of Closing, as described
in the Memorandum.
Section 10.12. Transactions with Affiliates. Except as set forth in the
Prospectus contained in the Registration Statement under the headings "Certain
Relationships and Related Transactions" and "Conflicts of Interest and Fiduciary
Responsibilities", the Company will not and will not permit any Restricted
Subsidiary to enter into, directly or indirectly, any transaction or group of
related transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
Affiliate, except in the ordinary course and pursuant to the reasonable
requirements of the Company's or such Restricted Subsidiary's business and upon
fair and reasonable terms no less favorable (taken as a whole, as determined in
good faith by the Board of Directors of the General Partner) to the Company or
such Restricted Subsidiary than would be obtainable in a comparable arm's-length
transaction with a Person not an Affiliate.
SECTION 11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or Make-Whole
Amount, if any, on any Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note for
more than five Business Days after the same becomes due and payable; or
(c) the Company defaults in the performance of, or compliance with, any
term contained in Section 7.1(d) or Section 10; or
(d) the Company defaults in the performance of, or compliance with, any
term contained herein (other than those terms referred to in paragraphs (a), (b)
and (c) of this Section 11) or in the Assumption Agreement (other than as to
those terms referred to in paragraphs (a), (b) and (c) of this Section 11) and
such default is not remedied within 30 days after the earlier of (i) a
Responsible Officer obtaining actual knowledge of such default and (ii) the
Company receiving written notice of such default from any holder of a Note (any
such written notice to be identified as a "notice of default" and to refer
specifically to this paragraph (d) of Section 11); or
(e) any representation or warranty made in writing by or on behalf of
the Company or the Transferee Company or any Original Subsidiary Guarantor or by
any officer of the General Partner, the Company, the Transferee Company or any
Original Subsidiary Guarantor in this Agreement, the Assumption Agreement, an
Original Subsidiary Guaranty Agreement or in any writing furnished in connection
with the transactions contemplated hereby (including, without limitation, the
assumption of all obligations of the Company under this Agreement and the Notes
by the Transferee Company), taken as a
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whole, proves to have been false or incorrect in any material respect on the
date as of which made (except to the extent that any such representation or
warranty relates to any earlier date, in which case it shall have been false or
incorrect in any material respect as of such earlier date); or
(f) (i) the Company or any Restricted Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal of or
premium or makewhole amount or interest on any Debt that is outstanding in an
aggregate principal amount of at least $10,000,000 beyond any period of grace
provided with respect thereto, or (ii) the Company or any Restricted Subsidiary
is in default in the performance of or compliance with any term of any evidence
of any Debt of the Company or a Restricted Subsidiary in an aggregate
outstanding principal amount of at least $10,000,000 or of any mortgage,
indenture or other agreement relating thereto or any other condition exists, and
as a consequence of such default or condition such Debt has become, or has been
declared (or one more Persons are entitled to declare such Debt to be), due and
payable before its stated maturity or before its regularly scheduled dates of
payment, or (iii) as a consequence of the occurrence or continuation of any
event or condition (other than the passage of time or the right of the holder of
such Debt to convert such Debt into equity interests), (x) the Company or any
Restricted Subsidiary has become obligated to purchase or repay Debt before its
regular maturity or before its regularly scheduled dates of payment in an
aggregate outstanding principal amount of at least $10,000,000, or (y) one or
more Persons have the right to require the Company or any Restricted Subsidiary
so to purchase or repay such Debt; or
(g) the Company or the General Partner unless timely replaced by a new
General Partner to the extent permitted by the Company's Partnership Agreement
or any Restricted Subsidiary (i) is generally not paying, or admits in writing
its inability to pay, its debts as they become due, (ii) files, or consents by
answer or otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an assignment
for the benefit of its creditors, (iv) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes action for the
purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction enters
an order appointing, without consent by the Company or the General Partner or
any Restricted Subsidiary, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a petition for relief
or reorganization or any other petition in bankruptcy or for liquidation or to
take advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of the Company or the
General Partner or any Restricted Subsidiary, or any such petition shall be
filed against the Company or the General Partner or any Restricted Subsidiary
and such petition shall not be dismissed or appointment discharged within 60
days unless, in the case of the General Partner, timely replaced by a new
General Partner to the extent permitted by the Company's Partnership Agreement;
or
(i) any judgments or orders, either individually or in the aggregate,
for the payment of money aggregating in excess of $10,000,000 shall be rendered
against one or more of the Company and its Restricted Subsidiaries and either
(i) enforcement proceedings shall have been commenced by any creditor thereon or
(ii) there shall be any period of 60 consecutive days during which a stay of
such
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Alliance Resource GP, LLC Note Purchase Agreement
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; provided, however, that any such judgment or order shall not be an Event
of Default under this paragraph (i) if and so long as (x) the amount of such
judgment or order is covered by a valid and binding policy of insurance between
the defendant and the insurer covering payment thereof and the insurer covering
payment thereof and (y) such insurer, which shall be rated at least "A" by A.M.
Best Company at the time the policy of insurance was issued, has been notified
of, and has not disputed the claim made for payment of, or the amount of such
judgment or order; or
(j) any Subsidiary Guaranty Agreement shall cease to be in full force
and effect in any material respect or shall be declared by a court or
Governmental Authority to be void, voidable or unenforceable against the
applicable Subsidiary Guarantor, or the Company, any Subsidiary or the MLP (or
any Person on behalf of any thereof) asserts any of the foregoing in writing or
before any court or Governmental Authority; or
(k) if (i) any Plan shall fail to satisfy the minimum funding standards
of ERISA or the Code for any plan year or part thereof or a waiver of such
standards or extension of any amortization period is sought or granted under
Section 412 of the Code, (ii) a notice of intent to terminate any Plan shall
have been or is reasonably expected to be filed with the PBGC or the PBGC shall
have instituted proceedings under Section 4042 of ERISA to terminate or appoint
a trustee to administer any Plan or the PBGC shall have notified the Company or
any ERISA Affiliate that a Plan may become a subject of any such proceedings,
(iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning
of Section 4001(a)(18) of ERISA) under all Plans, determined in accordance with
Title IV of ERISA, shall exceed $10,000,000, (iv) the Company or any ERISA
Affiliate shall have incurred or is reasonably expected to incur any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of
the Code relating to employee benefit plans, (v) the Company or any ERISA
Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any
Subsidiary establishes or amends any employee welfare benefit plan that provides
post-employment welfare benefits in a manner that would increase the liability
of the Company or any Subsidiary thereunder; and any such event or events
described in clauses (i) through (vi) above, either individually or together
with any other such event or events, could reasonably be expected to have a
Material Adverse Effect. As used in this Section 11(k) the terms "employee
benefit plan" and "employee welfare benefit plan" shall have the respective
meanings assigned to such terms in Section 3 of ERISA; or
(l) if the Company's Partnership Agreement shall be amended,
supplemented or restated in any manner that is reasonably likely to result in a
Material Adverse Effect or which is otherwise materially adverse to the
interests of the holders of the Notes; or
(m) if the MLP Agreement shall be amended, supplemented or restated in
any manner that is reasonably likely to result in a Material Adverse Effect or
which is otherwise materially adverse to the interests of the holders of the
Notes; or
(n) if the MLP or any entity controlled by the MLP shall purchase or
otherwise acquire, directly or indirectly, any of the outstanding Notes except,
in the case of the Company, upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement.
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Alliance Resource GP, LLC Note Purchase Agreement
SECTION 12. REmEDIES ON DEFAULT, ETC.
Section 12.1. Acceleration. (a) If an Event of Default with respect to
the Company or the General Partner described in paragraph (g) or (h) of Section
11 (other than an Event of Default described in clause (i) of paragraph (g) or
described in clause (vi) of paragraph (g) to the extent that such clause
encompasses clause (i) of paragraph (g)) has occurred, all the Notes then
outstanding shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, the
Required Holders may at any time at its or their option, by notice or notices to
the Company, declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.
Upon any Note's becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Note will forthwith mature and the
entire unpaid principal amount of such Note, plus (i) all accrued and unpaid
interest thereon and (ii) the Make-Whole Amount determined in respect of such
principal amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
Section 12.2. Other Remedies. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section 12.1, the holder of
any Note at the time outstanding may proceed to protect and enforce the rights
of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Note, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law or otherwise.
Section 12.3. Rescission. At any time after any Notes have been
declared due and payable pursuant to clause (b) or (c) of Section 12.1 (or shall
have become due and payable as provided in the Intercreditor Agreement - a
"Special Acceleration"), the Required Holders (but subject to the terms of the
Intercreditor Agreement in the case of a Special Acceleration), by written
notice to the Company, may rescind and annul any such declaration and its
consequences if (a) the Company has paid all overdue interest on the Notes, all
principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of the
Notes, at the Default Rate, (b) all Events of Default and Defaults, other than
non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been
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Alliance Resource GP, LLC Note Purchase Agreement
waived pursuant to Section 17, and (c) no judgment or decree has been entered
for the payment of any monies due pursuant hereto or to the Notes. No rescission
and annulment under this Section 12.3 will extend to or affect any subsequent
Event of Default or Default or impair any right consequent thereon.
Section 12.4. No Waivers or Election of Remedies, Expenses, Etc. No
course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 15, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including, without limitation,
attorneys' fees, expenses and disbursements.
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
Section 13.1. Registration of Notes. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes.
Section 13.2. Transfer and Exchange of Notes. Upon surrender of any
Note at the principal executive office of the Company for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of such Note or its attorney duly authorized
in writing and accompanied by the address for notices of each transferee of such
Note or part thereof), the Company shall execute and deliver, at the Company's
expense (except as provided below), one or more new Notes (as requested by the
holder thereof) in exchange therefor, in an aggregate principal amount equal to
the unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be substantially in
the form of Notes being surrendered as set forth in Exhibit 1. Each such new
Note shall be dated and bear interest from the date to which interest shall have
been paid on the surrendered Note or dated the date of the surrendered Note if
no interest shall have been paid thereon. The Company may require payment of a
sum sufficient to cover any stamp tax or governmental charge imposed in respect
of any such transfer of Notes. Notes shall not be transferred in denominations
of less than $1,000,000, provided that if necessary to enable the registration
of transfer by a holder of its entire holding of Notes, one Note may be in a
denomination of less than $1,000,000. Any transferee, by its acceptance of a
Note registered in its name (or the name of its nominee), shall be deemed to
have made the representation set forth in Section 6.2.
Section 13.3. Replacement of Notes. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which
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Alliance Resource GP, LLC Note Purchase Agreement
evidence shall be, in the case of an Institutional Investor, notice from such
Institutional Investor of such ownership and such loss, theft, destruction or
mutilation), and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note is, or is a nominee
for, an original Purchaser or another holder of a Note with a minimum net worth
of at least $200,000,000, such Person's own unsecured agreement of indemnity
shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
Section 13.4. Name of Company. Notes delivered pursuant to this Section
13 subsequent to the effectiveness of the Assumption Agreement shall be executed
by, and be issued in the name of, Alliance Resource Operating Partners, L.P, or
its successor as obligor under this Agreement and the Notes.
SECTION 14. PAYmENTs ON Notes.
Section 14.1. Place of Payment. Subject to Section 14.2, payments of
principal, Make Whole Amount, if any, and interest becoming due and payable on
the Notes shall be made in New York City, New York at the principal office of
The Chase Manhattan Bank in such jurisdiction. The Company may at any time, by
notice to each holder of a Note, change the place of payment of the Notes so
long as such place of payment shall be either the principal office of the
Company in New York State or the principal office of a bank or trust company in
New York State.
Section 14.2. Home Office Payment. So long as any Purchaser or such
Purchaser's nominee shall be the holder of any Note, and notwithstanding
anything contained in Section 14.1 or in such Note to the contrary, the Company
will pay all sums becoming due on such Note for principal, Make-Whole Amount, if
any, and interest by the method and at the address specified for such purpose
for such Purchaser on Schedule A, or by such other method or at such other
address as such Purchaser shall have from time to time specified to the Company
in writing for such purpose, without the presentation or surrender of such Note
or the making of any notation thereon, except that upon written request of the
Company made concurrently with or reasonably promptly after payment or
prepayment in full of any Note, such Purchaser shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by any Purchaser or such Purchaser's nominee such Purchaser
will, at its election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes pursuant to Section
13.2. The Company will afford the benefits of this Section 14.2 to any
Institutional Investor that is the direct or indirect transferee of any Note
purchased by any Purchaser under this Agreement and that has made the same
agreement relating to such Note as such Purchaser has made in this Section 14.2.
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Alliance Resource GP, LLC Note Purchase Agreement
SECTION 15. EXPENSES, ETC.
Section 15.1. Transaction Expenses. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all costs and expenses
(including attorneys' fees of a special counsel and, if reasonably required,
local or other counsel) incurred by each Purchaser or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the Notes (whether or not
such amendment, waiver or consent becomes effective), including, without
limitation: (a) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this Agreement
or the Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a holder of any Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or any Subsidiary or in connection with any
work-out or restructuring of the transactions contemplated hereby and by the
Notes. The Company shall not, in connection with any of the matters described in
this Section 15.1, be liable for the costs and expenses of more than one
separate legal firm, and separate local counsel as reasonably required, unless a
holder of a Note reasonably determines that its interests as such a holder
differ from the interests of other holders of Notes so as to require separate
legal advice. The Company will pay, and will save each Purchaser and each other
holder of a Note harmless from, all claims in respect of any fees, costs or
expenses if any, of brokers and finders (other than those retained by such
Purchaser or holder).
Section 15.2. Survival. The obligations of the Company under this
Section 15 will survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement or the Notes, and the
termination of this Agreement.
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by any Purchaser of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of such
Purchaser or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement shall be deemed representations and warranties of the
Company under this Agreement. Subject to the preceding sentence, this Agreement
and the Notes embody the entire agreement and understanding between each
Purchaser and the Company and supersede all prior agreements and understandings
relating to the subject matter hereof.
SECTION 17. AmENDmENT AND WAivER.
Section 17.1. Requirements. This Agreement and the Notes may be
amended, and the observance of any term hereof or of the Notes may be waived
(either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no amendment or
waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any
defined term (as it is used therein), will be effective as to any Purchaser
unless consented to by such Purchaser in writing, and (b) no such amendment or
waiver may, without the written consent of the holder of each
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Alliance Resource GP, LLC Note Purchase Agreement
Note at the time outstanding affected thereby, (i) subject to the provisions of
Section 12 relating to acceleration or rescission, change the amount or time of
any prepayment or payment of principal of, or change the rate or change the time
of payment or method of computation of interest or of the Make-Whole Amount on,
the Notes, (ii) change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver, or
(iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.
Section 17.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes of any waiver or amendment of any of the terms and provisions hereof or of
the Notes unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each holder of Notes then
outstanding even if such holder did not consent to such waiver or amendment.
Section 17.3. Binding Effect, Etc. Any amendment or waiver consented to
as provided in this Section 17 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
Section 17.4. Notes Held by Company, Etc. Solely for the purpose of
determining whether the holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement or the Notes, or
have directed the taking of any action provided herein or in the Notes to be
taken upon the direction of the holders of a specified percentage of the
aggregate principal amount of Notes then outstanding, Notes directly or
indirectly owned by the Company or any of its Affiliates or Restricted
Subsidiaries shall be deemed not to be outstanding.
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Alliance Resource GP, LLC Note Purchase Agreement
SECTION 18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telefacsimile if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to a Purchaser or such Purchaser's nominee, to such
Purchaser or such Purchaser's nominee at the address specified for such
communications for such Purchaser signature on Schedule A, or at such
other address as such Purchaser or such Purchaser's nominee shall have
specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the Company
in writing, or
(iii) if to the Company, to the Company at
Alliance Resource GP, LLC
1717 South Boulder Avenue
Tulsa, OK 74119
Attention: Michael L. Greenwood
or at such other address as the Company shall have specified to the
holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received
or the date on which delivery of such notice is rejected by the addressee.
SECTION 19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by each Purchaser at the Closing (except the
Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to each Purchaser, may be
reproduced by such Purchaser by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and such Purchaser
may destroy any original document so reproduced. The Company agrees and
stipulates that, to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by such Purchaser in the
regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence. This
Section 19 shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
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Alliance Resource GP, LLC Note Purchase Agreement
SECTION 20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information" means
information delivered to any Purchaser by or on behalf of the Company, any
Subsidiary, the MLP, the General Partner, the Special General Partner or
Alliance Coal Corporation in connection with the transactions contemplated by or
otherwise pursuant to this Agreement that is proprietary in nature and that was
clearly marked or labeled or otherwise adequately identified in writing when
received by such Purchaser as being confidential information of the Company,
such Subsidiary or such Affiliate, provided that such term does not include
information that (a) was publicly known or otherwise known to such Purchaser
prior to the time of such disclosure, (b) subsequently becomes publicly known
through no act or omission by such Purchaser or any Person acting on such
Purchaser's behalf, (c) otherwise becomes known to such Purchaser other than
through disclosure by the Company or any Subsidiary or (d) constitutes financial
statements or business data delivered to such Purchaser under Section 7.1 that
are otherwise publicly available. Each Purchaser will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by such Purchaser in good faith to protect confidential information of
third parties delivered to such Purchaser, provided that such Purchaser may
deliver or disclose Confidential Information to (i) such Purchaser's directors,
trustees, officers, employees, agents, attorneys and affiliates (to the extent
such disclosure reasonably relates to the administration of the investment
represented by such Purchaser's Notes), (ii) such Purchaser's financial advisors
and other professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this Section 20, (iii)
any other holder of any Note, (iv) any Institutional Investor to which such
Purchaser sells or offers to sell such Note or any part thereof or any
participation therein (if such Person has agreed with the Company in writing
prior to its receipt of such Confidential Information to be bound by the
provisions of this Section 20 by delivery of a letter substantially in the form
of Exhibit 20 hereto), (v) any Person from which such Purchaser offers to
purchase any security of the Company (if such Person has agreed with the Company
in writing prior to its receipt of such Confidential Information to be bound by
the provisions of this Section 20 by delivery of a letter substantially in the
form of Schedule 20 hereto), (vi) any federal or state regulatory authority
having jurisdiction over such Purchaser, (vii) the National Association of
Insurance Commissioners or any similar organization, or any nationally
recognized rating agency that requires access to information about such
Purchaser's investment portfolio, or (viii) any other Person to which such
delivery or disclosure may be necessary or appropriate (w) to effect compliance
with any law, rule, regulation or order applicable to such Purchaser, (x) in
response to any subpoena or other legal process, (y) in connection with any
litigation to which such Purchaser is a party or (z) if an Event of Default has
occurred and is continuing, to the extent such Purchaser may reasonably
determine such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under such
Purchaser's Notes and this Agreement. Each holder of a Note, by its acceptance
of a Note, will be deemed to have agreed to be bound as a "Purchaser" by and to
be entitled as such to the benefits of this Section 20 as though it were a party
to this Agreement. On reasonable request by the Company in connection with the
delivery to any holder of a Note of information required to be delivered to such
holder under this Agreement or requested by such holder (other than a holder
that is a party to this Agreement or its nominee), such holder will enter into
an agreement with the Company embodying the provisions of this Section 20.
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Alliance Resource GP, LLC Note Purchase Agreement
SECTION 21. SUBSTITUTION OF PURCHASER.
Each Purchaser shall have the right to substitute any one of such
Purchaser's Affiliates as the purchaser of the Notes that such Purchaser has
agreed to purchase hereunder, by written notice to the Company, which notice
shall be signed by both such Purchaser and such Purchaser's Affiliate, shall
contain such Affiliate's agreement to be bound by this Agreement and shall
contain a confirmation by such Affiliate of the accuracy with respect to it of
the representations set forth in Section 6. Upon receipt of such notice,
wherever the word "Purchaser" is used in this Agreement (other than in this
Section 21), such word shall be deemed to refer to such Affiliate in lieu of
such Purchaser. In the event that such Affiliate is so substituted as a
purchaser hereunder and such Affiliate thereafter transfers to such Purchaser
all of the Notes then held by such Affiliate, upon receipt by the Company of
notice of such transfer, wherever the word "Purchaser" is used in this Agreement
(other than in this Section 21), such word shall no longer be deemed to refer to
such Affiliate, but shall refer to such Purchaser, and such Purchaser shall have
all the rights of an original holder of the Notes under this Agreement.
SECTION 22. MISCELLANEOUS.
Section 22.1. Successors and Assigns. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not, except that the benefits of Sections 7.1, 7.2, 7.3, 13.1, 13.3
and 14.2 shall be limited as therein provided.
Section 22.2. Payments Due on Non-Business Days. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of principal
of, or Make-Whole Amount or interest on, any Note that is due on a date other
than a Business Day shall be made on the next succeeding Business Day without
including the additional days elapsed in the computation of the interest payable
on such next succeeding Business Day.
Section 22.3. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
Section 22.4. Construction. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
Section 22.5. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto. Delivery of an executed counterpart of a signature
page to this Agreement by telecopier shall be effective as delivery of an
original executed counterpart of this Agreement.
Section 22.6. Governing Law. (a) THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAW OF THE STATE OF NEW YORK.
(b) The Company hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or federal court of the United States of America sitting in New York
County, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, the Notes, the Subsidiary Guaranty
Agreement, or the Assumption Agreement or any of the other documents ancillary
hereto or thereto (collectively, the "Note Documents") to which it is or is to
be a party, or for recognition or enforcement of any judgment, and the Company
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding, to the extent permitted by law, may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. The Company agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Note Document shall affect any right that
any party may otherwise have to bring any action or proceeding relating to this
Agreement or any other Note Document in the courts of any jurisdiction.
(c) The Company irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or any of the other Note Documents to which
it is or is to be a party in any New York State or federal court. The Company
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such suit, action or proceeding
in any such court.
(d) THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE NOTE DOCUMENTS, THE USE OF
THE PROCEEDS OF THE NOTES OR THE ACTIONS OF ANY NOTEHOLDER IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
Section 22.7. Recourse Only to the Company and the Subsidiary
Guarantors; Non-Recourse to the General Partner and Associated Persons. Upon
the Assumption Agreement becoming effective as provided in Section 6 thereof,
each Purchaser agrees on behalf of itself and its successors, assigns and legal
representatives, and each subsequent holder of any Note (by acceptance thereof)
shall be deemed so to have agreed, that neither the General Partner nor any
Person (other than the Transferee Company or a Subsidiary Guarantor or the
Special General Partner) which is a partner, shareholder, member, owner,
officer, director, supervisor, trustee or other principal (collectively,
"Associated Persons") of the Transferee Company or of the General Partner or of
a Subsidiary Guarantor, or any of their respective successors or assigns (as
such), shall have any personal liability for the payment or performance of any
of the Company's obligations hereunder or under any of the Notes and no monetary
or other judgment shall be sought or enforced against the General Partner or any
of such Associated Persons or any of their respective successors or assigns (as
such). Notwithstanding the foregoing, no Purchaser shall be deemed barred by
this Section 22.7 from asserting any claim against any Person based upon an
allegation of fraud or misrepresentation.
-40-
<PAGE> 46
Alliance Resource GP, LLC Note Purchase Agreement
The execution hereof by the Purchasers shall constitute a contract
among the Company and the Purchasers for the uses and purposes hereinabove set
forth.
Very truly yours,
ALLIANCE RESOURCE GP, LLC
By: Alliance Resource Holdings,
Inc., its sole member
By /s/ Michael L. Greenwood
Its SVP & CFO
-41-
<PAGE> 47
Alliance Resource GP, LLC Note Purchase Agreement
The foregoing Note Purchase Agreement is
accepted as of the date first above written:
[VARIATION - See Conforming Note on the following page]
By: /s/ MICHAEL L. GREENWOOD
------------------------------
Name: Michael L. Greenwood
Title: Chief Financial Officer
-42-
<PAGE> 48
Alliance Resource GP, LLC Note Purchase Agreement
CONFORMING NOTE
Separate Note Purchase Agreements were entered into between the Company and each
of the Purchasers, respectively. The Note Purchase Agreements were accepted and
executed separately by the Purchasers as follows:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Randall M. Kob
Name: Randall M. Kob
Title: Vice President
UNUM LIFE INSURANCE COMPANY
OF AMERICA
By: Provident Invest Ment Management, LLC
Its: Agent
By: /s/ David Fussell
Name: David Fussell
Title: Vice President
PROVIDENT LIFE AND ACCIDENT INSURANCE
COMPANY
By: Provident Invest Ment Management, LLC
Its: Agent
By: /s/ David Fussell
Name: David Fussell
Title: Vice President
-43-
<PAGE> 49
Alliance Resource GP, LLC Note Purchase Agreement
IDS LIFE INSURANCE COMPANY
By: /s/ Lorraine R. Hart
Name: Lorraine R. Hart
Title: Vice President
AMERICAN ENTERPRISE LIFE INSURANCE
COMPANY
By: /s/ Lorraine R. Hart
Name: Lorraine R. Hart
Title: Vice President
SAFECO LIFE INSURANCE COMPANY
By: /s/ Ronald Spaulding
Name: Ronald Spaulding
Title: Vice President, Treasurer
GENERAL ELECTRIC CAPITAL ASSURANCE
COMPANY
By: /s/ Morian C. Mooers
Name: Morian C. Mooers
Title: Investment Officer
COLONIAL PENN INSURANCE COMPANY
By: /s/ Morian C. Mooers
Name: Morian C. Mooers
Title: Investment Officer
-44-
<PAGE> 50
Alliance Resource GP, LLC Note Purchase Agreement
FIRST COLONY LIFE INSURANCE
COMPANY
By: /s/ Morian C. Mooers
Name: Morian C. Mooers
Title: Investment Officer
HERITAGE LIFE INSURANCE COMPANY
By: /s/ Jon M. Lucia
Name: Jon M. Lucia
Title: Assistant Vice President
Investments
GE CAPITAL LIFE ASSURANCE COMPANY
OF NEW YORK
By: /s/ Morian C. Mooers
Name: Morian C. Mooers
Title: Investment Officer
-45-
<PAGE> 51
Principal Amount and
Denominations of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA $95,000,000 (No. R-1)
(Notes to be registered in its name) $ 5,000,000 (No. R-2)
(1) All payments on account of Notes held by such Purchaser shall be made
by wire transfer of immediately available funds for credit to:
Account No. 890-0304-391 (in the case of payments on account
of the Note (No. R-1) originally issued in the principal
amount of $95,000,000 (the "First Note")
Account No. 890-0304-944 (in the case of payments on account
of the Note (No. R-2) originally issued in the principal
amount of $5,000,000 (the "Second Note")
in each case at: The Bank of New York
New York, New York
(ABA No.: 021-000-018)
Each such wire transfer shall set forth the name of the Company, a
reference to (a) in the case of the First Note, "8.31% Senior Notes due
August 20, 2014, Security No. !INV6722!, PPN 01878@ AA 3, (b) in the
case of the Second Note, "8.31% Senior Notes due August 20, 2014,
Security No. !INV6722!, PPN 01878@ AA 3, and (c) in each case, the due
date and application (as among principal, interest and Make-Whole
Amount) of the payment being made.
(2) Address for all notices relating to payments:
The Prudential Insurance Company of America
c/o Investment Operations Group
Gateway Center Four, 10th Floor
100 Mulberry Street
Newark, New Jersey 07102-4077
Attention: Manager
(3) Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
2200 Ross Avenue, Suite 4200E
Dallas, TX 75201
Attention: Managing Director
(4) Recipient of telephonic prepayment notices:
Manager, Trade Management Group
Telephone: 973-367-3141
Telecopier: 973-802-4925
(5) Tax Identification No.: 22-1211670
SCHEDULE A
(to Note Purchase Agreement)
<PAGE> 52
Alliance Resource GP, LLC Note Purchase Agreement
Principal Amount and
Denominations of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
FIRST COLONY LIFE INSURANCE COMPANY $10,000,000 (No. R-3)
(Notes to be registered in name of SALKELD & CO.)
(1) All payments on account of the Notes shall be made by wire transfer of
Federal or other immediately available funds to:
Bankers Trust Company
14 Wall Street
New York, NY 10005
SWIFT Code: BKTR US 33
ABA #021001033
Account Number 99-911-145
FCC #: 098069
Ref: security description, coupon, maturity, PPN,
identifying principal or interest.
(2) The address for all other notices, statements and other communications
is as follows:
GE Financial Assurance
Account: First Colony Life Insurance Company
Two Union Square, 601 Union Street
Seattle, WA 98101
Attention: (see below)
All amendment requests, financial statements and
reports shall be marked to the attention as follows:
Attn: Investment Dept., Private Placements
Telephone No: 206-516-4954
Fax No: 206-516-4863
All notices with respect to payments and written
confirmation of each such payment shall be marked to
the attention as follows:
Attn: Investment Accounting
Telephone No: 206-516-2871
Fax No: 206-516-4740
(3) Taxpayer Identification Number: 54-0596414
-2-
<PAGE> 53
Alliance Resource GP, LLC Note Purchase Agreement
Principal Amount and
Denominations of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY
(Notes to be registered in name of SALKELD & CO.) $10,000,000 (No. R-4)
(1) All payments on account of the Notes shall be made by wire transfer of
Federal or other immediately available funds to:
Bankers Trust Company
14 Wall Street
New York, NY 10005
SWIFT Code: BKTR US 33
ABA #021001033
Account Number 99-911-145
FCC #: 097817
Ref: security description, coupon, maturity, PPN,
identifying principal or interest.
(2) The address for all other notices, statements and other communications
is as follows:
GE Financial Assurance
Account: GECA LTC
Two Union Square, 601 Union Street
Seattle, WA 98101
Attention: (see below)
All amendment requests, financial statements and
reports shall be marked to the attention as follows:
Attn: Investment Dept., Private Placements
Telephone No: 206-516-4954
Fax No: 206-516-4863
All notices with respect to payments and written
confirmation of each such payment shall be marked to
the attention as follows:
Attn: Investment Accounting
Telephone No: 206-516-2871
Fax No: 206-516-4740
(3) Taxpayer Identification Number: 91-6027719
-3-
<PAGE> 54
Alliance Resource GP, LLC Note Purchase Agreement
Principal Amount and
Denominations of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK $2,000,000 (No. R-5)
(Notes to be registered in name of SALKELD & CO.)
(1) All payments on account of the Notes shall be made by wire transfer of
Federal or other immediately available funds to:
Bankers Trust Company
14 Wall Street
New York, NY 10005
SWIFT Code: BKTR US 33
ABA #021001033
Account Number 99-911-145
FCC #: 097836
Ref: security description, coupon, maturity, PPN,
identifying principal or interest.
(2) The address for all other notices, statements and other communications
is as follows:
GE Financial Assurance
Account: GE Life and Annuity Assurance Company
Two Union Square, 601 Union Street
Seattle, WA 98101
Attention: (see below)
All amendment requests, financial statements and
reports shall be marked to the attention as follows:
Attn: Investment Dept., Private Placements
Telephone No: 206-516-4954
Fax No: 206-516-4863
All notices with respect to payments and written
confirmation of each such payment shall be marked to
the attention as follows:
Attn: Investment Accounting
Telephone No: 206-516-2871
Fax No: 206-516-4740
(3) Taxpayer Identification Number: 22-2882416
-4-
<PAGE> 55
Alliance Resource GP, LLC Note Purchase Agreement
Principal Amount and
Denominations of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
COLONIAL PENN INSURANCE COMPANY $2,000,000 (No. R-6)
(Notes to be registered in name of SALKELD & CO.)
(1) All payments on account of the Notes shall be made by wire transfer of
Federal or other immediately available funds to:
Bankers Trust Company
14 Wall Street
New York, NY 10005
SWIFT Code: BKTR US 33
ABA #021001033
Account Number 99-911-145
FCC #: 098592
Ref: security description, coupon, maturity, PPN,
identifying principal or interest.
(2) The address for all other notices, statements and other communications
is as follows:
GE Financial Assurance
Account: Colonial Penn Insurance Company
Two Union Square, 601 Union Street
Seattle, WA 98101
Attention: (see below)
All amendment requests, financial statements and
reports shall be marked to the attention as follows:
Attn: Investment Dept., Private Placements
Telephone No: 206-516-4954
Fax No: 206-516-4863
All notices with respect to payments and written
confirmation of each such payment shall be marked to
the attention as follows:
Attn: Investment Accounting
Telephone No: 206-516-2871
Fax No: 206-516-4740
(3) Taxpayer Identification Number: 23-2044095
-5-
<PAGE> 56
Alliance Resource GP, LLC Note Purchase Agreement
Principal Amount and
Denominations of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
HERITAGE LIFE INSURANCE COMPANY $1,000,000 (No. R-7)
(Notes to be registered in name of SALKELD & CO.)
(1) All payments on account of the Notes shall be made by wire transfer of
Federal or other immediately available funds to:
Bankers Trust Company
14 Wall Street
New York, NY 10005
SWIFT Code: BKTR US 33
ABA #021001033
Account Number 99-911-145
FCC #: 097825
Ref: security description, coupon, maturity, PPN,
identifying principal or interest.
(2) The address for all other notices, statements and other communications
is as follows:
GE Financial Assurance
Account: Heritage Life Insurance Company
Two Union Square, 601 Union Street
Seattle, WA 98101
Attention: (see below)
All amendment requests, financial statements and
reports shall be marked to the attention as follows:
Attn: Investment Dept., Private Placements
Telephone No: 206-516-4954
Fax No: 206-516-4863
All notices with respect to payments and written
confirmation of each such payment shall be marked to
the attention as follows:
Attn: Investment Accounting
Telephone No: 206-516-2871
Fax No: 206-516-4740
(3) Taxpayer Identification Number: 86-0165716
-6-
<PAGE> 57
Alliance Resource GP, LLC Note Purchase Agreement
Principal Amount and
Denominations of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
UNUM LIFE INSURANCE COMPANY OF AMERICA $15,000,000 (No. R-8)
(Notes to be registered in the name of CUDD & CO.)
(1) ADDRESS ALL NOTICES REGARDING PAYMENTS
and all other communications to:
Provident Investment Management, LLC
Private Placements
One Fountain Square
Chattanooga, Tennessee 37402
Telephone: (423) 755-8468
Fax: (423) 755-3351
(2) All payments on account of the
Notes shall be made by wire
transfer of immediately available
funds to:
CUDD & CO.
c/o The Chase Manhattan Bank
New York, NY
ABA No. 021 000 021
SSG Private Income Processing
A/C #900-9-000200
Custodial Account No. G08287
Please reference: Issuer: Alliance Resource Operating Partners, L.P.
PPN 01878@ AA 3
Coupon: 8.31%
Principal $
--------
Interest $
--------
(3) Taxpayer Identification Number: 13-6022143 (CUDD & CO.)
-7-
<PAGE> 58
Alliance Resource GP, LLC Note Purchase Agreement
Principal Amount and
Denominations of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY $10,000,000 (No. R-9)
(Notes to be registered in the name of CUDD & CO.)
(1) ADDRESS ALL NOTICES REGARDING PAYMENTS
and all other communications to:
Provident Investment Management, LLC
Private Placements
One Fountain Square
Chattanooga, Tennessee 37402
Telephone: (423) 755-8468
Fax: (423) 755-3351
(2) All payments on account of the
Notes shall be made by wire
transfer of immediately available
funds to:
CUDD & CO.
c/o The Chase Manhattan Bank
New York, NY
ABA No. 021 000 021
SSG Private Income Processing
A/C #900-9-000200
Custodial Account No. G06704
Please reference: Issuer: Alliance Resource Operating Partners, L.P.
PPN 01878@ AA 3
Coupon: 8.31%
Principal $
--------
Interest $
--------
(3) Taxpayer Identification Number: 13-6022143 (CUDD & CO.)
-8-
<PAGE> 59
Alliance Resource GP, LLC Note Purchase Agreement
Principal Amount and
Denominations of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
IDS LIFE INSURANCE COMPANY COMPANY $10,000,000 (No. R-10)
(Notes to be registered in the name of SHER Co.)
(1) All payments on account of the Notes shall be made by wire transfer of
immediately available funds to:
Norwest Bank Minnesota
ABA # 091000019
For credit to American Express Trust Company Acct #
0000038500 For the benefit of: SHER Co.
(with sufficient information to identify the source
and application of such funds)
(2) Address for notices in respect of payments:
SHER Co.
1200 Northstar West Building
625 Marquette Avenue
Minneapolis, MN 55402
Fax: 612-671-2409
(3) Address for all other notices:
American Express Financial Corporation
Attn: Ron Angevine
733 Marquette Avenue
Minneapolis, MN 554021
(4) Taxpayer Identification Number: 41-1430260
-9-
<PAGE> 60
Alliance Resource GP, LLC Note Purchase Agreement
Principal Amount and
Denominations of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY $5,000,000 (No. R-11)
(Notes to be registered in the name of WRAP TWO & Co.)
(1) All payments on account of the Notes shall be made by wire transfer of
immediately available funds to:
Norwest Bank Minnesota
ABA # 091000019
For credit to American Express Trust Company
Acct # 0000038500
For the benefit of: WRAP TWO & Co.
(with sufficient information to identify the source
and application of such funds)
(2) Address for notices in respect of payments:
WRAP TWO & Co.
1200 Northstar West Building
625 Marquette Avenue
Minneapolis, MN 55402
Fax: 612-671-2409
(3) Address for all other notices:
American Express Financial Corporation
Attn: Ron Angevine
733 Marquette Avenue
Minneapolis, MN 554021
(4) Taxpayer Identification Number: 41-1435284
-10-
<PAGE> 61
Alliance Resource GP, LLC Note Purchase Agreement
Principal Amount and
Denominations of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
SAFECO LIFE INSURANCE COMPANY $15,000,000 (No. R-12)
(Notes to be registered in name of ATWELL & CO.)
(1) All payments on account of the Notes shall be made by bank wire or
intra-bank transfer of Federal or other immediately available funds
(identifying the issue upon which payment is being made and the
application of the payment as between interest, principal and premium)
to:
The Chase Manhattan Bank ABA #: 021000021 for credit
to SAFECO Life Annuity - AFS account # P 21158
Attention: David Carrasquillo
(2) Address for all notices and confirmations relating to payments:
The Chase Manhattan Bank
3 Chase Metro Tech Center
6th Floor
Brooklyn, NY 11245
Attn: David Carrasquillo
(3) Address for all other communications:
SAFECO Life Insurance Company
c/o SAFECO asset Management Co.
601 Union Street, Suite 2500
Seattle, WA 98101
Attention: Michael-Ann McAboy
Investment Department
(4) Taxpayer Identification Number: 91-0742147 (SAFECO Life
Insurance Company)
13-6065575 (Atwell & Co.)
-11-
<PAGE> 62
DEFINED TERMS
GENERAL PROVISIONS
Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, the same shall be done in accordance with GAAP, to the extent
applicable, except where such principles are inconsistent with the express
requirements of this Agreement. All express or implied references herein to "the
Company and the Restricted Subsidiaries" for the purposes of computing the
consolidated financial position, results of operations, or other balance sheet
or financial statement item (including, without limitation, Available Cash,
Consolidated Cash Flow, Consolidated Income Tax Expense, Consolidated Interest
Expense, Consolidated Net Income, Consolidated Non-Cash Charges and Consolidated
Total Assets) shall be deemed to include only the Company and the Restricted
Subsidiaries as separate legal entities (and for the purpose of such
computations all such Restricted Subsidiaries shall be treated as being
Wholly-Owned subsidiaries) and, unless otherwise expressly provided herein,
shall not include the financial position, results of operations, or other such
items, of any other Person (including, without limitation, an Unrestricted
Subsidiary), whether or not, in any particular instance, such accounting
treatment would be in accordance with GAAP.
DEFINITIONS
As used herein (including the Schedules hereto), the following terms
have the respective meanings set forth below or set forth in the Section hereof
following such term:
"Affiliate" means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, (b) any Person beneficially owning or holding, directly or
indirectly, 10% or more of the Capital Stock of such first Person or any
subsidiary of such first Person or any corporation of which such first Person
and the subsidiaries of such first Person beneficially own or hold, in the
aggregate, directly or indirectly, 10% or more of the Capital Stock, and (c) any
officer or director of such first Person. As used in this definition, "Control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Unless the context
otherwise clearly requires, any reference to an "Affiliate" is a reference to an
Affiliate of the Company; provided, however, the Company shall not be an
Affiliate of any Restricted Subsidiary and no Restricted Subsidiary shall be an
Affiliate of the Company or any other Restricted Subsidiary.
"Asset Acquisition " means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged with or into the Company or
any Restricted Subsidiary, (b) the acquisition by the Company or any Restricted
Subsidiary of the assets of any Person (other than a Restricted Subsidiary)
which constitute all or substantially all of the assets of such Person or (c)
the acquisition by the Company or any Restricted Subsidiary of any division or
line of business of any Person (other than a Restricted Subsidiary).
SCHEDULE B
(to Note Purchase Agreement)
<PAGE> 63
"Assumption Agreement" is defined in Schedule 4.8(d).
"Assumption Conditions" is defined in Section 4.8(d).
"Available Cash" means, with respect to any fiscal quarter ending prior
to the Liquidation Date,
(a) the sum of (i) all cash and cash equivalents of the
Partnership Group on hand at the end of such fiscal quarter, and (ii)
all additional cash and cash equivalents of the Partnership Group on
hand on the date of determination of Available Cash with respect to
such fiscal quarter resulting from Working Capital Borrowings made
subsequent to the end of such fiscal quarter, less
(b) the amount of any cash reserves that is necessary or
appropriate in the reasonable discretion of the General Partner to (i)
provide for the proper conduct of the business of the Partnership Group
(including reserves for future capital expenditures and for anticipated
future credit needs of the Partnership Group) subsequent to such fiscal
quarter, (ii) comply with applicable law or any loan agreement,
security agreement, mortgage, debt installment or other agreement or
obligation to which any Group Member is a party or by which it is bound
or its assets are subject or (iii) provide funds for distributions
under Section 6.4 or 6.5 of the MLP Agreement in respect of any one or
more of the next four fiscal quarters; provided, however, that the
General Partner may not establish cash reserves pursuant to (iii) above
if the effect of such reserves would be that the MLP is unable to
distribute the Minimum Quarterly Distribution on all Common Units, plus
any Cumulative Common Unit Arrearage on all Common Units, with respect
to such fiscal quarter, and provided further that disbursements made by
a Group Member or cash reserves established, increased or reduced after
the end of such fiscal quarter but on or before the date of
determination of Available Cash with respect to such fiscal quarter
shall be deemed to have been made, established, increased or reduced,
for purposes of determining Available Cash, within such fiscal quarter
if the General Partner so determines.
Notwithstanding the foregoing, "Available Cash " with respect to the
fiscal quarter in which the Liquidation Date occurs and any subsequent Quarter
shall equal zero.
For purposes of the definition of "Available Cash", the following terms
shall have the following meanings:
"Common Unit" has the meaning assigned to such term in the MLP
Agreement.
"Cumulative Common Unit Arrearage " has the meaning assigned
to such term in the MLP Agreement.
"Group Member" means a member of the Partnership Group.
"Liquidation Date" means (a) in the case of an event giving
rise to the dissolution of the Transferee Company of the type described
in clauses (a) and (b) of the first sentence of Section 12.2 of the
Partnership Agreement, the date on which the applicable time period
during which the
B-2
<PAGE> 64
partners of the Transferee Company have the right to elect to
reconstitute the Transferee Company and continue its business has
expired without such an election being made, and (b) in the case of any
other event giving rise to the dissolution of the Transferee Company,
the date on which such event occurs.
"Minimum Quarterly Distribution" has the meaning assigned to
such term in the MLP Agreement.
MLP Agreement" means the Amended and Restated Agreement of
Limited Partnership of the MLP, as it may be amended, supplemented or
restated from time to time.
"Partnership Agreement" means the Agreement of Limited
Partnership of the Transferee Company, as it may be amended,
supplemented or restated from time to time.
"Partnership Group" means the Transferee Company and all
Subsidiaries, treated as a single consolidated entity.
"Working Capital Borrowings" means borrowings under the Bank
Facility giving rise to Debt incurred for working capital purposes and
for the purpose of making distributions to the MLP.
"Bank Facility" means the Debt facility made available to the Company
for (i) the purchase of Qualifying Securities and/or (ii) for the provision of
working capital, and/or (iii) the provision of additional funds for general
partnership purposes, all pursuant to the Credit Agreement dated as of August
16, 1999 among Alliance Resource GP, LLC and the banks, financial institutions
and other lenders parties thereto, The Chase Manhattan Bank ("Chase") as paying
agent, Deutsche Bank AG, New York Branch, as documentation agent and Citicorp
USA, Inc. and Chase as co-administrative agents, as from time to time amended,
supplemented, modified or refinanced and any other credit agreements from time
to time entered into by the Company for the purchase of Qualifying Securities
and/or the provision of working capital and/or the provision of additional funds
for general partnership purposes.
"Business Day" means (a) for the purposes of Section 8.7 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provisions of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in Tulsa, Oklahoma or New York City are required
or authorized to be closed.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Capital Lease Obligation" means, with respect to any Person and a
Capital Lease, the amount of the obligation of such Person as the lessee under
such Capital Lease which would, in accordance with GAAP, appear as a liability
on a balance sheet of such Person.
"Capital Stock" shall mean, with respect to any Person, any and all
shares, units representing interests, participations, rights in or other
equivalents (however designated) of such Person's capital
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stock, including, (x) with respect to partnerships, partnership interests
(whether general or limited) and any other interest or participation that
confers upon a Person the right to receive a share of the profits and losses of,
or distributions of assets of, such partnership, (y) with respect to limited
liability companies, member interests, and (z) with respect to any Person, any
rights (other than debt securities convertible into capital stock), warrants or
options exchangeable for or convertible into such capital stock.
"Closing" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Company" means Alliance Resource GP, LLC, a Delaware limited liability
company, subject however to the provisions of Section 1(b) of the Assumption
Agreement from and after the time at which the same becomes effective in
accordance with Section 6 thereof and the provisions of Section 10.6.
"Company Notice" is defined in Section 8.3.
"Confidential Information" is defined in Section 20.
"Consolidated Adjusted Restricted Subsidiary Debt" means all Debt of
Restricted Subsidiaries other than
(i) Debt owing to the Company or to a Restricted Subsidiary
with respect to which the Company shall have at least the same degree
of ownership and control as it does with respect to the indebted
Restricted Subsidiary; and
(ii) Debt consisting of obligations of Subsidiary Guarantors
under (x) the Subsidiary Guaranty Agreement or (y) the Bank Facility
Guaranties which are executed and remain outstanding in conformity with
the provisions of Section 10.10.
"Consolidated Cash Flow" means, as of any date of determination for any
applicable period, the excess, if any, of (a) the sum of, without duplication,
the amounts for such period, taken as a single accounting period, of (i)
Consolidated Net Income for such period, plus (ii) to the extent deducted in the
determination of Consolidated Net Income for such period, without duplication,
(A) Consolidated Non-Cash Charges, (B) Consolidated Interest Expense and (C)
Consolidated Income Tax Expense, over (b) any non-cash items increasing
Consolidated Net Income for such period to the extent that such items constitute
reversals of Consolidated Non-Cash Charges for a previous period and which were
included in the computation of Consolidated Cash Flow for such previous period
pursuant to the provisions of the preceding clause (a), provided that in
calculating Consolidated Cash Flow for any such period, (1) full effect shall be
given to the proviso to the definition of "Consolidated Interest Expense" set
forth below and (2) Consolidated Cash Flow shall be calculated after giving
effect on a pro forma basis for such period, in all respects in accordance with
GAAP, to any Transfer or Asset Acquisitions (including, without limitation any
Asset Acquisition by the Company or any Restricted
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Subsidiary giving rise to the need to determine Consolidated Cash Flow as a
result of the Company or one of its Restricted Subsidiaries (including any
Person that becomes a Restricted Subsidiary as result of any such Asset
Acquisition) incurring, assuming or otherwise becoming liable for any Debt)
occurring during the period commencing on the first day of such period to and
including the date of the transaction, as if such Transfer or Asset Acquisition
occurred on the first day of such period.
"Consolidated Income Tax Expense" means, with respect to any period,
all provisions for Federal, state, local and foreign income taxes of the Company
and its Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Interest Expense" means, as of the date of any
determination for any applicable period, the sum (without duplication) of the
following (in each case, eliminating all offsetting debits and credits between
the Company and its Restricted Subsidiaries and all other items required to be
eliminated in the course of the preparation of consolidated financial statements
of the Company and its Restricted Subsidiaries in accordance with GAAP): (a) all
interest in respect of Debt of the Company and its Restricted Subsidiaries
whether paid or accrued (including non-cash interest payments and imputed
interest on Capital Lease Obligations) deducted in determining Consolidated Net
Income for such period, and (b) all debt discount (but not expense) amortized or
required to be amortized in the determination of Consolidated Net Income for
such period, less (c) all interest earned or accrued with respect to Qualifying
Securities during such period; provided that for purposes of making any
computation pursuant to Section 10.1(a)(iii), (iv) or (v) or Section 10.4(a)(ii)
(including any calculation of Consolidated Cash Flow relating thereto),
Consolidated Interest Expense (A) shall be determined on a pro forma basis
giving effect to the incurrence of all Debt (and the application of proceeds
thereof) which either (x) is the subject of such computation, or (y) was issued
after the end of such period and prior to such date of computation, as if all of
such Debt had been incurred (and the proceeds thereof applied) on the first day
of such period, and (B) shall not be reduced by the amount of any interest
earned or accrued with respect to Transferred Qualifying Securities during such
period for the purposes of any computation then being made under clause (ii) of
the last sentence of Section 10.1. In computing Consolidated Interest Expense
for any period prior to the end of the first four fiscal quarters ending after
the date of Closing, Consolidated Interest Expense of the Company and the
Restricted Subsidiaries shall be determined with respect to the principal amount
of Debt actually outstanding from time to time but on the basis of interest
accruing at a rate equal to the weighted average interest rate payable on the
date of determination with respect to Debt outstanding under the Notes and the
Bank Facility, rather than the rates of interest actually applicable to the Debt
refinanced thereby.
"Consolidated Net Debt" means, as of any date of determination, the
aggregate outstanding principal amount of all Debt of the Company and its
Restricted Subsidiaries outstanding on such date, after eliminating all
offsetting debits and credits between the Company and its Restricted
Subsidiaries and all other items required to be eliminated in the course of the
preparation of consolidated financial statements of the Company and its
Restricted Subsidiaries in accordance with GAAP; less the principal amount of
all Qualifying Securities held by the Company and its Restricted Subsidiaries.
"Consolidated Net Income" means, with reference to any period, the net
income (or loss) of the Company and its Restricted Subsidiaries for such period
(taken as a cumulative whole), as determined in accordance with GAAP, provided
that there shall be excluded:
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(a) the income (or loss) of any Person accrued prior to the
date it becomes a Subsidiary or is merged into or consolidated with the
Company or a Subsidiary, and the income (or loss) of any Person,
substantially all of the assets of which have been acquired in any
manner, realized by such other Person prior to the date of acquisition,
(b) the income (or loss) of any Person (other than a
Restricted Subsidiary) in which the Company or any Restricted
Subsidiary has an ownership interest, except to the extent that any
such income has been actually received by the Company or such
Restricted Subsidiary in the form of cash dividends or similar cash
distributions,
(c) the undistributed earnings of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary is not at the time
permitted by the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary,
(d) any aggregate net gain or loss during such period arising
from the sale, conversion, exchange or other disposition of capital
assets (such term to include, without limitation, (i) all non-current
assets, and, without duplication, (ii) the following, whether or not
current: all fixed assets, whether tangible or intangible, all
inventory sold in conjunction with the disposition of fixed assets, and
all Securities), and
(e) any net income or gain or loss during such period from (i)
any change in accounting principles in accordance with GAAP, (ii) any
prior period adjustments resulting from any change in accounting
principles in accordance with GAAP, or (iii) any extraordinary or
unusual items.
"Consolidated Non-Cash Charges" means, with respect to the Company and
its Restricted Subsidiaries for any period, the aggregate depreciation,
depletion and amortization (other than amortization of debt discount and
expense), the non-cash portion of advance royalties and any non-cash employee
compensation expenses for such period, in each case, reducing Consolidated Net
Income of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Assets" means, at any time, the total assets and
properties of the Company and its Restricted Subsidiaries which would be shown
as assets on a consolidated balance sheet of the Company and its Restricted
Subsidiaries as of such time prepared in accordance with GAAP.
"Contribution Agreement" means the Contribution Agreement to be entered
into as of the date of Closing between the Company and the Transferee Company in
order to implement the Contribution Transactions.
"Contribution Transactions" means the transactions referred to in the
initial recital of the Assumption Agreement and more fully described in and
occurring pursuant to the Contribution Agreement.
"Debt" means, with respect to any Person, without duplication,
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(a) its liabilities for borrowed money;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable arising in
the ordinary course of business but including, without limitation, all
liabilities created or arising under any conditional sale or other
title retention agreement with respect to any such property);
(c) its Capital Lease Obligations;
(d) all liabilities secured by any Lien with respect to any
property owned by such Person (whether or not it has assumed or
otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks or other financial institutions (whether or not
representing obligations for borrowed money), other than any thereof
incurred in the ordinary course of business of such Person and which
are issued (i) to support such Person's obligations in respect of
worker's compensation or unemployment insurance laws, the payment of
retirement benefits or performance guarantees relating to coal
deliveries or insurance deductibles and which shall exceed no more than
$10,000,000 in the aggregate at any time outstanding for all of the
foregoing or (ii) in respect of current trade payables of such Person;
(f) Swaps of such Person, to the extent required to be
reflected on a balance sheet of such Person prepared as of any date of
determination in accordance with GAAP;
(g) Preferred Stock of Restricted Subsidiaries owned by
Persons other than the Company, a Subsidiary Guarantor or a
Wholly-Owned Restricted Subsidiary; and
(h) any Guaranty of such Person with respect to liabilities of
a type described in any of clauses (a) through (g) hereof.
Debt of any Person shall include all obligations of such Person of the
character described in clauses (a) through (h) to the extent such
Person remains legally liable in respect thereof notwithstanding that
any such obligation is deemed to be extinguished under GAAP.
"Default" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"Default Rate" means with respect to any Note that rate of interest
that is the greater of (i) 2% per annum above the rate of interest stated in
clause (a) of the first paragraph of such Note or (ii) the rate of interest
publicly announced by Citibank, N.A. as its "base" or "prime" rate.
"Designated Proceeds" is defined in Section 8.3.
"Distribution " means, in respect of any corporation, association or
other business entity:
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(a) dividends or other distributions or payments on Capital
Stock of such corporation, association or other business entity (except
distributions in such stock or other equity interest); and
(b) the redemption, retirement, purchase or acquisition of
such stock or other equity interests or of warrants, rights or other
options to purchase such stock or other equity interests (except when
solely in exchange for such stock or other equity interests) unless
made, substantially contemporaneously, with the net proceeds of (or
utilizing funds or other property valued in an amount not exceeding the
net proceeds of) a sale of such stock or other equity interests or from
a contribution to the equity of such corporation, association or other
business.
"Environmental Laws " means any and all applicable Federal, state,
local, and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, concessions, grants, franchises, licenses, agreements
or governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under Section 414 of the Code.
"Event of Default" is defined in Section 11.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"General Partner" means, from and after the fulfillment of the
Assumption Conditions, Alliance Resource Management GP, LLC, a Delaware limited
liability company, and its successors and permitted assigns as the managing
general partner of the Transferee Company.
"Governmental Authority" means
(a) the government of
(i) the United States of America or any State or
other political subdivision thereof, or
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(ii) any other jurisdiction in which the Company or
any Subsidiary conducts all or any part of its business, or
which asserts jurisdiction over any properties of the Company
or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"Guaranty" and, with correlative meaning, "Guaranteed" means, with
respect to any Person, any obligation (except the endorsement in the ordinary
course of business of negotiable instruments for deposit or collection) of such
Person guaranteeing or in effect guaranteeing any Debt of any other Person in
any manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person:
(a) to purchase such Debt or any property constituting
security therefor;
(b) to advance or supply funds (i) for the purchase or payment
of such Debt, or (ii) to maintain any working capital or other balance
sheet condition or any income statement condition of any other Person
or otherwise to advance or make available funds for the purchase or
payment of such Debt;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such Debt of the
ability of any other Person to make payment of the Debt; or
(d) otherwise to assure the owner of such Debt against loss in
respect thereof.
In any computation of the Debt of the obligor under any Guaranty, the Debt that
is the subject of such Guaranty shall be assumed to be a direct obligation of
such obligor. The amount of any Guaranty shall be equal to the outstanding
amount of the Debt guaranteed, or such lesser amount to which the maximum
exposure of such Person shall have been specifically limited.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"Holder" or "holder" means, with respect to any Note, the Person in
whose name such Note is registered in the register maintained by the Company
pursuant to Section 13.1.
"Institutional Investor" means (a) any original purchaser of a Note,
(b) any holder of a Note holding more than 5% of the aggregate principal amount
of the Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
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"Intercreditor Agreement" means an agreement substantially in the form
of the Intercreditor Agreement attached hereto as Exhibit 4.6, as the same may
be amended and be from time to time in effect.
"Investment" means any investment, made in cash or by delivery of
property, by the Company or any of its Restricted Subsidiaries (i) in any
Person, whether by acquisition of stock, debt or other obligations or Security,
or by loan, guaranty of any debt, advance, capital contribution or otherwise, or
(ii) in any property.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest, production payment or other encumbrance, or any
interest or title of any vendor, lessor, lender or other secured party to or of
such Person under any conditional sale or other title retention agreement or
Capital Lease, upon or with respect to any property or asset of such Person
(including in the case of stock, stockholder agreements, voting trust agreements
and all similar arrangements); provided, however, "Lien" shall not include any
negative pledge nor any royalty interest or overriding royalty interest under
any lease, sublease or other similar agreement entered into in the ordinary
course of business.
"MLP " means Alliance Resource Partners, L.P., a Delaware limited
partnership.
"Make-Whole Amount" is defined in Section 8.7.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties or prospects of the Company and
its Restricted Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Restricted Subsidiaries taken as a whole, (b) the ability of the
Company to perform its payment obligations, its obligations under Sections 9 or
10 or any other material obligations under this Agreement and the Notes, (c) the
ability of a Subsidiary Guarantor to perform its payment obligations or other
material obligations under the Subsidiary Guaranty Agreement, or (d) the
validity or enforceability of this Agreement, the Notes or the Subsidiary
Guaranty Agreement.
"Memorandum" is defined in Section 5.3.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA).
"Notes" is defined in Section 1.
"Officer's Certificate" means a certificate of a Senior Financial
Officer or of any other officer of Alliance Coal Corporation whose
responsibilities extend to the subject matter of such certificate.
"Original Subsidiary Guaranty Agreement" is defined in Section 4.5.
"Original Subsidiary Guarantor" means a Restricted Subsidiary which is
identified as an Original Subsidiary Guarantor in Schedule 5.4.
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"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Permitted Investments " means, at any time, all of the following:
(a) Investments in property to be used in the ordinary course
of business of the Company and its Restricted Subsidiaries;
(b) Investments in current assets arising from the sales of
goods and services in the ordinary course of business of the Company
and its Restricted Subsidiaries;
(c) Investments in one or more Restricted Subsidiaries or any
Person that concurrently with such Investment becomes a Restricted
Subsidiary;
(d) Investments by the Restricted Subsidiaries in the Company
otherwise expressly permitted in this Agreement;
(e) Investments in United States Governmental Securities
maturing within one year (or, in the case of Qualifying Securities, two
years) from the date of acquisition;
(f) Investments in certificates of deposit, banker's
acceptances or other bank instruments maturing within one year (or, in
the case of Qualifying Securities, two years) from the date of
acquisition thereof, issued by Acceptable Banks;
(g) Investments in Repurchase Agreements;
(h) Investments in obligations of any state of the United
States of America, or any municipality of any such state, in each case
rated "AA" or better by S&P, "Aa2" or better by Moody's or an
equivalent rating by any other credit rating agency of recognized
national standing, provided that such obligations mature within one
year from the date of acquisition thereof;
(i) Investments in commercial paper maturing in 270 days or
less from the date of issuance which, at the time of acquisition by the
Company or any Restricted Subsidiary, is rated Al or better by S&P or
P1 or better by Moody's or an equivalent rating by any other credit
rating agency of recognized national standing; and
(j) Other Investments, provided that the aggregate of all such
other Investments would not exceed 10% of Consolidated Total Assets.
As used in this definition of "Permitted Investments ":
"Acceptable Bank " means (i) any bank or trust company (a)
which is organized under the laws of the United States of America or
any State thereof, (b) which has capital, surplus and undivided profits
aggregating at least $500,000,000, and (c) whose long-term unsecured
debt obligations (or the long-term unsecured debt obligations of the
holding company owning all of the capital stock of such bank or trust
company) shall have been given a rating of "AA-" or better by S&P,
"Aa3" or better by Moody's or an equivalent rating by any other credit
rating agency of
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recognized national standing or the commercial paper or other
short-term unsecured debt obligations of which (or the short-term
unsecured debt obligations of the holding company owning all of the
capital stock of such bank or trust company) shall have been given a
rating of "Al " or better by S&P or "Prime 1 " or better by Moody's or
an equivalent rating by any other credit rating agency of recognized
national standing or (ii) any bank party to the Bank Facility..
"Acceptable Broker-Dealer" means any Person other than a
natural person (i) which is registered as a broker or dealer pursuant
to the Exchange Act and (ii) whose long-term unsecured debt obligations
shall have been given a rating of "AA-" or better by S&P, "Aa3" or
better by Moody's or an equivalent rating by any other credit rating
agency of recognized national standing.
"Moody's" means Moody's Investors Service, Inc.
"Repurchase Agreement" means any written agreement.
(a) that provides for (i) the transfer of one or more United
States Governmental Securities in an aggregate principal amount at
least equal to the amount of the Transfer Price (defined below) to the
Company or any of its Restricted Subsidiaries from an Acceptable Bank
or an Acceptable Broker-Dealer against a transfer of funds (the
"Transfer Price") by the Company or such Restricted Subsidiary to such
Acceptable Bank or Acceptable Broker-Dealer, and (ii) a simultaneous
agreement by the Company or such Restricted Subsidiary, in connection
with such transfer of funds, to transfer to such Acceptable Bank or
Acceptable Broker-Dealer the same or substantially similar United
States Governmental Securities for a price not less than the Transfer
Price plus a reasonable return thereon at a date certain not later than
365 days after such transfer of funds,
(b) in respect of which the Company or such Restricted
Subsidiary shall have the right, whether by contract or pursuant to
applicable law, to liquidate such agreement upon the occurrence of any
default thereunder, and
(c) in connection with the Company or such Restricted
Subsidiary, or an agent thereof, shall have taken all action required
by applicable law or regulations to perfect a Lien on such United
States Governmental Securities.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"United States Governmental Security" means any direct
obligation of, or obligation guaranteed by, the United States of
America, or any agency controlled or supervised by or acting as an
instrumentality of the United States of America pursuant to authority
granted by the Congress of the United States of America, so long as
such obligation or guarantee shall have the benefit of the full faith
and credit of the United Sates of America which shall have been pledged
pursuant to authority granted by the Congress of the United States of
America.
"Person" means an individual, partnership, joint venture, corporation,
limited liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
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"Plan" means an "employee benefit plan" (as defined in Section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"Prepayment Date" is defined in Section 8.3.
"Preferred Stock" of any Person means any class of Capital Stock of
such Person that is preferred over any other class of Capital Stock of such
Person as to the payment of dividends or the payment of any amount upon
liquidation or dissolution of such Person.
"Pro Forma Financial Statements" means the financial statements of the
Company and its Restricted Subsidiaries contained in the Registration Statement
and giving effect, on a pro forma basis, to the completion of the Restructuring
Transactions, all as more specifically described in Section 5.5(b).
"property" or "properties" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.
"Purchaser" and "Purchasers" are defined in Section 2.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"Qualified Debt" is defined in Section 10.7.
"Qualifying Securities" means Investments of the Company or any
Restricted Subsidiary of the type described in clauses (e) through (i) of the
definition of the term "Permitted Investments" but only to the extent that (x)
such Investments have been purchased with the proceeds of Debt under the Bank
Facility and other available funds (not exceeding $50,000,000 in aggregate
amount) and have been pledged to secure the payment of the Term Loan under the
Bank Facility (not exceeding $50,000,000 in aggregate principal amount at any
time outstanding) and (y) the acquisition of such Investments and the incurrence
of such Debt and the making of such pledge shall be effected only in connection
with maintenance or expansion capital expenditures to be made by the Company and
its Restricted Subsidiaries; provided, that, solely for purposes of this
definition, Investments described in clauses (e) and (f) of the definition of
the term "Permitted Investments" may have a maturity of up to two years from
their date of acquisition by the Company or a Restricted Subsidiary.
"Registration Statement" shall mean the Registration Statement on Form
S-1 of Alliance Resource Partners L.P. (Registration No. 33-78845) filed with
the Securities and Exchange Commission on May 20, 1999, as amended by Amendment
No. 1, filed with the Securities and Exchange Commission on June 30, 1999,
Amendment No. 2, filed with the Securities and Exchange Commission on July 20,
1999, Amendment No. 3, filed with the Securities and Exchange Commission on July
23, 1999 Amendment No. 4, filed with the Securities and Exchange Commission on
August 9, 1999 and Amendment No. 5, filed with the Securities and Exchange
Commission on August 13, 1999 in the form when declared effective by the
Commission and as amended, and as reflected in the final prospectus filed
pursuant to Rule 424(b) under the Securities Act, in each case on or prior to
the date of this Agreement.
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"Required Holders" means, at any time, the holders of at least 60% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).
"Responsible Officer" means any Senior Financial Officer and any other
officer of the General Partner with responsibility for the administration of the
relevant portion of this Agreement or the Subsidiary Guaranty Agreement, as
applicable.
"Restricted Payment" means any Distribution in respect of the Company
or a Restricted Subsidiary (other than, in the case of a Restricted Subsidiary,
a Distribution made to the Company or another Restricted Subsidiary or a
Distribution constituting or resulting in a Permitted Investment), including,
without limitation, any Distribution resulting in the acquisition by the Company
of securities that would constitute treasury stock. For purposes of this
Agreement, the amount of any Restricted Payment made in property shall be the
greater of (x) the Fair Market Value of such property (as determined in good
faith by the board of directors (or equivalent governing body) of the Person
making such Restricted Payment) and (y) the net book value thereof on the books
of such Person, in each case determined as of the date on which such Restricted
Payment is made.
"Restricted Subsidiary" means any Subsidiary (i) of which more than 50%
(by number of votes) of each class of (x) Voting Stock, and (y) all other
securities convertible into, exchangeable for or representing the right to
purchase, Voting Stock is beneficially owned, directly or indirectly, by the
Company, (ii) which is organized under the laws of the United States or any
State thereof, (iii) which maintains substantially all of its assets and
conducts substantially all of its business within the United States, and (iv)
which is properly designated as such by the Company in the most recent notice
(or, prior to any such notice, on Schedule 5.4, including Alliance Coal LLC)
with respect to such Subsidiary given by the Company pursuant to and in
accordance with the provisions of Section 7.4.
"Restructuring Transactions" shall mean the Contribution Transactions
and the transactions described in clauses 1, 2, 4, 5 and 6 of Schedule 4.8(d).
"Restructuring Payment" means the Restricted Payment to be made on the
Closing Date in connection with the Restructuring Transactions as contemplated
by the Registration Statement (under the heading "Use of Proceeds") in an
aggregate amount not exceeding $320 million.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Security" has the meaning set forth in section 2(a)(1) of the
Securities Act.
"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the General Partner.
"Solvent" or "Solvency" means, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (b) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay such debts and liabilities as they mature and (d) such Person is not engaged
in a business or a transaction, for which such Person's
B-14
<PAGE> 76
property would constitute an unreasonably small capital. The amount of
contingent liabilities at any time shall be computed as the amount that, in the
light of all facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability.
"Special General Partner" means Alliance Resource GP, LLC, a Delaware
limited liability company, and its successors and permitted assigns as a special
general partner of the Transferee Company.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited liability company, partnership, joint venture, association, trust or
other entity of which (or in which) more than 50% of (a) the issued and
outstanding Capital Stock having ordinary voting power to elect a majority of
the board of directors of such corporation (irrespective of whether at the time
Capital Stock of any other class or classes of such corporation shall or might
have voting power upon the occurrence of any contingency), (b) the interests in
the capital or profits of such partnership, limited liability company, joint
venture or association with ordinary voting power to elect a majority of the
board of directors (or Persons performing similar functions) of such
partnership, limited liability company, joint venture or association, or (c) the
beneficial interests in such trust or other entity with ordinary voting power to
elect a majority of the board of trustees (or Persons performing similar
functions) of such trust or other entity, is at the time directly or indirectly
owned or controlled by such Person, by such Person and one or more of its
Subsidiaries, or by one or more of such Person's other Subsidiaries.
"Subsidiary Guaranty Agreement" means an agreement substantially in the
form of the Subsidiary Guaranty Agreement attached hereto as Exhibit 4.5, as the
same may be amended and be from time to time in effect.
"Subsidiary Guarantor" means an Original Subsidiary Guarantor or
another Restricted Subsidiary which, subsequent to the date of Closing, executes
and delivers a Subsidiary Guaranty Supplement pursuant to the provisions of
Section 10.10, in each case so long as the Subsidiary Guaranty Supplement of
such Person and the Intercreditor Agreement, as it relates to such Subsidiary,
remains in full force and effect.
"Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"Transfer" means, with respect to any Person, any transaction in which
such Person sells, conveys, abandons, transfers, leases (as lessor), or
otherwise disposes of any of its assets; provided, however, that "Transfer"
shall not include (i) the granting of any Liens permitted to be granted pursuant
to this Agreement, (ii) any transfer of assets permitted pursuant to Section
10.6, (iii) the making of any
B-15
<PAGE> 77
Restricted Payment permitted pursuant to Section 10.4 or (iv) the making of any
Investment permitted pursuant to Section 10.9.
"Transferee Company" means Alliance Resource Operating Partners, L.P.,
a Delaware limited partnership.
"Unrestricted Subsidiary" means a Subsidiary which is not a Restricted
Subsidiary.
"Voting Stock" means, (i) Securities of any class of classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the directors (or Persons performing similar functions) or
(ii) in the case of a partnership, limited liability company or joint venture,
interests in the profits or capital thereof entitling the holders of such
interests to approve major business actions.
"Wholly-Owned Restricted Subsidiary" means, at any time, any Restricted
Subsidiary at least ninety-eight percent (98%) of all of the equity interests
(except directors' qualifying shares) and voting interests of which are owned by
any one or more of the Company and the Company's other Wholly-Owned Restricted
Subsidiaries at such time.
B-16
<PAGE> 78
ASSUMPTION CONDITIONS
1. The Company shall have transferred to the Transferee Company a
99.999% membership interest in Alliance Coal LLC, a Delaware limited liability
company.
2. There shall have been authorized, executed and delivered by or on
behalf of the Transferee Company an agreement substantially in the form of the
Assumption Agreement attached to this Schedule as Annex I (the "Assumption
Agreement").
3. The Transferee Company shall have delivered to each Purchaser
certificates certifying as to:
(a) resolutions of the Board of Directors of Alliance Resource
Holdings, Inc., sole member of the Special General Partner, and
(b) resolutions of the Board of Directors of the Special
General Partner (at the time of adoption of such resolutions and at the
time of delivery of such certificate, the sole general partner of the
Transferee Company),
which resolutions in each case authorize, among other things, the execution and
delivery by or on behalf of the Transferee Company of, and the performance by
the Transferee Company of its obligations under (i) the Assumption Agreement
(the "Senior Notes Assumption Agreement"), (ii) the Assumption Agreement
relating to the Bank Facility (the "Bank Facility Assumption Agreement" and,
with the Senior Notes Assumption Agreement, the "Assumption Agreements"), and
(iii) each other agreement or instrument referred to in the Assumption
Agreements as containing obligations to be assumed by the Transferee Company
pursuant thereto.
4. All obligations of the Company under the Bank Facility shall have
been assumed by the Transferee Company; all rights of the Company under said
Bank Facility shall have accrued to the Transferee Company; and such Bank
Facility shall be in full force and effect.
5. The MLP shall have issued and sold limited partnership units to the
public for an aggregate net sale price of at least $110,000,000.
6. The MLP shall have contributed $110,000,000 net cash proceeds from
the sale of its limited partnership units to the Transferee Company and it shall
own a 98.9899% limited partnership interest in the Transferee Company.
7. Each Purchaser shall have received, in form and substance
satisfactory to such Purchaser, the opinions referred to in Sections 4.4(a)-(e)
inclusive, of the Note Purchase Agreement covering such matters incident to the
Transferee Company's assumption of the obligations of the Company under the Note
Purchase Agreement and the Notes and the other transactions contemplated herein
as such Purchaser or such Purchaser's special counsel may reasonably request.
SCHEDULE 4.8(d)
(to Note Purchase Agreement)
<PAGE> 79
FORM OF ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT dated as of August 20, 1999 made by ALLIANCE
RESOURCE OPERATING PARTNERS, L.P., a Delaware limited partnership (the
"Transferee Company'), in favor of the persons or entities listed on Schedule A
attached hereto (the "Noteholders"), each of which is a party to that certain
Note Purchase Agreement dated as of August 16, 1999 (the "Note Purchase
Agreement") of Alliance Resource GP, LLC, a Delaware limited liability company
that is the special general partner of the Transferee Company (the "Company").
Capitalized terms used herein without definition shall have the meanings
assigned to such terms in the Note Purchase Agreement.
WITNESSETH:
WHEREAS, pursuant to the Contribution Agreement dated as of August 20,
1999, between the Company and the Transferee Company, the Company has conveyed
(i) a 99.999% membership interest in (i) Alliance Coal LLC, a Delaware limited
liability company, and (ii)certain Qualifying Securities, to the Transferee
Company in exchange for a .001% general partner interest and a 99.9899% limited
partner interest in the Transferee Company and the assumption by the Transferee
Company all of the rights, duties, liabilities and obligations of the Company,
including, without limitation, all of the rights, duties, liabilities and
obligations of the Company under the Note Purchase Agreement and the Notes (the
"Transaction "); and
WHEREAS, the Transferee Company, as the transferee of such assets of
the Company pursuant to the Transaction, shall receive direct and indirect
benefits by reason of the investments made by the Noteholders under the Note
Purchase Agreement (which benefits are hereby acknowledged); and
WHEREAS, the Note Purchase Agreement requires, as a condition precedent
to the issuance and sale of the Notes, that the Transferee Company execute and
deliver this Agreement;
Now THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Transferee Company hereby agrees as follows:
1. Assumption. (a) The Transferee Company, as the transferee
of the above described assets of the Company pursuant to the
Transaction, hereby unconditionally and expressly assumes, confirms and
agrees to perform and observe each and every one of the covenants,
rights, promises, agreements, terms, conditions, obligations, duties
and liabilities of the Company under the Note Purchase Agreement and
the Notes and under any documents, instruments or agreements executed
and delivered or furnished by the Company in connection therewith.
(b) From and after the effectiveness of this Agreement (as
provided in Section 6 hereof), unless the context clearly otherwise
requires, all references to "the Company" in the Note Purchase
Agreement or any Note or any other document, instrument or agreement
(other than this Agreement) executed and delivered or furnished, or to
be executed and delivered or furnished, in connection therewith shall
be deemed to be references to the Transferee Company, except that
references to the Company as at any time prior to the consummation of
the initial
ANNEX I
(to Schedule 4.8(d) to Note Purchase Agreement)
<PAGE> 80
issuance, sale and delivery of the Notes under the Note Purchase
Agreement and satisfaction of all conditions precedent thereto shall
continue as references to the Company.
2. Representations and Warranties. The Transferee Company
hereby accepts and assumes all obligations and liabilities of the
Company related to each representation or warranty made by the Company
in the Note Purchase Agreement or any other document, instrument or
agreement executed and delivered or furnished in connection therewith.
In addition, the Transferee Company further represents, warrants and
affirms for the benefit of the Noteholders that, after giving effect to
the Assumption Conditions:
(a) Organization; Power and Authority; Ownership. The
Transferee Company is a limited partnership duly formed and
validly existing under the laws of the State of Delaware, and
is duly licensed or qualified as a foreign limited partnership
in each jurisdiction in which such qualification is required
by law, other than those jurisdictions as to which the failure
to be so qualified or in good standing could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Transferee Company has the power and
authority to own or hold under lease the properties it
purports to own or hold under lease, to transact the business
it transacts and proposes to transact, to execute and deliver
this Agreement and to perform the provisions hereof.
(b) Authorization, Etc. This Agreement has been duly
authorized by all necessary action on the part of the Board of
Directors of Alliance Coal Corporation, a Delaware
corporation, which is the sole general partner of the
Transferee Company, and this Agreement constitutes, and upon
execution and delivery thereof each Note will constitute, a
legal, valid and binding obligation of the Transferee Company
enforceable against the Transferee Company in accordance with
its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors'
rights generally and (ii) general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(c) Compliance with Laws, Other Instruments, Etc. The
execution, delivery and performance by the Transferee Company
of this Agreement will not (i) contravene, result in any
breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of the
Transferee Company or any Restricted Subsidiary under, any
indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, articles of formation, partnership
agreement, operating agreement or other agreement or
instrument to which the Transferee Company or any Restricted
Subsidiary is bound or by which the Transferee Company or any
Restricted Subsidiary or any of their respective properties
may be bound or affected, (ii) result in a breach of any of
the terms, conditions or provisions of any Material order,
judgment, decree, or ruling of any court, arbitrator or
Governmental Authority applicable to the Transferee Company or
any Restricted Subsidiary or (iii) violate any provision of
any statute or other rule or regulation of any Governmental
Authority applicable to the Transferee Company or any
Restricted Subsidiary.
-2-
<PAGE> 81
(d) Governmental Authorizations, Etc. No consent, approval or
authorization of, or registration, filing or declaration with, any
Governmental Authority is required in connection with the execution,
delivery or performance by the Transferee Company of this Agreement.
(e) Pari Passu Ranking. The Transferee Company's obligations
under the Notes, and the Note Purchase Agreement will rank at least
pari passu, without preference or priority with all of the outstanding
unsecured and unsubordinated Debt of the Transferee Company.
(f) Default. No Default or Event of Default has occurred and
is continuing under the Note Purchase Agreement.
3. Further Assurances. At any time and from time to time, upon any
Noteholder's request and at the sole expense of the Transferee Company, the
Transferee Company will promptly execute and deliver any and all further
instruments and documents and will take such further action as such Noteholder
may reasonably deem necessary to effect the purposes of this Agreement.
4. Amendment, Etc. No amendment or waiver of any provision of this
Agreement shall be effective, unless the same be in writing and executed in
accordance with the provisions of the Note Purchase Agreement.
5. Notices Under Section 18(iii) of Note Purchase Agreement. From and
after the effectiveness of this Agreement (as provided in Section 6 hereof), all
notices and communications to the Company under the Note Purchase Agreement
shall be sent to:
Alliance Resource Operating Partners, L.P.
1717 South Boulder Avenue
Tulsa, OK 74119
Attention: Michael L. Greenwood
6. Binding Effect; Assignment; Effectiveness. This Agreement shall be
binding upon the Transferee Company, and shall inure to the benefit of the
Noteholders and their respective successors and assigns. This Agreement shall
take effect as of a moment in time one nanosecond following the initial
issuance, sale and delivery of the Notes by the Company to the holders of the
Notes pursuant to the Note Purchase Agreement.
7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
-3-
<PAGE> 82
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed and delivered by its duly authorized officer on the date first
above written.
ALLIANCE REsouRcE OPERATING PARTNERS, L.P.
By: Alliance Resource Management GP, LLC, its
Managing General Partner
By:
-------------------------------------
Name:
Title:
Agreed and consented to as of
the date first above written
ALLIANCE REsouRcE GP, LLC
By:
-------------------------------------
Name:
Title:
-4-
<PAGE> 83
OWNERSHIP OF COMPANY
Schedule 5.1
(to Note Purchase Agreement)
<PAGE> 84
DISCLOSURE MATERIALS
NONE
Schedule 5.3
(to Note Purchase Agreement)
<PAGE> 85
SUBSIDIARIES OF COMPANY AND OWNERSHIP
OF SUBSIDIARIES CAPITAL STOCK
Schedule 5.4
(to Note Purchase Agreement)
<PAGE> 86
FINANCIAL STATEMENTS
Schedule 5.5
(to Note Purchase Agreement)
<PAGE> 87
CERTAIN LITIGATION
Schedule 5.8
(to Note Purchase Agreement)
<PAGE> 88
LICENSES, PERMITS, ETC.
Schedule 5.11
(to Note Purchase Agreement)
<PAGE> 89
USE OF PROCEEDS
Schedule 5.14
(to Note Purchase Agreement)
<PAGE> 90
EXISTING DEBT AND LIENS
Schedule 5.15
(to Note Purchase Agreement)
<PAGE> 91
[FORM OF NOTE]
ALLIANCE RESOURCE GP, LLC
8.31% SENIOR NOTE DUE AUGUST 20, 2014
No. [R-_] [Date]
$[___________] PPN: 01878@ AA 3
FOR VALUE RECEIVED, the undersigned, ALLIANCE RESOURCE GP, LLC (herein
called the "Company"), a limited liability company organized and existing under
the laws of the State of Delaware, hereby promises to pay to [____________] or
registered assigns, the principal sum of [__________] DOLLARS on August 20, 2014
with interest (computed on the basis of a 360-day year of twelve 30-day months)
(a) on the unpaid balance thereof at the rate of 8.31% per annum. from the date
hereof, payable semiannually, on the twentieth day of February and August in
each year, commencing with the February or August next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law, on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreement
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum. from time to time
equal to the greater of (i) 10.31% or (ii) the rate of interest publicly
announced by The Chase Manhattan Bank from time to time as its "base" or "prime"
rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of The Chase Manhattan Bank in New York City or
at such other place as provided in the Note Purchase Agreement referred to
below.
This Note is one of the 8.31% Senior Notes (herein called the "Notes"),
issued pursuant to the Note Purchase Agreement, dated as of August 16, 1999 (as
from time to time amended, the "Note Purchase Agreement"), between the Company
and the Purchasers named therein and is entitled to the benefits thereof. Each
holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed
to the confidentiality provisions set forth in Section 20 of the Note Purchase
Agreement and (ii) to have made the applicable representation set forth in
Section 6.2 of the Note Purchase Agreement, and (iii) to have made the agreement
contained in Section 22.7 of the Note Purchase Agreement. The Notes are entitled
to the benefits of a Subsidiary Guaranty Agreement and an Intercreditor
Agreement (each as defined in the Note Purchase Agreement).
This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
Exhibit 1
(to Note Purchase Agreement)
<PAGE> 92
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreement. This Note is also
subject to prepayment, in whole or from time to time in part, at the times and
on the terms specified in the Note Purchase Agreement, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.
This Note shall be construed and enforced in accordance with, and the
rights of the issuer and holder hereof shall be governed by, the law of the
State of New York.
ALLIANCE REsouRcE GP, LLC
By: Alliance Resource Holdings, Inc.,
its sole member
By
-------------------------------------------
Its
-------------------------------------
1-2
<PAGE> 93
FORM OF OPINION OF SPECIAL COUNSEL FOR THE COMPANY
AND THE ORIGINAL SUBSIDIARY GUARANTORS
The closing opinion of Andrews & Kurth L.L.P., special counsel for the
Company, which is called for by Section 4.4(a) of the Note Purchase Agreement
shall be dated the date of the Closing and addressed to the Purchasers, shall be
satisfactory in scope and form to the Purchasers and shall cover such matters
incident to the transactions contemplated hereby as the Purchasers or the
Purchasers' special counsel may reasonably request.
Exhibit 4.4(a)
(to Note Purchase Agreement)
<PAGE> 94
FORM OF OPINION OF COUNSEL FOR THE COMPANY
AND THE ORIGINAL SUBSIDIARY GUARANTORS
The closing opinion of Crowell & Moring LLP., counsel for the Company,
which is called for by Section 4.4(b) of the Note Purchase Agreement shall be
dated the date of the Closing and addressed to the Purchasers, shall be
satisfactory in scope and form to the Purchasers and shall cover such matters
incident to the transactions contemplated hereby as the Purchasers or the
Purchasers' special counsel may reasonably request.
Exhibit 4.4(b)
(to Note Purchase Agreement)
<PAGE> 95
FORM OF OPINION OF COUNSEL TO THE COMPANY AND THE ORIGINAL
SUBSIDIARY GUARANTORS
The closing opinion of Thomas L. Pearson, counsel for the Company and
the Original Subsidiary Guarantors, which is called for by Section 4.4(c) of the
Note Purchase Agreement, shall be dated the date of the Closing and addressed to
the Purchasers, shall be satisfactory in scope and form to the Purchasers and
and shall cover such matters incident to the transactions contemplated hereby as
the Purchasers or the Purchasers' special counsel may reasonably request.
Exhibit 4.4(c)
(to Note Purchase Agreement)
<PAGE> 96
FORM OF OPINION OF SPECIAL COUNSEL
FOR THE PURCHASERS
The closing opinion of Willkie Farr & Gallagher, special counsel for
the Purchasers, which is called for by Section 4.4(d) of the Note Purchase
Agreement, shall be dated the date of the Closing and addressed to the
Purchasers, shall be satisfactory in form and substance to the Purchasers and
shall and shall cover such matters incident to the transactions contemplated
hereby as the Purchasers or the Purchasers' special counsel may reasonably
request.
Exhibit 4.4(d)
(to Note Purchase Agreement)
<PAGE> 97
FORM OF SUBSIDIARY GUARANTY AGREEMENT
Exhibit 4.4(d)
(to Note Purchase Agreement)
<PAGE> 98
SUBSIDIARY GUARANTY AGREEMENT
Dated as of August 16, 1999
From
THE GUARANTORS NAMED HEREIN
and
THE ADDITIONAL GUARANTORS REFERRED TO HEREIN
as Guarantors
in favor of
THE HOLDERS OF THE 8.31% SENIOR NOTES DUE AUGUST 20, 2014
OF
ALLIANCE RESOURCE GP, LLC
1-3
<PAGE> 99
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
1. Guaranty; Limitation of Liability......................................................................................1
2. Guaranty Absolute......................................................................................................2
3. Waivers and Acknowledgments............................................................................................3
4. Subrogation............................................................................................................4
5. Representations and Warranties.........................................................................................5
6. Covenants..............................................................................................................5
7. Amendments, Guaranty Supplements, Etc..................................................................................5
8. Notices, Etc...........................................................................................................6
9. No Waiver; Remedies....................................................................................................6
10. Right of Set-off......................................................................................................6
11. Indemnification.......................................................................................................6
13. Continuing Guaranty; Transfer of Notes................................................................................8
14. Execution in Counterparts.............................................................................................8
15. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc................................................................8
</TABLE>
Exhibit A - Guaranty Supplement
Exhibit 4.5
(to Note Purchase Agreement)
<PAGE> 100
SUBSIDIARY GUARANTY AGREEMENT
SUBSIDIARY GUARANTY AGREEMENT dated as of August 16, 1999 made
by the Persons listed on the signature pages hereof under the caption
"Subsidiary Guarantors" and the Additional Guarantors (as defined in Section
7(b)) (such Persons so listed and the Additional Guarantors being, collectively,
the "GUARANTORS" and, individually, each a "GUARANTOR") in favor of the
Noteholders (as defined below).
PRELIMINARY STATEMENT. Alliance Resource GP, LLC, a Delaware
limited liability company (the "COMPANY"), is party to a Note Purchase Agreement
dated as of August 16, 1999 (as amended, amended and restated, supplemented or
otherwise modified from time to time, the "NOTE AGREEMENT"; the capitalized
terms defined therein and not otherwise defined herein being used herein as
therein defined) with certain institutional investors party thereto (the
"PURCHASERS"), under and pursuant to which the Company is issuing $180,000,000
principal amount of its 8.31% Senior Notes due August 20, 2014 (the "NOTES") to
the Purchasers. Each Guarantor may receive, directly or indirectly, a portion of
the proceeds of the sale of the Notes pursuant to the Note Agreement and will
derive substantial direct and indirect benefits from the transactions
contemplated by the Note Agreement. It is a condition precedent to the purchase
of the Notes by the Purchasers under the Note Agreement that each Guarantor
shall have executed and delivered this Guaranty Agreement. The holders from time
to time of the Notes are herein called the "NOTEHOLDERS" (and individually a
"NOTEHOLDER") and the Note Agreement and the Notes and this Guaranty Agreement
(including any Guaranty Supplement) are herein collectively called the "NOTE
DOCUMENTS" (and individually a "NOTE DOCUMENT").
NOW, THEREFORE, in consideration of the premises and in
consideration of the purchase of Notes by the Purchasers pursuant to the Note
Agreement, each Guarantor, jointly and severally with each other Guarantor,
hereby agrees as follows:
Section 1. Guaranty; Limitation of Liability. (a) Each
Guarantor hereby absolutely, unconditionally and irrevocably guarantees the
punctual payment when due, whether at scheduled maturity or on any date of a
required prepayment or by acceleration, demand or otherwise, of all obligations
of each other Note Party now or hereafter existing under or in respect of the
Note Documents (including, without limitation, any extensions, modifications,
substitutions, amendments or renewals of any or all of the foregoing
obligations) (such obligations being the "GUARANTEED OBLIGATIONS"), and agrees
to pay any and a expenses (including, without limitation, fees and expenses of
counsel) incurred by any Noteholder in enforcing any rights under this Guaranty
or any other Note Document. Without limiting the generality of the foregoing,
each Guarantor's liability shall extend to all amounts that constitute part of
the Guaranteed Obligations and would be owed by any other Note Party to any
Noteholder under or in respect of the Note Documents but for the fact that they
are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such other Note Party.
(b) Each Guarantor, and by its acceptance of the benefits of
this Guaranty, each Noteholder, hereby confirms that it is the intention of all
such Persons that this Guaranty and Guaranteed Obligations of each Guarantor
hereunder not constitute a fraudulent transfer or conveyance for purposes of
Bankruptcy Law (as hereinafter defined), the Uniform Fraudulent
<PAGE> 101
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign,
federal or state law to the extent applicable to this Guaranty and the
Guaranteed Obligations of each Guarantor hereunder. To effectuate the foregoing
intention, each Noteholder, by accepting the benefits hereof, and the Guarantors
hereby irrevocably agree that the Guaranteed Obligations of each Guarantor under
this Guaranty at any time shall be limited to the maximum amount as will result
in the Guaranteed Obligations of such Guarantor under this Guaranty not
constituting a fraudulent transfer or conveyance. For purposes hereof,
"BANKRUPTCY LAW" means any Title 11, U.S. Code, or any other bankruptcy,
insolvency, reorganization, moratorium or other similar foreign, federal or
state law for the relief of debtors.
(c) Each Guarantor hereby unconditionally and irrevocably
agrees that in the event any payment shall be required to be made to any
Noteholder under this Guaranty or any other guaranty, such Guarantor will
contribute, to the maximum extent permitted by law, such amounts to each other
Guarantor and each other guarantor so as to maximize the aggregate amount paid
to the Noteholders under or in respect of the Note Documents.
Section 2. Guaranty Absolute. To the extent permitted by law,
each Guarantor guarantees that the Guaranteed Obligations will be paid strictly
in accordance with the terms of the Note Documents, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of any Noteholder with respect thereto. To the
extent permitted by law, the Guaranteed Obligations of each Guarantor under or
in respect of this Guaranty are independent of the Guaranteed Obligations or any
other obligations of any other Note Party under or in respect of the Note
Documents, and a separate action or actions may be brought and prosecuted
against each Guarantor to enforce this Guaranty, irrespective of whether any
action is brought against the Company or any other Note Party or whether the
Company or any other Note Party is joined in any such action or actions. To the
extent permitted by law, the liability of each Guarantor under this Guaranty
shall be irrevocable, absolute and unconditional irrespective of, and each
Guarantor hereby irrevocably waives any defenses it may now have or hereafter
acquire in any way relating to, any or all of the following:
(a) any lack of validity or enforceability of any Note
Document or any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations or any
other obligations of any other Note Party under or in respect of the
Note Documents, or any other amendment or waiver of or any consent to
departure from any Note Document, including, without limitation, any
increase in the Guaranteed Obligations resulting from the extension of
additional credit to any Note Party or any of its Subsidiaries or
otherwise;
(c) any taking, exchange, release or non-perfection of any
Collateral or any other collateral, or any taking, release or amendment
or waiver of, or consent to departure from, any other guaranty, for all
or any of the Guaranteed Obligations;
(d) any manner of application of Collateral or any other
collateral, or proceeds thereof, to all or any of the Guaranteed
Obligations, or any manner of sale or other
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disposition of any Collateral or any other collateral for all or any of
the Guaranteed Obligations or any other obligations of any Note Party
under the Note Documents or any other assets of any Note Party or any
of its Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of any Note Party or any of its Subsidiaries;
(f) any failure of any Noteholder to disclose to any Note
Party any information relating to the business, condition (financial or
otherwise), operations, performance, properties or prospects of any
other Note Party now or hereafter known to such Noteholder (each
Guarantor waiving any duty on the part of the Noteholders to disclose
such information);
(g) the failure of any other Person to execute or deliver this
Guaranty, any Guaranty Supplement (as hereinafter defined) or any other
guaranty or agreement or the release or reduction of liability of any
Guarantor or other guarantor or surety with respect to the Guaranteed
Obligations; or
(h) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by any Noteholder that might otherwise constitute a
defense available to, or a discharge of, any Note Party or any other
guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by any Noteholder or any other Person upon the
insolvency, bankruptcy or reorganization of the Company or any other Note Party
or otherwise, all as though such payment had not been made.
Section 3. Waivers and Acknowledgments. (a) To the extent
permitted by law, each Guarantor hereby unconditionally and irrevocably waives
promptness, diligence, notice of acceptance, presentment, demand for
performance, notice of nonperformance, default, acceleration, protest or
dishonor and any other notice with respect to any of the Guaranteed Obligations
and this Guaranty and any requirement that any Noteholder protect, secure,
perfect or insure any Lien or any property subject thereto or exhaust any right
or take any action against any Note Party or any other Person or any Collateral.
(b) To the extent permitted by law , each Guarantor hereby
unconditionally and irrevocably waives any right to revoke this Guaranty and
acknowledges that this Guaranty is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future.
(c) To the extent permitted by law, each Guarantor hereby
unconditionally and irrevocably waives (i) any defense arising by reason of any
claim or defense based upon an election of remedies by any Noteholder that in
any manner impairs, reduces, releases or otherwise adversely affects the
subrogation, reimbursement, exoneration, contribution or indemnification rights
of such Guarantor or other rights of such Guarantor to proceed against any of
the other
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Note Parties, any other guarantor or any other Person or any Collateral and (ii)
any defense based on any right of set-off or counterclaim against or in respect
of the Guaranteed Obligations of such Guarantor hereunder.
(d) To the extent permitted by law, each Guarantor hereby
unconditionally and irrevocably waives any duty on the part of any Noteholder to
disclose to such Guarantor any matter, fact or thing relating to the business,
condition (financial or otherwise), operations, performance, properties or
prospects of any other Note Party or any of its Subsidiaries now or hereafter
known by such Noteholder.
(e) Each Guarantor acknowledges that it will receive
substantial direct and indirect benefits from the financing arrangements
contemplated by the Note Documents and that the waivers set forth in Section 2
and this Section 3 are knowingly made in contemplation of such benefits.
Section 4. Subrogation. Each Guarantor hereby unconditionally
and irrevocably agrees not to exercise any rights that it may now have or
hereafter acquire against the Company, any other Note Party or any other insider
guarantor that arise from the existence, payment, performance or enforcement of
such Guarantor's Obligations under or in respect of this Guaranty or any other
Note Document, including, without limitation, except as provided in Section 1(c)
above, any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of any
Noteholder against the Company, any other Note Party or any other insider
guarantor or any Collateral, whether or not such claim, remedy or right arises
in equity or under contract, statute or common law, including, without
limitation, the right to take or receive from the Company, any other Note Party
or any other insider guarantor, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim, remedy or right, unless and until all of the Guaranteed Obligations
and all other amounts payable under this Guaranty shall have been indefeasibly
paid in full in cash. If any amount shall be paid to any Guarantor in violation
of the immediately preceding sentence at any time prior to the latest of (a) the
payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Guaranty, and (b) the Termination Date, such amount shall be
received and held in trust for the benefit of the Noteholders, shall be
segregated from other property and funds of such Guarantor and shall forthwith
be paid or delivered to the Noteholders, pro rata, in the same form as so
received (with any necessary endorsement or assignment) to be credited and
applied to the Guaranteed Obligations and all other amounts payable under this
Guaranty, whether matured or unmatured, in accordance with the terms of the Note
Documents, or to be held as Collateral for any Guaranteed Obligations or other
amounts payable under this Guaranty thereafter arising. If (i) any Guarantor
shall make payment to any Noteholder of all or any part of the Guaranteed
Obligations, and (ii) all of the Guaranteed Obligations and all other amounts
payable under this Guaranty shall have been indefeasibly paid in full in cash,
the Noteholders will, at such Guarantor's request and expense, execute and
deliver to such Guarantor appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer by subrogation to
such Guarantor of an interest in the Guaranteed Obligations resulting from such
payment made by such Guarantor pursuant to this Guaranty.
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<PAGE> 104
Section 5. Representations and Warranties. Each Guarantor
hereby makes each representation and warranty made in the Note Documents by the
Company with respect to such Guarantor and each Guarantor hereby further
represents and warrants as follows:
(a) There are no conditions precedent to the effectiveness of
this Guaranty that have not been satisfied or waived.
(b) Such Guarantor has, independently and without reliance
upon any Noteholder and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to
enter into this Guaranty and each other Note Document to which it is or
is to be a party, and such Guarantor has established adequate means of
obtaining from each other Note Party on a continuing basis information
pertaining to, and is now and on a continuing basis will be completely
familiar with, the business, condition (financial or otherwise),
operations, performance, properties and prospects of such other Note
Party.
Section 6. Covenants. Each Guarantor covenants and agrees
that, so long as any part of the Guaranteed Obligations shall remain unpaid or
any Lender Party shall have any Commitment, such Guarantor will perform and
observe, and cause each of its Subsidiaries to perform and observe, all of the
terms, covenants and agreements set forth in the Note Documents on its or their
part to be performed or observed or that the Company has agreed to cause such
Guarantor or such Subsidiaries to perform or observe.
Section 7. Amendments, Guaranty Supplements, Etc. (a) No
amendment or waiver of any provision of this Guaranty and no consent to any
departure by any Guarantor therefrom shall in any event be effective unless the
same shall be in writing and signed by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all of the Noteholders (a)
reduce or limit the obligations of any Guarantor hereunder, release any
Guarantor hereunder or otherwise limit any Guarantor's liability with respect to
the Guaranteed Obligations owing to the Noteholders under or in respect of the
Note Documents, (b) postpone any date fixed for payment hereunder or (c) change
the number of Noteholders or the percentage of the aggregate unpaid principal
amount of the Notes that, in each case, shall be required for the Noteholders or
any of them to take any action hereunder.
(b) Upon the execution and delivery by any Person of a
guaranty supplement in substantially the form of Exhibit A hereto (each, a
"GUARANTY SUPPLEMENT"), (i) such Person shall be referred to as an "ADDITIONAL
GUARANTOR" and shall become and be a Guarantor hereunder, and each reference in
this Guaranty to a "GUARANTOR" shall also mean and be a reference to such
Additional Guarantor, and each reference in any other Note Document to a
"SUBSIDIARY GUARANTOR" shall also mean and be a reference to such Additional
Guarantor, and (ii) each reference herein to "THIS GUARANTY", "HEREUNDER",
"HEREOF" or words of like import referring to this Guaranty, and each reference
in any other Note Document to the "SUBSIDIARY GUARANTY", "THEREUNDER", "THEREOF"
or words of like import referring to this Guaranty, shall mean and be a
reference to this Guaranty as supplemented by such Guaranty Supplement.
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<PAGE> 105
Section 8. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered
to it, if to any Guarantor, addressed to it in care of the Company at the
Company's address specified in Section 18 of the Note Agreement, if to any
Noteholder, at its address specified in Section 18 of the Note Agreement, or, as
to any party, at such other address as shall be designated by such party in a
written notice to each other party. All such notices and other communications
shall, when mailed, telegraphed, telecopied or telexed, be effective when
deposited in the mails, delivered to the telegraph company, transmitted by
telecopier or confirmed by telex answerback, respectively. Delivery by
telecopier of an executed counterpart of a signature page to any amendment or
waiver of any provision of this Guaranty or of any Guaranty Supplement to be
executed and delivered hereunder shall be effective as delivery of an original
executed counterpart thereof.
Section 9. No Waiver; Remedies. No failure on the part of any
Noteholder to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
Section 10. Right of Set-off. Upon (a) the occurrence and
during the continuance of any Event of Default and (b) the acceleration of the
maturity of the Notes pursuant to the provisions of the Note Agreement or the
Intercreditor Agreement each Noteholder and its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Noteholder or such Affiliate to or for the credit or the account of any
Guarantor against any and all of the obligations of such Guarantor now or
hereafter existing under the Note Documents, irrespective of whether such
Noteholder shall have made any demand under this Guaranty or any other Note
Document and although such obligations may be unmatured. Each Noteholder agrees
promptly to notify such Guarantor after any such set-off and application;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Noteholder and its
Affiliates under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) that such Noteholder
and its Affiliates may have.
Section 11. Indemnification. (a) Without limitation of any
other Guaranteed Obligations of any Guarantor or remedies of the Noteholders
under this Guaranty, each Guarantor shall, to the fullest extent permitted by
law, indemnify, defend and save and hold harmless each Noteholder and each of
their Affiliates and their respective officers, directors, employees, agents and
advisors (each, an "Indemnified Party") from and against, and shall pay on
demand, any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded against any Indemnified Party in
connection with or as a result of any failure of any Guaranteed Obligations to
be the legal, valid and binding obligations of any Note Party enforceable
against such Note Party in accordance with their terms.
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<PAGE> 106
(b) Each Guarantor hereby also agrees that none of the
Indemnified Parties shall have any liability (whether direct or indirect, in
contract, tort or otherwise) to any of the Guarantors or any of their respective
Affiliates or any of their respective officers, directors, employees, agents and
advisors, and each Guarantor hereby agrees not to assert any claim against any
Indemnified Party on any theory of liability, for special, indirect
consequential or punitive damages arising out of or otherwise relating to the
Note Agreement, the actual or proposed use of the proceeds of the Notes, the
Transaction Documents or any of the transactions contemplated by the Transaction
Documents.
(c) Without prejudice to the survival of any of the other
agreements of any Guarantor under this Guaranty or any of the other Note
Documents, the agreements and obligations of each Guarantor contained in Section
1(a) (with respect to enforcement expenses), the last sentence of Section 2 and
this Section 11 shall survive the payment in full of the Guaranteed Obligations
and all of the other amounts payable under this Guaranty.
Section 12. Subordination. Each Guarantor hereby subordinates
any and all debts, liabilities and other obligations owed to such Guarantor by
each other Note Party (the "SUBORDINATED OBLIGATIONS") to the Guaranteed
Obligations to the extent and in the manner hereinafter set forth in this
Section 11:
(a) Prohibited Payments. Etc. Except during the continuance of
an Event of Default (including the commencement and continuation of any
proceeding under any Bankruptcy Law relating to any other Note Party),
each Guarantor may receive regularly scheduled payments from any other
Note Party on account of the Subordinated Obligations. After the
occurrence and during the continuance of any Default (including the
commencement and continuation of any proceeding under any Bankruptcy
Law relating to any other Note Party), however, unless the Required
Holders otherwise agree, no Guarantor shall demand, accept or take any
action to collect any payment on account of the Subordinated
Obligations.
(b) Prior Payment of Guaranteed Obligations. In any proceeding
under any Bankruptcy Law relating to any other Note Party, each
Guarantor agrees that the Noteholders shall be entitled to receive
payment in full in cash of all Guaranteed Obligations (including all
interest and expenses accruing after the commencement of a proceeding
under any Bankruptcy Law, whether or not constituting an allowed claim
in such proceeding ("POST PETITION INTEREST") before such Guarantor
receives payment of any Subordinated Obligations.
(c) Turn-Over. After the occurrence and during the continuance
of any Default (including the commencement and continuation of any
proceeding under any Bankruptcy Law relating to any other Note Party),
each Guarantor shall, if the Required Holders so requests, collect,
enforce and receive payments on account of the Subordinated Obligations
as trustee for the Noteholders and deliver such payments to the
Noteholders, pro rata, on account of the Guaranteed Obligations
(including all Post Petition Interest), together with any necessary
endorsements or other instruments of transfer, but without
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reducing or affecting in any manner the liability of such Guarantor
under the other provisions of this Guaranty.
(d) Agency Authorization. After the occurrence and during the
continuance of any Default (including the commencement and continuation
of any proceeding under any Bankruptcy Law relating to any other Note
Party), the Required Holders are authorized and empowered (but without
any obligation to so do), in their discretion, to appoint an agent
("NOTE AGENT") (i) in the name of each Guarantor, to collect and
enforce, and to submit claims in respect of, Subordinated Obligations
and to apply any amounts received thereon to the Guaranteed Obligations
(including any and all Post Petition Interest), and (ii) to require
each Guarantor (A) to collect and enforce, and to submit claims in
respect of, Subordinated Obligations and (B) to pay any amounts
received on such obligations to the Note Agent for application to the
Guaranteed Obligations (including any and all Post Petition Interest).
Section 13. Continuing Guaranty; Transfer of Notes. This
Guaranty is a continuing guaranty and shall (a) remain in full force and effect
until the latest of (i) the payment in full in cash of the Guaranteed
Obligations and all other amounts payable under this Guaranty and (ii) the
payment of the Notes, (b) be binding upon the Guarantor, its successors and
assigns and (c) inure to the benefit of and be enforceable by the Noteholders
and their successors, transferees and assigns. Without limiting the generality
of clause (c) of the immediately preceding sentence, any Noteholder may assign
or otherwise transfer all or any portion of its rights and obligations under the
Note Agreement (including, without limitation, all or any portion of the Note or
Notes held by it) to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to such
Noteholder herein or otherwise. No Guarantor shall have the right to assign its
rights hereunder or any interest herein without the prior written consent of the
Noteholders.
Section 14. Execution in Counterparts. This Guaranty and each
amendment, waiver and consent with respect hereto may be executed in any number
of counterparts and by different parties thereto in separate counterparts, each
of which when so executed shall be deemed to be an original and a of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Guaranty by telecopier shall be
effective as delivery of an original executed counterpart of this Guaranty.
Section 15. Governing Law; Jurisdiction; Waiver of Jury Trial,
Etc. (a) This Guaranty shall be governed by, and construed in accordance with,
the laws of the State of New York.
(b) Each Guarantor hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or federal court of the United States of America sitting in
New York County, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Guaranty or any of the other Note
Documents to which it is or is to be a party, or for recognition or enforcement
of any judgment, and each Guarantor hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding, to the
extent permitted by law, may be heard and
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<PAGE> 108
determined in any such New York State court or, to the extent permitted by law,
in such federal court. Each Guarantor agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Guaranty or any other Note Document shall affect any right that
any party may otherwise have to bring any action or proceeding relating to this
Guaranty or any other Note Document in the courts of any jurisdiction.
(c) Each Guarantor irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Guaranty or any of the other Note
Documents to which it is or is to be a party in any New York State or federal
court. Each Guarantor hereby irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such suit,
action or proceeding in any such court.
(d) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE NOTE
DOCUMENTS, THE USE OF THE PROCEEDS OF THE NOTES OR THE ACTIONS OF ANY NOTEHOLDER
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
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<PAGE> 109
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to
be duly executed and delivered by or on its behalf as of the date first above
written.
ALLIANCE COAL, LLC
ALLIANCE LAND, LLC
ALLIANCE PROPERTIES, LLC
BACKBONE MOUNTAIN, LLC
EXCEL MINING, LLC
GIBSON COUNTY COAL, LLC
HOPKINS COUNTY COAL, LLC
MC MINING, LLC
METTIKI COAL, LLC
METTIKI COAL (WV), LLC
MT. VERNON TRANSFER TERMINAL, LLC
PONTIKI COAL, LLC
TOPTIKI COAL, LLC
WEBSTER COUNTY COAL, LLC
WHITE COUNTY COAL, LLC
By:
-----------------------------
Name: Michael L. Greenwood
Title: Chief Financial Officer, of
each of the above-referenced
persons
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<PAGE> 110
EXHIBIT A
TO THE
SUBSIDIARY GUARANTY
FORM OF SUBSIDIARY GUARANTY SUPPLEMENT
________________,____
The Holders of the 8.31% Senior Notes of the Company
referred to below
RE: Note Agreement dated as of August 16, 1999 among Alliance Resource GP,
LLC, a Delaware limited liability company (the "COMPANY"),and the
original purchasers of the Company's 8.31% Senior Notes due August 20,
2014 ("AGREEMENT")
Ladies and Gentlemen:
Reference is made to the above-captioned Note Agreement and to
the Subsidiary Guaranty Agreement referred to therein (such Subsidiary Guaranty
Agreement, as in effect on the date hereof and as it may hereafter be amended,
supplemented or otherwise modified from time to time, together with this
Guaranty Supplement, being the "SUBSIDIARY GUARANTY"). The capitalized terms
defined in the Subsidiary Guaranty or in the Note Agreement and not otherwise
defined herein are used herein as therein defined.
Section 1. Guaranty; Limitation of Liability. (a) The
undersigned hereby absolutely, unconditionally and irrevocably guarantees the
punctual payment when due, whether at scheduled maturity or on any date of a
required prepayment or by acceleration, demand or otherwise, of all obligations
of each other Note Party now or hereafter existing under or in respect of the
Note Documents (including, without limitation, any extensions, modifications,
substitutions, amendments or renewals of any or all of the foregoing
obligations), whether direct or indirect, absolute or contingent, and whether
for principal, interest, premium, fees, indemnities, contract causes of action,
costs, expenses or otherwise (such obligations being the "GUARANTEED
OBLIGATIONS"), and agrees to pay any and all expenses (including, without
limitation, fees and expenses of counsel) incurred by any Noteholder in
enforcing any rights under this Guaranty Supplement, the Subsidiary Guaranty or
any other Note Document. Without limiting the generality of the foregoing, the
undersigned's liability shall extend to all amounts that constitute part of the
Guaranteed Obligations and would be owed by any other Note Party to any
Noteholder under or in respect of the Note Documents but for the fact that they
are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such other Note Party.
Exhibit 4.5
(to Note Purchase Agreement)
<PAGE> 111
(b) The undersigned, and by its acceptance of the benefits of
this Guaranty Supplement, each Noteholder, hereby confirms that it is the
intention of all such Persons that this Guaranty Supplement, the Subsidiary
Guaranty and the obligations of the undersigned hereunder and thereunder not
constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law,
the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or
any similar foreign, federal or state law to the extent applicable to this
Guaranty Supplement, the Subsidiary Guaranty and the obligations of the
undersigned hereunder and thereunder. To effectuate the foregoing intention,
each Noteholder, by accepting the benefits hereof, and the undersigned hereby
irrevocably agree that the obligations of the undersigned under this Guaranty
Supplement and the Subsidiary Guaranty at any time shall be limited to the
maximum amount as will result in the obligations of the undersigned under this
Guaranty Supplement and the Subsidiary Guaranty not constituting a fraudulent
transfer or conveyance.
(c) The undersigned hereby unconditionally and irrevocably
agrees that in the event any payment shall be required to be made to any
Noteholder under this Guaranty Supplement, the Subsidiary Guaranty or any other
guaranty, the undersigned will contribute, to the maximum extent permitted by
applicable law, such amounts to each other Guarantor and each other guarantor so
as to maximize the aggregate amount paid to the Noteholders under or in respect
of the Note Documents.
Section 2. Obligations Under the Guaranty. The undersigned
hereby agrees, as of the date first above written, to be bound as a Guarantor by
all of the terms and conditions of the Subsidiary Guaranty to the same extent as
each of the other Guarantors thereunder. The undersigned further agrees, as of
the date first above written, that each reference in the Subsidiary Guaranty to
an "ADDITIONAL GUARANTOR" or a "GUARANTOR" shall also mean and be a reference to
the undersigned, and each reference in any other Note Document to a "SUBSIDIARY
GUARANTOR" or a "NOTE PARTY" shall also mean and be a reference to the
undersigned.
Section 3. Representations and Warranties. The undersigned
hereby makes each representation and warranty set forth in Section 5 of the
Subsidiary Guaranty to the same extent as each other Guarantor.
Section 4. Delivery by Telecopier. Delivery of an executed
counterpart of a signature page to this Guaranty Supplement by telecopier shall
be effective as delivery of an original executed counterpart of this Guaranty
Supplement.
Section 5. Governing Law; Jurisdiction; Waiver of Jury Trial,
Etc. (a) This Guaranty Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.
(b) The undersigned hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or any federal court of the United States of America
sitting in New York County, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Guaranty Supplement, the
Subsidiary Guaranty or any of the other Note Documents to which it is or is to
be a party, or for recognition or enforcement of any judgment, and the
undersigned hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any such
New York State court or, to the extent permitted by law, in such federal court.
The undersigned agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
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<PAGE> 112
judgment or in any other manner provided by law. Nothing in this Guaranty
Supplement or the Subsidiary Guaranty or any other Note Document shall affect
any right that any party may otherwise have to bring any action or proceeding
relating to this Guaranty Supplement, the Subsidiary Guaranty or any of the
other Note Documents to which it is or is to be a party in the courts of any
other jurisdiction.
(c) The undersigned irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Guaranty Supplement, the
Subsidiary Guaranty or any of the other Note Documents to which it is or is to
be a party in any New York State or federal court. The undersigned hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such suit, action or proceeding in any
such court.
(d) THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE NOTE
DOCUMENTS, THE ADVANCES OR THE ACTIONS OF ANY NOTEHOLDER IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
Very truly yours,
[NAME OF ADDITIONAL GUARANTOR]
By
-----------------------------------
Title:
-3-
<PAGE> 113
FORM OF INTERCREDITOR AGREEMENT
Exhibit 4.6
(to Note Purchase Agreement)
<PAGE> 114
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT dated as of August 16, 1999 by and
among (i) the Paying Agent (as hereinafter defined) on behalf of the Banks and
the Agents (each as hereinafter defined) party to the Credit Agreement dated as
of August 12, 1999 among Citicorp USA, Inc. ("CITICORP") and The Chase Manhattan
Bank ("Chase") as Co-Administrative Agents, Chase as Paying Agent (in such
capacity, the "PAYING AGENT" and, with Citicorp and Chase in their capacities as
Co-Administrative Agents, the "AGENTS"), Deutsche Bank AG, New York Branch, as
documentation agent, Alliance Resource GP, LLC, a Delaware limited liability
company ("ALLIANCE GP"), and the several banks and other financial institutions
from time to time parties thereto (the "BANKS") (said agreement as from time to
time amended, restated, supplemented or otherwise modified and in effect being
herein called the "BANK AGREEMENT") and (ii) the holders from time to time (the
"NOTEHOLDERS") of the Company's (as hereinafter defined) 8.31% Senior Notes due
August 19, 2014 originally issued in the aggregate principal amount of
$180,000,000 (the "SENIOR NOTES") under the Note Purchase Agreement dated as of
August 16, 1999 (as from time to time amended and in effect being herein called
the "NOTE AGREEMENT") which have executed the signature pages hereof or which
have otherwise become parties hereto in the manner provided in Section 17
hereof, (the Banks, the Agents and the Noteholders being herein sometimes
collectively called the "LENDERS" and individually called a "LENDER"). As used
herein, the term "COMPANY" means Alliance GP until its obligations under the
Bank Agreement and the Note Agreement are assumed by Alliance Resource Operating
Partners, L.P., a Delaware limited partnership ("AROP"), and thereafter means
AROP.
WITNESSETH:
WHEREAS, payment of certain obligations of the Company to the
Banks and the Agents arising under or in connection with the Bank Agreement from
time to time may be guaranteed by one or more subsidiaries of the Company
(herein sometimes collectively called the "BANK GUARANTORS" and individually
called a "BANK Guarantor") pursuant to one or more guaranty agreements in favor
of the Paying Agent for the ratable benefit of the Banks (as amended, restated,
supplemented or otherwise modified and in effect from time to time, the "BANK
GUARANTIES");
WHEREAS, payment of the obligations of the Company to the
Noteholders arising under or in connection with the Note Agreement and the
Senior Notes from time to time may be guaranteed by one or more subsidiaries of
the Company (herein sometimes collectively called the "NOTE GUARANTORS" and
individually called a "NOTE GUARANTOR" and the Bank Guarantors and the Note
Guarantors being herein collectively called the "Guarantors" and individually
called a "GUARANTOR") pursuant to one or more guaranty agreements in favor of
the Noteholders (as amended, restated, supplemented or otherwise modified and in
effect from time to time, the "NOTE GUARANTIES" and the Bank Guaranties and the
Note Guaranties being herein collectively called the "SUBJECT GUARANTIES" and
individually called a "SUBJECT GUARANTY" and the Bank Agreement, Note Agreement
and Senior Notes are herein collectively called the "COMPANY LOAN DOCUMENTS");
WHEREAS, under applicable law and the terms of the Subject
Guaranties, one or more of the Lenders may, to the extent authorized or
permitted by law, be entitled to set-off, appropriate and apply any deposits
(general or special (except trust and escrow accounts), time or demand,
including without limitation indebtedness evidenced by certificates of deposit,
in each case whether matured or
Exhibit 4.6
(to Note Purchase Agreement)
<PAGE> 115
unmatured) and any other indebtedness at any time held or owing by such Lender
to or for the credit or account of the Guarantors, against and on account of
liabilities of the Guarantors under the Guaranties benefiting such Lender
(collectively, the "GUARANTOR SET-OFF RIGHTS"; including any right to receive a
lien on amounts previously subject to the Guarantor Set-Off Rights, and to
recover such amounts, after the commencement of any action under any applicable
bankruptcy, insolvency or other similar law are collectively referred to herein
as the "SET-OFF RIGHTS");
WHEREAS, the obligations of the Guarantors under the Subject
Guaranties in respect of (i) the Note Agreement and the Senior Notes and (ii)
the Bank Agreement, are intended to rank pari passu with each other; and
WHEREAS, the Noteholders and the Paying Agent on behalf of the
Banks and the Agents have agreed to become parties to this Agreement so as to
evidence the agreement between the Lenders with respect to certain payments that
may be received by the Lenders under or in connection with the Subject
Guaranties;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Noteholders and the Paying Agent on
behalf of the Banks and the Agents hereby agree as follows:
1. If demand shall be made upon (or any enforcement
proceedings shall be commenced against) a Guarantor under any Subject Guaranty
by or on behalf of any Lender for the payment of any indebtedness outstanding
under the Company Loan Documents to which such Lender is a party or any Lender
shall exercise Set-Off Rights in respect thereof (any such demand, commencement
or exercise being herein called a "LENDER GUARANTY DEMAND"), the Lender making
such Lender Guaranty Demand shall give notice thereof to all of the other
Lenders.
2. If after making a Lender Guaranty Demand (or as the result
of any distribution made in any bankruptcy, insolvency, moratorium or other
similar proceeding for the relief of debtors) any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
Set-Off Rights or otherwise) on account of its Subject Guaranty or Subject
Guaranties (a "GUARANTY RECOVERY") it shall give notice thereof to all of the
other Lenders specifying the amount thereof and the portion thereof which
exceeds such Lender's Proportionate Share. If after giving effect to such
Guaranty Recovery such Lender shall have received payments in excess of its
Proportionate Share of payments then obtained by all Lenders with respect to the
Subject Guaranties, such Lender shall purchase from all Requesting Lenders (as
defined below) such participation(s) (a "LENDER PARTICIPATION") in the
indebtedness of the Company held by such Requesting Lenders pursuant to the
Company Loan Documents as shall be necessary to cause such purchasing Lender to
share such payment or other recovery ratably, based on Proportionate Shares,
with such selling Lenders; provided, however, that if all or any portion of such
payment or other recovery is thereafter recovered from such purchasing Lender,
the purchase shall be rescinded, and each selling Lender shall repay to the
purchasing Lender the purchase price, to the ratable extent of such recovery in
proportion to the amount received by such selling Lender, together with an
amount equal to such selling Lender's ratable share (according to the proportion
of (x) the amount of such selling Lender's required repayment to the purchasing
Lender to (y) the total amount so recovered from the purchasing Lender) of any
interest or other amount paid or payable by the purchasing Lender in respect of
the total amount so recovered. Any Requesting Lender shall make its
-2-
<PAGE> 116
request for the purchase of a Lender Participation by notice given to the Lender
making the applicable Lender Guaranty Demand within ten Business Days after
receipt of notice from such Lender of a Guaranty Recovery. Any such request by
any Bank or the Paying Agent shall be deemed to be a request by all of the Banks
for the purchase of a Lender Participation. Any such request by any Noteholder
shall be deemed to be a request by all of the Noteholders for the purchase of a
Lender Participation.
The term "PROPORTIONATE SHARE", as used herein, shall mean at
any time for each Lender a fraction (a) the numerator of which is the aggregate
principal amount of the indebtedness of the Company held by such Lender at such
time pursuant to the Company Loan Documents and (b) the denominator of which is
the aggregate principal amount of the indebtedness of the Company held by all
Lenders at such time pursuant to the Company Loan Documents.
The term "REQUESTING LENDER", as used herein, shall mean a
Lender which shall have requested any other Lender to purchase a Lender
Participation in the indebtedness of the Company held by such Requesting Lender
pursuant to this Section 2.
3. Each of the parties hereto, by signing a copy of this
Agreement, agrees that the Qualifying Securities (as defined in the Bank
Agreement as originally in effect) and any proceeds received by the Paying Agent
with respect thereto shall be excluded for all purposes from the transactions
contemplated by this Agreement.
4. The Noteholders, the Paying Agent on behalf of the Banks
and the Agents and the Company, by signing this Agreement, agree that if any
Lender is required to purchase a Lender Participation pursuant to Section 2, all
of the Senior Notes then outstanding under the Note Agreement and all
indebtedness of the Company then outstanding under the Bank Agreement shall
become immediately due and payable (unless the same is already due and payable)
in each and every case without presentment, demand, protest or further notice,
all of which are hereby waived by the Company (collectively, the "MATURED
DEBT").
5. The Noteholders and the Paying Agent on behalf of the Banks
and the Agents hereby agree that the status of the Matured Debt as being
immediately due and payable in full by the Company will not be changed or
rescinded without (x) the prior written consent of the Required Lenders (as
defined in the Bank Agreement) and the Agents in the case of any Senior Notes
constituting Matured Debt, and (y) without the prior written consent of the
Required Holders (as provided under the Note Agreement), in the case of any
indebtedness under the Bank Agreement constituting Matured Debt.
6. Each of the Company and each Guarantor, by signing a copy
of this Agreement, agrees that each Lender so purchasing a Lender Participation
from another Lender pursuant to Section 2 hereof may, to the fullest extent
permitted by law, exercise all its rights of payment (including rights of
setoff) with respect to such Lender Participation as fully as if such Lender
were the direct creditor of the Company and such Guarantor in the amount of such
Lender Participation. The Company agrees to cause each Subsidiary that issues a
Subject Guaranty to execute a counterpart of a Consent and Agreement in
substantially the form thereof attached as Annex A hereto.
7. If under any applicable bankruptcy, insolvency or other
similar law, any Lender possesses a secured claim, or receives a secured claim
in lieu of a setoff to which Section 2 hereof
-3-
<PAGE> 117
applies, such Lender shall exercise its rights in respect of such secured claim
in a manner consistent with the rights of the other Lenders in accordance with
Section 2 hereof.
8. This Agreement shall in all respects be a continuing,
absolute, unconditional and irrevocable agreement, and shall remain in full
force and effect until all obligations of the Company and the Guarantors to the
Lenders shall have been satisfied in full and all obligations of all Lenders to
the other Lenders hereunder shall have been satisfied in full. Each of the
Noteholders and the Paying Agent on behalf of the Banks and the Agents agree
that this Agreement shall continue to be effective or be reinstated, as the case
may be, if at any time any payment (in whole or in part) of any of the
obligations of any of the Guarantors is rescinded or must otherwise be restored
by any Lender, upon the insolvency, bankruptcy or reorganization of the Company
or any of the Company and the Guarantors or otherwise, as though such payment
had not been made.
9. This Agreement shall be binding upon, and inure to the
benefit of and be enforceable by, the Lenders, each of their respective
successors, transferees and assigns and each person or entity that purchases a
participation in the indebtedness of the Company or any Guarantor held by a
Lender. Without limiting the generality of the foregoing sentence, any Lender
may assign or otherwise transfer (in whole or in part) to any other person or
entity the obligations of the Company or any of the Guarantors to such Lender
under any of the Company Loan Documents, and such other person or entity shall
thereupon become vested with all rights and benefits, and become subject to all
the obligations, in respect thereof granted to or imposed upon such Lender under
this Agreement.
10. None of the provisions of this Agreement shall inure to
the benefit of the Company, any of the Guarantors or, except as provided in
Section 9 hereof, any other person other than the Lenders; consequently, to the
extent permitted by law, the Company, the Guarantors and any and all other
persons shall not be entitled to rely upon, or to raise as a defense, in any
manner whatsoever, the provisions of this Agreement or the failure of any Lender
to comply with such provisions.
11. Except for amendments effected pursuant to Section 17, no
amendment to or waiver of any provision of this Agreement, nor consent to any
departure herefrom by any Noteholder or the Paying Agent on behalf of the Banks
and the Agents, shall in any event be effective unless the same shall be in
writing and signed by all the Required Holders and the Paying Agent on behalf of
the Banks and the Agents and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
12. All notices and other communications provided to the
Paying Agent on behalf of the Banks and the Agents, the Noteholders or the
Company under this Agreement shall be in writing or by facsimile and addressed,
delivered or transmitted to such party at its address or facsimile number set
forth on Schedule I hereto or at such other address or facsimile number as may
be designated by such party in a notice to the other parties hereto. Any notice,
if mailed and properly addressed with postage prepaid or if properly addressed
and sent by pre-paid courier service, shall be deemed given when received; any
notice, if transmitted by facsimile, shall be deemed given when transmitted if
actually received, and the burden of proving receipt shall be on the
transmitting party.
13. No failure or delay on the part of any Lender in
exercising any power or right under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such
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<PAGE> 118
power or right preclude any other or further exercise thereof or the exercise of
any other power or right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
14. Whenever possible each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THIS AGREEMENT CONSTITUTES
THE ENTIRE UNDERSTANDING BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND SUPERSEDES ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
THERETO.
16. This Agreement may be executed in any number of
counterparts and by any combination of the parties hereto in separate
counterparts (including by telecopy), each of which counterparts shall be an
original and all of which when taken together shall constitute one and the same
agreement.
17. Any Noteholder which is not one of the original parties
hereto by accepting any Note shall be subject to all the provisions hereof and
entitled to the benefits thereunder. Any such Noteholder shall execute and
deliver an Instrument of Accession substantially in the form of Annex B hereto
and shall deliver a copy thereof to all the other Noteholders at the time
parties hereto and the Paying Agent on behalf of the Banks and the Agents, but
no such execution and delivery shall be required as a pre-condition to becoming
a Noteholder hereunder; provided that any other Lender may require such
execution and delivery before purchasing a Lender Participation from such
Noteholder.
18. By executing this Agreement the Paying Agent represents
that it is authorized to execute and deliver this Agreement on behalf of the
Agents and the Banks and to bind the Agents and the Banks to the provisions
hereof.
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<PAGE> 119
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written by their duly
authorized officers.
THE CHASE MANHATTAN BANK, as
Paying Agent
By:
-----------------------------
Name:
Title:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:
-----------------------------
Name:
Title:
UNUM LIFE INSURANCE COMPANY
OF AMERICA
By:
-----------------------------
Name:
Title:
PROVIDENT LIFE AND ACCIDENT
INSURANCE COMPANY
By:
-----------------------------
Name:
Title:
-6-
<PAGE> 120
IDS LIFE INSURANCE COMPANY
By:
-----------------------------
Name:
Title:
AMERICAN ENTERPRISE LIFE INSURANCE
COMPANY
By:
-----------------------------
Name:
Title:
SAFECO LIFE INSURANCE COMPANY
By:
-----------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL ASSURANCE
COMPANY
By:
-----------------------------
Name:
Title:
COLONIAL PENN INSURANCE COMPANY
By:
-----------------------------
Name:
Title:
-7-
<PAGE> 121
FIRST COLONY LIFE INSURANCE
COMPANY
By:
-----------------------------
Name:
Title:
HERITAGE LIFE INSURANCE COMPANY
By:
-----------------------------
Name:
Title:
GE CAPITAL LIFE ASSURANCE COMPANY
OF NEW YORK
By:
-----------------------------
Name:
Title:
Acknowledged and Agreed:
ALLIANCE RESOURCE GP, LLC
By: ALLIANCE RESOURCE HOLDINGS, INC.,
its sole member
By:
--------------------------
Title:
-8-
<PAGE> 122
ANNEX A
CONSENT AND AGREEMENT
Each of the undersigned hereby consents to the provisions of
the foregoing Intercreditor Agreement and the transactions contemplated thereby
and specifically agrees to the provisions of Section 2 of the Intercreditor
Agreement (including the provisions regarding the right of setoff) Each of the
undersigned agrees to notify each Lender promptly upon its becoming aware of any
payment to, or setoff or obtaining of a secured claim by, the other Lenders
contemplated by the foregoing Intercreditor Agreement.
Dated: as of August 16, 1999
<TABLE>
<S> <C>
ALLIANCE RESOURCE GP, LLC ALLIANCE COAL, LLC
ALLIANCE LAND, LLC
By Alliance Resource Holdings, Inc., its sole member ALLIANCE PROPERTIES, LLC
BACKBONE MOUNTAIN, LLC
EXCEL MINING, LLC
GIBSON COUNTY COAL, LLC
HOPKINS COUNTY COAL, LLC
MC MINING, LLC
By: /s/ MICHAEL L. GREENWOOD METTIKI COAL, LLC
----------------------------------- METTIKI COAL (WV), LLC
Name: Michael L. Greenwood MT. VERNON TRANSFER TERMINAL, LLC
PONTIKI COAL, LLC
TOPTIKI COAL, LLC
WEBSTER COUNTY COAL, LLC
Title: Chief Financial Officer WHITE COUNTY COAL, LLC
</TABLE>
By: /s/ MICHAEL L. GREENWOOD
---------------------------------
Name: Michael L. Greenwood
Title: Chief Financial Officer, of each of
the above-referenced persons
-9-
<PAGE> 123
ANNEX B
INSTRUMENT OF ACCESSION
With the intention of becoming a "Lender" for the purposes and
within the meaning of the Intercreditor Agreement, dated as of August 16, 1999,
annexed hereto (the "Intercreditor Agreement") the undersigned hereby consents
and agrees to be bound by the terms and provisions of the Intercreditor
Agreement to the same extent and with the same effect as if the undersigned had
executed and delivered the same as one of the original parties thereto as a
Lender in respect of the Senior Notes referred to therein and the Guaranties (as
defined in the Intercreditor Agreement) which have been executed for the benefit
of the holders of the Senior Notes.
Dated: ____________, ____.
[NAME OF LENDER]
By:
-------------------------------
Title:
-10-
<PAGE> 124
FORM OF CONFIDENTIALITY LETTER
[Date]
Alliance Resource Operating Partners, L.P.
Re: Note Purchase Agreement (the "Note Agreement")
dated as of August 16, 1999 providing for the
8.31% Senior Notes due 2014 (the "Notes") of
Alliance Operating Partners, L.P. (the "Company")
Ladies and Gentlemen:
The undersigned (the "Investor") proposes to [sell/purchase] a [describe
security of the Company] (the "Transaction") [to/from] [insert name of
Noteholder] (the "Noteholder"). The Noteholder is in the possession of certain
"Confidential Information" (as defined in the Note Agreement) relating to the
Company which it proposes to disclose to the Investor in connection with the
Transaction. Pursuant to the provisions of Section 20 of the Note Agreement (a
copy of which is annexed hereto) the Investor hereby agrees to be bound by the
terms of Section 20 with respect to the Confidential Information delivered to it
by the Noteholder to the same extent as if it were a "Purchaser" within the
meaning of said Section 20.
Very truly yours,
[Name of Investor]
By:
----------------------
Name:
Title:
Exhibit 20
(to Note Purchase Agreement)
<PAGE> 1
EXHIBIT 10.3
CONTRIBUTION AND ASSUMPTION AGREEMENT
THIS CONTRIBUTION AND ASSUMPTION AGREEMENT dated as of August
20, 1999 (this "Agreement"), is entered into by and among ALLIANCE RESOURCE
HOLDINGS, INC., a Delaware corporation (formerly known as Alliance Coal
Corporation) ("Alliance Holdings"); ALLIANCE RESOURCE MANAGEMENT GP, LLC, a
Delaware limited liability company ("MGP"); ALLIANCE RESOURCE GP, LLC, a
Delaware limited liability company ("SGP"); ALLIANCE RESOURCE PARTNERS, L.P., a
Delaware limited partnership (the "Partnership"); ALLIANCE RESOURCE OPERATING
PARTNERS, L.P., a Delaware limited partnership (the "Operating
Partnership"); ALLIANCE COAL, LLC, a Delaware limited liability company
("Alliance Coal"); MC MINING, LLC, a Delaware limited liability company ("MC
Mining"); GIBSON COUNTY COAL, LLC, a Delaware limited liability company ("Gibson
County"); TOPTIKI COAL, LLC, a Delaware limited liability company ("Toptiki
Coal"); PONTIKI COAL, LLC, a Delaware limited liability company ("Pontiki
Coal"); ALLIANCE PROPERTIES, LLC, a Delaware limited liability company
("Alliance Properties"); BACKBONE MOUNTAIN, LLC, a Delaware limited liability
company ("Backbone Mountain"); WHITE COUNTY COAL, LLC, a Delaware limited
liability company ("White County"); MT. VERNON TRANSFER TERMINAL, LLC, a
Delaware limited liability company ("Mt. Vernon"); WEBSTER COUNTY COAL, LLC, a
Delaware limited liability company ("Webster County"); METTIKI COAL, LLC, a
Delaware limited liability company ("Mettiki Coal"); METTIKI COAL (WV), LLC, a
Delaware limited liability company ("MCWV"); ALLIANCE LAND, LLC, a Delaware
limited liability company ("Alliance Land"); HOPKINS COUNTY COAL, LLC, a
Delaware limited liability
<PAGE> 2
company ("Hopkins County"); and EXCEL MINING, LLC, a Delaware limited liability
company ("Excel Mining") (MC Mining, Gibson County, Toptiki Coal, Pontiki Coal,
Alliance Properties, Backbone Mountain, White County, Mt. Vernon, Webster
County, Mettiki Coal, MCWV, Alliance Land, Hopkins County and Excel Mining are
sometimes collectively referred to in this Agreement as the "Alliance Coal
Subsidiaries")
RECITALS
WHEREAS, SGP and Thomas L. Pearson (the "Organizational
Limited Partner") have heretofore formed the Partnership pursuant to the
Delaware Revised Uniform Limited Partnership Act (the "Delaware Act") for the
purpose of serving as a limited partner of the Operating Partnership; and
WHEREAS, SGP contributed $10.00 to the capital of the
Partnership and received a 1% general partner interest therein, and the
Organizational Limited Partner contributed $990.00 to the capital of the
Partnership and received a 99% limited partner interest therein; and
WHEREAS, SGP and the Organizational Limited Partner have
heretofore formed the Operating Partnership pursuant to the Delaware Act for the
purpose of acquiring membership interests in Alliance Coal; and
WHEREAS, SGP contributed $10.00 to the capital of the
Operating Partnership and received a 1% general partner interest therein, and
the Organizational Limited Partner contributed $990.00 to the capital of the
Operating Partnership and received a 99% limited partner interest therein; and
-2-
<PAGE> 3
WHEREAS, Alliance Holdings has formed and owns all of the
membership interest in Alliance Coal; and
WHEREAS, the Initial Transactions have occurred; and
WHEREAS, SGP has entered into a note purchase agreement (the
"Note Purchase Agreement") with certain institutional investors providing for
the issuance by SGP of $180 million of 8.31% senior notes due 2014; and
WHEREAS, SGP has entered into a bank credit agreement (the
"Bank Credit Agreement") providing for a term loan facility of $50 million, a
$25 million working capital facility and a $25 million revolving credit
facility; and
WHEREAS, concurrently with the consummation of the
transactions contemplated by this Agreement, MGP, SGP and the Partnership have
entered into that certain First Amended and Restated Agreement of Limited
Partnership of the Operating Partnership (the "Operating Partnership
Agreement"); and
WHEREAS, concurrently with the consummation of the
transactions contemplated by this Agreement, MGP, SGP and the Organizational
Limited Partner have entered into that certain First Amended and Restated
Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement");
NOW, THEREFORE, in consideration of their mutual undertakings
and agreements hereunder, the parties to this Agreement undertake and agree as
follows:
-3-
<PAGE> 4
ARTICLE I
DEFINITIONS; INITIAL TRANSACTIONS
1.1 Definitions. The following capitalized terms shall have
the meanings given below.
"Agreement" means this Contribution and Assumption Agreement.
"Alliance Coal" has the meaning assigned to such term in the
opening paragraph of this Agreement.
"Alliance Coal Subsidiaries" has the meaning assigned to such
term in the opening paragraph of this Agreement.
"Alliance Entities" means MGP, SGP, the Partnership, the
Operating Partnership, Alliance Coal and the Alliance Coal Subsidiaries.
"Alliance Holdings" has the meaning assigned to such term in
the opening paragraph of this Agreement.
"Alliance Land" has the meaning assigned to such term in the
opening paragraph of this Agreement.
"Alliance Properties" has the meaning assigned to such term
in the opening paragraph of this Agreement.
"Backbone Mountain" has the meaning assigned to such term in
the opening paragraph of this Agreement.
"Bank Credit Agreement" has the meaning assigned to such term
in the Recitals to this Agreement.
-4-
<PAGE> 5
"Common Units" means common limited partner interests in the
Partnership.
"Delaware Act" has the meaning assigned to such term in the
Recitals to this Agreement.
"Effective Time" means 12:01 a.m. Eastern Standard Time on
August 20, 1999.
"Environmental Laws" shall mean any federal, state and local
law, rule, regulation or enforceable order, as in effect as of the date of this
Agreement, that regulates or imposes liability with respect to the health,
environment, ecology or work place.
"Excel Mining" has the meaning assigned to such term in the
opening paragraph of this Agreement.
"Existing Indebtedness" means indebtedness, liabilities and
obligations of SGP under
(i) the Note Purchase Agreement and (ii) the Bank Credit Agreement.
"Gibson County" has the meaning assigned to such term in the
opening paragraph of this Agreement.
"Hazardous Materials" shall mean those materials in any way
regulated by any Environmental Law.
"Hopkins County" has the meaning assigned to such term in the
opening paragraph of this Agreement.
"Initial Transactions" has the meaning assigned to such term
in Section 1.2.
"Laws" means any and all laws, statutes, ordinances, rules
or regulations promulgated by a governmental authority, orders of a governmental
authority, judicial decisions, decisions of arbitrators or determinations of any
governmental authority or court.
-5-
<PAGE> 6
"Liabilities" means obligations, responsibilities and
liabilities (whether based in common law or statute or arising under written
contract or otherwise, known or unknown, fixed or contingent, real or potential,
tangible or intangible, now existing or hereafter arising), including, without
limitation, liabilities for violations of Environmental Laws and the disposal,
release, spill, leakage, migration or transportation of Hazardous Materials.
"MC Mining" has the meaning assigned to such term in the
opening paragraph of this Agreement.
"MCWV" has the meaning assigned to such term in the opening
paragraph of this Agreement.
"Mettiki Coal" has the meaning assigned to such term in the
opening paragraph of this Agreement.
"MGP" has the meaning assigned to such term in the opening
paragraph of this Agreement.
"Mt. Vernon" has the meaning assigned to such term in the
opening paragraph of this Agreement.
"Note Purchase Agreement" has the meaning assigned to such
term in the Recitals to this Agreement.
"Operating Partnership" has the meaning assigned to such term
in the opening paragraph of this Agreement.
"Operating Partnership Agreement" has the meaning assigned to
such term in the Recitals to this Agreement.
-6-
<PAGE> 7
"Organizational Limited Partner" has the meaning assigned to
such term in the Recitals to this Agreement.
"Partnership" has the meaning assigned to such term in the
opening paragraph of this Agreement.
" Partnership Agreement" has the meaning assigned to such term
in the Recitals to this Agreement.
"Pontiki Coal" has the meaning assigned to such term in the
opening paragraph of this Agreement.
"Retained Liabilities" means (i) all Liabilities related to
the assets and businesses of Alliance Holdings and its affiliates that are
retained by Alliance Holdings and its affiliates (other than the Alliance
Entities) after the Effective Time and (ii) all federal, state and local income
tax liabilities attributable to operation of the assets and business of Alliance
Holdings and its affiliates prior to the Effective Time, including any such
income tax liabilities that may result from the consummation of the transactions
contemplated by this Agreement.
"SGP" has the meaning assigned to such term in the opening
paragraph of this Agreement.
"SGP OLP Interest" has the meaning assigned to such term in
Section 2.1.
"Subordinated Units" means subordinated limited partner
interests in the Partnership.
"Webster County" has the meaning assigned to such term in the
opening paragraph of this Agreement.
"White County" has the meaning assigned to such term in the
opening paragraph of this Agreement.
-7-
<PAGE> 8
1.2 Initial Transactions. The following transactions have occurred
prior to the date hereof
(the "Initial Transactions"):
(a) REP Sales Inc. merged into MAPCO Coal Inc.
(b) Scotts Branch Company and MC Mining, Inc. merged into
MC Mining.
(c) Alliance Coal Corporation contributed its 100% member
interest in MC Mining to MAPCO Coal Inc.
(d) Posey, County Coal Corporation and Gibson County Coal
Corporation merged into Gibson County.
(e) Toptiki Coal Corporation merged into Toptiki Coal.
(f) Pontiki Coal Corporation merged into Pontiki Coal.
(g) MAPCO Coal Land Corporation and MAPCO Coal Land &
Development Corporation merged into Alliance Properties.
(h) Cari International Mining Corporation was liquidated.
(i) Garrett County Coal Corporation merged into Backbone
Mountain.
(j) White County Coal Corporation merged into White
County.
(k) Mt. Vernon Coal Transfer Company merged into
Mt. Vernon.
(l) Webster County Coal Corporation merged into Webster
County.
(m) Mettiki Coal Corporation merged into Mettiki Coal.
(n) Mettiki Coal Corporation (West Virginia) merged into
MCWV.
(o) MLDC Corporation merged into Alliance Land.
(p) Alliance Power Corporation merged into Alliance
Power, LLC.
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<PAGE> 9
(q) MAPCO Coal International filed documents with the
government of Barbados to effectuate its dissolution.
(r) MAPCO Coal Inc. merged into Alliance Coal.
(s) Alliance Coal distributed the stock of South Atlantic
Coal Company, Inc. to Alliance Coal Corporation.
(t) Alliance Coal Corporation changed its name to
Alliance Resource Holdings, Inc.
1.3. Concurrent Transactions.
(a) Alliance Holdings has previously formed SGP and
Alliance Holdings hereby contributes all of the member interests in Alliance
Coal to SGP in exchange for all of the member interests in SGP.
(b) SGP and the Operating Partnership agree that upon
completion of the public offering by the Partnership as set forth in Section 2.1
below, SGP will contribute its 100% interest in Alliance Coal to the Operating
Partnership in exchange for certain partnership interests, debt assumption and
cash as more fully set forth below, and SGP will contribute its limited partner
interest in the Operating Partnership to the Partnership in exchange for
Partnership interests as more fully set forth below.
(c) Certain members of Alliance Holdings management and
certain funds affiliated with The Beacon Group, LP purchase all the member
interests in MGP for $5.9 million.
(d) The Alliance Coal Subsidiaries distribute $37.2
million of working capital assets (composed principally, if not exclusively, of
accounts receivable to be identified by Alliance Coal) to Alliance Coal and
Alliance Coal distributes such working capital assets to SGP.
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<PAGE> 10
(e) SGP borrows $180 million under the Note Purchase
Agreement and $50 million under the term loan facility of the Bank Credit
Agreement and purchases $15.5 million in U.S. treasury notes.
ARTICLE II
PUBLIC OFFERING AND CASH CONTRIBUTIONS
2.1 Public Cash Contribution. The parties to this Agreement
acknowledge a cash contribution to the Partnership of $147,250,000 ($137,872,500
after payment of underwriting discounts and commissions) from the public in
exchange for 7,750,000 Common Units.
2.2 MGP Cash Contribution to Partnership. MGP hereby contributes
$2,926,983 in cash to the Partnership in exchange for a .99% managing general
partner interest and incentive distribution rights in the Partnership and the
Partnership hereby accepts such cash contribution as a contribution to the
capital of the Partnership.
2.3 Partnership Cash Contribution. The Partnership hereby
contributes cash in the amount of $137,872,500 to the Operating Partnership in
exchange for a limited partner interest in the Operating Partnership and the
Operating Partnership hereby accepts such cash contribution as a contribution
to the capital of the Operating Partnership.
2.4 MGP Cash Contribution to Operating Partnership. MGP hereby
contributes $2,987,016 in cash to the Operating Partnership in exchange for a
1.0001% managing general partner interest in the Operating Partnership and the
Operating Partnership hereby accepts such cash contribution as a contribution to
the capital of the Operating Partnership.
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<PAGE> 11
ARTICLE III
ADDITIONAL CLOSING TRANSACTIONS
3.1 Contribution by SGP to the Operating Partnership. SGP hereby
contributes to the Operating Partnership a 100% member interest in Alliance Coal
and $15.5 million in U.S. treasury notes in exchange for (a) a .01% special
general partner interest in the Operating Partnership, (b) a limited partner
interest (such limited partner interest, the "SGP OLP Interest") in the
Operating Partnership and (c) the assumption by the Operating Partnership of the
indebtedness, liabilities and obligations of SGP under the Existing
Indebtedness, and the Operating Partnership hereby accepts such interests from
SGP, as a contribution to the capital of the Operating Partnership.
3.2 Contribution by SGP to the Partnership. SGP hereby
contributes to the Partnership the SGP OLP Interest in exchange for (a) a .01%
special general partner interest in the Partnership, (b) 6,422,531 Subordinated
Units and 1,232,980 Common Units and the Partnership hereby accepts the SGP OLP
Interest as a contribution to the capital of the Partnership.
3.3 Operating Partnership Use of Proceeds. The parties to this
Agreement acknowledge that the Operating Partnership has used the cash received
as set forth in Article II above as follows: (a) reimbursement to SGP for
certain capital expenditures in the amount of $64.8 million; (b) payment of
certain transaction expenses in the aggregate amount of $16.7 million including,
without limitation, all of the syndication costs incurred by the Partnership in
connection with the public offering of the Common Units; (c) distribution of
cash in the aggregate amount of $37.2 million to Alliance Coal to replenish the
working capital previously distributed by Alliance Coal to SGP; and (d) purchase
of U.S. treasury notes in the aggregate amount of $34.5 million which, along
with the
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<PAGE> 12
$15.5 million in treasury notes it received from SGP, have been collaterally
assigned by the Operating Partnership to the lenders under the Bank Credit
Agreement.
3.4 Alliance Coal Cash Contribution to Alliance Coal
Subsidiaries. Alliance Coal hereby distributes cash to the Alliance Coal
Subsidiaries in an amount sufficient to replenish the working capital of such
Alliance Coal Subsidiaries.
3.5 MGP Contribution to Alliance Coal. MGP hereby contributes to
Alliance Coal $2,987 in cash in exchange for a .001% managing member interest in
Alliance Coal and Alliance Coal hereby accepts such cash contribution as a
contribution to the capital of Alliance Coal.
3.6 SGP Distribution to Alliance Holdings. SGP hereby distributes
$279.3 million to Alliance Holdings.
ARTICLE IV
ASSUMPTION OF EXISTING INDEBTEDNESS
4.1. Assumption of Existing Indebtedness by the Operating Partnership.
In connection with the transactions contemplated by Section 3.1 hereof, the
Operating Partnership hereby assumes and agrees to duly and timely pay, perform
and discharge the Existing Indebtedness, to the full extent that SGP has been
heretofore or would have been in the future, were it not for the execution and
delivery of this Agreement, obligated to pay, perform and discharge the
Existing Indebtedness; provided, however, that said assumption and agreement to
duly and timely pay, perform and discharge the Existing Indebtedness shall not
(i) increase the obligation of the Operating Partnership with respect to the
Existing Indebtedness beyond that of SGP, (ii) waive any valid defense that was
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<PAGE> 13
available to SGP with respect to the Existing Indebtedness or (iii) enlarge any
rights or remedies of any lender under, or holder of, the Existing Indebtedness
or any portion thereof.
ARTICLE V
INDEMNIFICATION
5.1. Indemnification With Respect to Existing Indebtedness. The
Operating Partnership shall indemnify, defend and hold harmless SGP, its
officers and directors, its successors and assigns from and against any and all
claims, demands, costs, Liabilities and expenses (including court costs and
reasonable attorneys' fees) of every kind, character and description, arising
from or relating to the Existing Indebtedness.
5.2 Indemnification with Respect to Retained Liabilities.
Alliance Holdings shall indemnify, defend and hold harmless the Alliance
Entities, their respective officers and directors and their respective
successors and assigns from and against any and all claims, demands, costs,
Liabilities and expenses (including court costs and reasonable attorneys' fees)
of every kind, character and description, arising from or relating to the
Retained Liabilities. Notwithstanding the preceding sentence, nothing in this
indemnification provision shall be construed to conflict with or alter the terms
of the indemnification provisions contained in that certain Omnibus Agreement,
dated August 20, 1999, by and among Alliance Holdings, MGP, SGP and the
Partnership.
ARTICLE VI
FURTHER ASSURANCES
6.1. Further Assurances. From time to time after the date hereof,
and without any further consideration, each party upon request from another
shall execute, acknowledge and deliver all such additional instruments, notices
and other documents, and will do all such other acts and things, all
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<PAGE> 14
in accordance with applicable law, as may be reasonably necessary or appropriate
to more fully and effectively carry out the purposes and intent of this
Agreement.
ARTICLE VII
MISCELLANEOUS
7.1. Order of Completion of Transactions; Effective Time. The
transactions provided for in Articles I, II, III and IV of this Agreement shall
be completed on the date of this Agreement in the following order:
First, the transactions provided for in Article I shall be
completed;
Second, the transactions provided for in Article II shall be
completed;
Third, the transactions provided for in Article III shall be
completed; and
Fourth, the transactions provided for in Article IV shall be
completed.
7.2. Costs. The Operating Partnership shall pay all sales, use and
similar taxes arising out of the contributions and deliveries to be made
hereunder, and shall pay all documentary, filing, recording, transfer, deed, and
conveyance taxes and fees required in connection therewith, if any.
7.3. Headings: References: Interpretation. All Article and Section
headings in this Agreement are for convenience only and shall not be deemed to
control or affect the meaning or construction of any of the provisions hereof.
The words "hereof," "herein" and "hereunder" and words of similar import, when
used in this Agreement, shall refer to this Agreement as a whole, including,
without limitation, all Schedules and Exhibits attached hereto, and not to any
particular provision of this Agreement. All references herein to Articles,
Sections, Schedules and Exhibits, if any, shall, unless the context requires a
different construction, be deemed to be references to the Articles and Sections
of this Agreement and the Schedules and Exhibits attached hereto, and all such
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<PAGE> 15
Schedules and Exhibits attached hereto are hereby incorporated herein and made a
part hereof for all purposes. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders, and the singular shall include the plural and vice versa. The use
herein of the word "including" following any general statement, term or matter
shall not be construed to limit such statement, term or matter to the specific
items or matters set forth immediately following such word or to similar items
or matters, whether or not non-limiting language (such as "without limitation,"
"but not limited to," or words of similar import) is used with reference
thereto, but rather shall be deemed to refer to all other items or matters that
could reasonably fall within the broadest possible scope of such general
statement, term or matter.
7.4. Successors and Assigns. The Agreement shall be binding upon
and inure to the benefit of the parties signatory hereto and their respective
successors and assigns.
7.5. No Third Party Rights. The provisions of this Agreement are
intended to bind the parties signatory hereto as to each other and are not
intended to and do not create rights in any other person or confer upon any
other person any benefits, rights or remedies and no person is or is intended to
be a third party beneficiary of any of the provisions of this Agreement.
7.6. Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one agreement binding on
the parties hereto.
7.7. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts made and to be performed wholly within such state without giving
effect to conflict of law principles thereof.
7.8. Severability. If any of the provisions of this Agreement are
held by any court of competent jurisdiction to contravene, or to be invalid
under, the laws of any political body having
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<PAGE> 16
jurisdiction over the subject matter hereof, such contravention or invalidity
shall not invalidate the entire Agreement. Instead, this Agreement shall be
construed as if it did not contain the particular provision or provisions held
to be invalid, and an equitable adjustment shall be made and necessary
provision added so as to give effect to the intention of the parties as
expressed in this Agreement at the time of execution of this Agreement.
7.9. Amendment or Modification. This Agreement may be amended or
modified from time to time only by the written agreement of all the parties
hereto.
7.10 Integration. This Agreement supersedes all previous
understandings or agreements between the parties, whether oral or written with
respect to its subject matter. This document is an integrated agreement which
contains the entire understanding of the parties. No understanding,
representation, promise or agreement, whether oral or written, is intended to be
or shall be included in or form part of this Agreement unless it is contained in
a written amendment hereto executed by the parties hereto after the date of this
Agreement.
7.11 Power of Attorney. Each of the Alliance Coal Subsidiaries
hereby constitutes and appoints SGP and its successors and assigns as its true
and lawful attorney with full power of substitution, having full right and
authority in each of the Alliance Coal Subsidiaries' name and their respective
successors and assigns, to demand, sue for, recover, collect and receive any and
all accounts receivable hereby distributed and delivered to SGP, and to use and
take any and all lawful means for the recovery thereof by legal process or
otherwise; to give receipts, releases and acquittances for or in respect of the
same or any part thereof, to institute and prosecute in the name of each of the
Alliance Coal Subsidiaries or otherwise, and to defend and compromise, any and
all actions, suits or proceedings in respect of any accounts receivable hereby
distributed and delivered
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<PAGE> 17
to SGP, which SGP and its successors and assigns shall deem desirable. Each of
the Alliance Coal Subsidiaries hereby declares that the foregoing powers are
coupled with an interest and shall be irrevocable by it in any manner or for any
reason.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 18
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
ALLIANCE RESOURCE HOLDINGS, INC.,
a Delaware corporation
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration, General Counsel
and Secretary
ALLIANCE RESOURCE MANAGEMENT GP, LLC,
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration, General Counsel
and Secretary
ALLIANCE RESOURCE GP, LLC,
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration, General Counsel
and Secretary
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<PAGE> 19
ALLIANCE RESOURCE PARTNERS, L.P.
a Delaware limited partnership
By: Alliance Resources GP, LLC,
its general partner
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration, General Counsel
and Secretary
ALLIANCE RESOURCE OPERATING
PARTNERS, L.P., a Delaware limited partnership
By: Alliance Resources GP, LLC,
its general partner
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration, General Counsel
and Secretary
ALLIANCE COAL, LLC,
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
-------------------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration and Secretary
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<PAGE> 20
MC MINING, LLC,
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration and Secretary
GIBSON COUNTY COAL, LLC,
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration and Secretary
TOPTIKI COAL, LLC
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration and Secretary
PONTIKI COAL, LLC,
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration and Secretary
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<PAGE> 21
ALLIANCE PROPERTIES, LLC,
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration and Secretary
BACKBONE MOUNTAIN, LLC,
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration and Secretary
WHITE COUNTY COAL LLC,
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration and Secretary
MT. VERNON TRANSFER TERMINAL, LLC,
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration and Secretary
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<PAGE> 22
WEBSTER COUNTY COAL, LLC,
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration and Secretary
METTIKI COAL, LLC,
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration and Secretary
METTIKI COAL (WV), LLC
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration and Secretary
ALLIANCE LAND, LLC,
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration and Secretary
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<PAGE> 23
HOPKINS COUNTY COAL, LLC,
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration and Secretary
EXCEL MINING, LLC,
a Delaware limited liability company
By: /s/ THOMAS L. PEARSON
---------------------------------
Thomas L. Pearson
Senior Vice President -- Law and
Administration and Secretary
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<PAGE> 1
EXHIBIT 10.4
Execution Copy
================================================================================
OMNIBUS AGREEMENT
among
ALLIANCE RESOURCE HOLDINGS, INC.
ALLIANCE RESOURCE GP, LLC
ALLIANCE RESOURCE MANAGEMENT GP, LLC
and
ALLIANCE RESOURCE PARTNERS, L.P.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
Definitions .................................................................................... 1
1.1 Definitions ............................................................................... 1
ARTICLE II
Business Opportunities ......................................................................... 3
2.1 Restricted Businesses ..................................................................... 3
2.2 Permitted Exceptions ...................................................................... 3
2.3 Procedures ................................................................................ 4
2.4 Termination ............................................................................... 6
2.5 Scope of Restricted Business Prohibition .................................................. 6
2.6 Enforcement ............................................................................... 6
ARTICLE III
Indemnification ................................................................................ 7
3.1 Indemnification of MGP by SGP ............................................................. 7
3.2 Indemnification of Partnership Entities by ARH ............................................ 7
3.3 Indemnification Procedures ................................................................ 7
ARTICLE IV
Assignment ..................................................................................... 8
4.1 Assignment of Rights by Partnership Entities to ARH ....................................... 8
ARTICLE V
Miscellaneous .................................................................................. 9
5.1 Choice of Law; Submission to Jurisdiction ................................................. 9
5.2 Notice .................................................................................... 9
5.3 Entire Agreement; Supersedure ............................................................. 9
5.4 Effect of Waiver or Consent ............................................................... 9
5.5 Amendment or Modification ................................................................. 9
5.6 Assignment ................................................................................ 10
5.7 Counterparts .............................................................................. 10
5.8 Severability .............................................................................. 10
5.9 Gender, Parts, Articles and Sections ...................................................... 10
5.10 Further Assurances ........................................................................ 10
5.11 Withholding or Granting of Consent ........................................................ 10
5.12 Laws and Regulations ...................................................................... 10
5.13 Negotiation of Rights of Limited Partners, Assignees, and Third Parties ................... 10
</TABLE>
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<PAGE> 3
OMNIBUS AGREEMENT
THIS OMNIBUS AGREEMENT is entered into on, and effective as of, the
Closing Date by and among Alliance Resource Partners, L.P., a Delaware limited
partnership (the "MLP"), Alliance Resource Holdings, Inc., a Delaware
corporation ("ARH"), Alliance Resource GP, LLC, a Delaware limited liability
company and special general partner of the MLP (the "SGP"), Alliance Resource
Management GP, LLC, a Delaware limited liability company and managing general
partner of the MLP (the "MGP").
R E C I T A L:
ARH, the MLP, the SGP, in its capacity as the special general partner
of the MLP and Alliance Resource Operating Partners, L.P., a Delaware limited
partnership (the "OLP"), and the MGP, in its capacity as the managing general
partner of the MLP and the OLP, desire by their execution of this Agreement to
evidence their understanding, (i) as more fully set forth in Article II of this
Agreement, with respect to (a) those business opportunities that ARH will not
pursue unless the MLP has declined to engage in such business opportunity for
its own account and (b) the procedures whereby such business opportunities are
to be offered to the MLP and accepted or declined and (ii) as more fully set
forth in Article III of this Agreement, with respect to (a) the indemnification
obligations of the SGP in favor of the MGP relating to the indebtedness incurred
by the SGP and assumed by the OLP on the Closing Date and (b) the
indemnification obligations of ARH in favor of the Partnership Entities relating
to any liabilities associated with Martiki Coal Corporation, MAPCO Coal
International, Inc. and Cari International Mining, Inc.
In consideration of the premises and the covenants, conditions, and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. (a) Capitalized terms used herein but not defined herein
shall have the meanings given them in the MLP Agreement.
(b) As used in this Agreement, the following terms shall have the
respective meanings set forth below:
"Affiliate" shall have the meaning attributed to such term in the MLP
Agreement.
"Agreement" shall mean this Omnibus Agreement, as amended, modified,
or supplemented from time to time in accordance with the terms hereof.
"ARH" shall mean Alliance Resource Holdings, Inc., a Delaware
corporation.
<PAGE> 4
"ARH Entities" shall mean ARH and any of its Affiliates, other than
the Partnership Entities and The Beacon Group, LP and its affiliated funds.
"Bank Credit Agreement" means the Credit Agreement, dated as of August
16, 1999, by and among the SGP, as Borrower, and The Chase Manhattan Bank,
as Paying Agent thereunder, The Chase Manhattan Bank and Citicorp USA,
Inc., as Co-Administrative Agents thereunder and the Initial Lenders and
Swing Line Bank named as parties thereto.
"Change of Control" shall have the meaning attributed to such term in
Section 2.4.
"Closing Date" shall mean the date of the closing of the initial
public offering of common units representing limited partner interests in
the MLP.
"Conflicts Committee" shall have the meaning attributed to such term
in the MLP Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Indemnified Party" shall have the meaning assigned to such term in
Section 3.3(a).
"Indemnifying Party"shall have the meaning assigned to such term in
Section 3.3(a).
"Losses" shall have the meaning assigned to such term in Section 3.1.
"Martiki Sale Agreement" shall mean the Stock Purchase and Sale
Agreement, dated November 6, 1998 between MAPCO Coal Inc. and Coal Ventures
Holding Company, Inc.
"MGP" shall mean Alliance Resource Management GP, LLC, a Delaware
limited liability company and managing general partner of the MLP.
"MLP" shall mean Alliance Resource Partners, L.P., a Delaware limited
partnership, and any successors thereto.
"MLP Agreement"shall mean the Amended and Restated Agreement of
Limited Partnership of the MLP, dated as of the Closing Date, as such
agreement is in effect on the Closing Date, to which reference is hereby
made for all purposes of this Agreement. No amendment or modification to
the MLP Agreement subsequent to the Closing Date shall be given effect for
the purposes of this Agreement unless consented to by each of the parties
to this Agreement.
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<PAGE> 5
"Note Purchase Agreement" means the Note Purchase Agreement, dated as
of August 16, 1999, between the SGP and the several purchasers listed in
the Schedule A attached thereto.
"OLP" shall mean Alliance Resource Operating Partners, L.P., a
Delaware limited partnership, and any successors thereto.
"Partnership Entities" shall mean the SGP, the MGP and the MLP and any
Affiliate controlled by the SGP, the MGP or the MLP.
"Partnership Group" shall mean the MLP and any of its subsidiaries.
"Person" shall mean an individual, corporation, partnership, joint
venture, trust, limited liability company, unincorporated organization or
any other entity.
"SGP" shall mean Alliance Resource GP, LLC, a Delaware limited
liability company and special general partner of the MLP.
"Restricted Business" shall have the meaning attributed to such term
in Section 2.1.
"Voting Stock" means securities or membership interests of any class
or series of either ARH or the MGP entitling the holders thereof to vote on
a regular basis in the election of members of the board of directors, board
of managers or other governing body of such entity.
ARTICLE II
BUSINESS OPPORTUNITIES
2.1 RESTRICTED BUSINESSES. Subject to the terms of the MLP Agreement, for
as long as the MGP (or any Affiliate of ARH) is the managing general partner of
the MLP or the OLP, each of the ARH Entities shall be prohibited from engaging
in the business of mining, marketing or transporting coal in any state in the
United States (a "Restricted Business").
2.2 PERMITTED EXCEPTIONS. Notwithstanding any provision of Section 2.1 to
the contrary, an ARH Entity may pursue an opportunity to purchase or invest in,
and may ultimately purchase, own and/or operate, a Restricted Business under any
of the following circumstances:
(a) The Restricted Business was engaged in by the ARH Entity on the
date of this Agreement; or
(b) The fair market value of the assets that comprise the Restricted
Business represents less than a majority of the fair market value of the
business being considered for purchase or investment, in the reasonable belief
of a majority of the board of directors of the ARH Entity; or
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<PAGE> 6
(c) The MGP (with the approval of the Conflicts Committee) has elected
not to cause a member of the Partnership Group to pursue such opportunity in
accordance with the procedures set forth in Section 2.3.
2.3 PROCEDURES.
(a) In the event that an ARH Entity becomes aware of an opportunity to
purchase a Restricted Business, then, as soon as practicable, such ARH Entity
shall notify the MGP of such opportunity and deliver to the MGP all information
prepared by or on behalf of such ARH Entity relating to such potential purchase.
As soon as practicable but in any event within 30 days after receipt of such
notification and information, the MGP, on behalf of the Partnership, shall
notify the ARH Entity that either (i) the MGP, on behalf of the Partnership, has
elected, with the approval of the Conflicts Committee, not to cause a member of
the Partnership Group to pursue the opportunity to acquire such Restricted
Business, or (ii) the MGP, on behalf of the Partnership, has elected to cause a
member of the Partnership Group to pursue the opportunity to acquire such
Restricted Business. If, at any time, the MGP or its Affiliates abandons such
opportunity (as evidenced in writing by the MGP or such Affiliates following the
request of the ARH entity), the ARH Entity may pursue such opportunity. Any
Restricted Business which is permitted to be purchased by an ARH Entity must be
so purchased (i) within 12 months of the time the ARH Entity becomes able to
pursue such acquisition in accordance with the provisions of this Section 2.3
and (ii) on terms not materially more favorable to the ARH Entity than were
offered to the Partnership. If either of these conditions are not satisfied, the
opportunity must be reoffered to the Partnership.
(b) In the event that an ARH Entity acquires a Restricted Business as
part of a larger transaction in accordance with the provisions of Section
2.2(b), then, within 30 days of the consummation of such purchase, such ARH
Entity shall notify the MGP of such purchase and offer the Partnership the
opportunity to purchase the Restricted Business constituting a portion of such
purchase and deliver to the MGP all information prepared by or on behalf of or
in the possession of such ARH Entity relating to the Restricted Business. As
soon as practicable but in any event within 30 days after receipt of such
notification, the MGP shall notify the ARH Entity that either (i) the MGP, on
behalf of the Partnership, has elected, with the approval of the Conflicts
Committee, not to cause a member of the Partnership Group to purchase such
Restricted Business, in which event the ARH Entity shall be free to continue to
engage in such Restricted Business, or (ii) the MGP, on behalf of the
Partnership, has elected to cause a member of the Partnership Group to purchase
such Restricted Business, in which event the following procedures shall be
followed:
(i) The ARH Entity shall submit a good faith offer to the MGP to sell
the Restricted Business (the "Offer") to any member of the Partnership Group
designated by the MGP on the terms and for the consideration stated in the
Offer.
(ii) The ARH Entity and the MGP shall negotiate in good faith, for 60
days after receipt of such Offer by the MGP, the terms on which the Restricted
Business will be sold to a member of the Partnership Group. The ARH Entity shall
provide all information concerning the
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<PAGE> 7
business, operations and finances of such Restricted Business as may be
reasonably requested by the MGP.
(A) If the ARH Entity and the MGP agree on such terms within 60
days after receipt by the MGP of the Offer, a member of the Partnership
Group shall purchase the Restricted Business on such terms as soon as
commercially practicable after such agreement has been reached.
(B) If the ARH Entity and the MGP are unable to agree on the terms
of a sale during such 60-day period, the ARH Entity shall attempt to sell
the Restricted Business to a Person that is not an Affiliate of the ARH
Entity (a "NonAffiliate Purchaser") within nine months of the termination of
such 60-day period. Any such sale to a NonAffiliate Purchaser must be for a
purchase price, as determined by the board of directors of ARH Resources,
not less than 95% of the purchase price last offered by a member of the
Partnership Group.
(iii) If, after the expiration of such nine-month period, the ARH
Entity has not sold the Restricted Business to a NonAffiliate Purchaser, it
shall submit another Offer (the "Second Offer") to the MGP within seven days
after the expiration of such nine-month period. The ARH Entity shall provide all
information concerning the business, operations and finances of such Restricted
Business as may be reasonably requested by the MGP.
(A) If the MGP, with the concurrence of the Conflicts Committee,
elects not to cause a member of the Partnership Group to pursue the Second
Offer, the ARH Entity shall be free to continue to engage in such Restricted
Business.
(B) If the MGP shall elect to cause a member of the Partnership
Group to purchase such Restricted Business, then the MGP and the ARH Entity
shall negotiate the terms of such purchase for 60 days. If the ARH Entity
and the MGP agree on such terms within 60 days after receipt by the MGP of
the Second Offer, a member of the Partnership Group shall purchase the
Restricted Business on such terms as soon as commercially practicable after
such agreement has been reached.
(C) If during such 60-day period, no agreement has been reached
between the ARH Entity and the MGP or a member of the Partnership, the ARH
Entity and the MGP will engage an independent investment banking firm with a
national reputation to determine the value of the Restricted Business. Such
investment banking firm will determine the value of the Restricted Business
within 30 days and furnish the ARH Entity and the MGP its opinion of such
value. The ARH Entity and the MGP shall share equally the fees and expenses
of such investment banking firm. Upon receipt of such opinion, the MGP will
have the option, subject to the approval of the Conflicts Committee, to (A)
cause a member of the Partnership Group to purchase the Restricted Business
for an amount equal to
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<PAGE> 8
the value determined by such investment banking firm or (B) decline to
purchase such Restricted Business, in which event the ARH Entity will be
free to continue to engage in such Restricted Business.
2.4 TERMINATION. The provisions of this Article II may be terminated by
ARH upon or at any time after a "Change of Control" of ARH or the MGP by written
notice to the MLP. A Change of Control of ARH or the MGP shall be deemed to have
occurred upon the occurrence of one or more of the following events: (i) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the ARH or
the MGP to any Person or its Affiliates, unless immediately following such sale,
lease, exchange or other transfer such assets are owned, directly or indirectly,
by the ARH Entities, The Beacon Group, L.P. and its affiliated funds or the MGP;
(ii) the consolidation or merger of ARH or the MGP with or into another Person
pursuant to a transaction in which the outstanding Voting Stock of ARH or the
MGP is changed into or exchanged for cash, securities or other property, other
than any such transaction where (a) the outstanding Voting Stock of ARH or the
MGP is changed into or exchanged for Voting Stock of the surviving corporation
or its parent and (b) the holders of the Voting Stock of ARH or the MGP
immediately prior to such transaction own, directly or indirectly, not less than
a majority of the Voting Stock of the surviving corporation or its parent
immediately after such transaction; or (iii) a "person" or "group" (within the
meaning of Sections 13(d) or 14(d)(2) of the Exchange Act) being or becoming the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act)
of more than 50% of all Voting Stock of ARH or the MGP then outstanding, other
than (a) in a merger or consolidation which would not constitute a Change of
Control under clause (ii) above and (b) The Beacon Group, LP and its affiliated
funds.
2.5 SCOPE OF RESTRICTED BUSINESS PROHIBITION. Except as provided in this
Article II and the Partnership Agreement, each ARH Entity shall be free to
engage in any business activity whatsoever, including those that may be in
direct competition with any Partnership Entity.
2.6 ENFORCEMENT. The ARH Entities agree and acknowledge that the
Partnership Group does not have an adequate remedy at law for the breach by the
ARH Entities of the covenants and agreements set forth in this Article II, and
that any breach by the ARH Entities of the covenants and agreements set forth in
Article II would result in irreparable injury to the Partnership Group. The ARH
Entities further agree and acknowledge that any member of the Partnership Group
may, in addition to the other remedies which may be available to the Partnership
Group hereunder or under applicable law, file a suit in equity to enjoin the ARH
Entities from such breach, and consent to the issuance of injunctive relief
hereunder.
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<PAGE> 9
ARTICLE INDEMNIFICATION III
3.1 INDEMNIFICATION OF MGP BY SGP. The SGP shall indemnify, defend and
hold harmless the MGP from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses incurred
in connection with defending or investigating any such action or claim)
(collectively, "Losses") relating to the indebtedness outstanding (including
principal and interest) under the Note Purchase Agreement and the Bank Credit
Agreement.
3.2 INDEMNIFICATION OF PARTNERSHIP ENTITIES BY ARH. In addition to its
indemnification obligations under the Contribution Agreement (as defined in the
MLP Agreement), ARH shall indemnify, defend and hold harmless the Partnership
Entities from and against any Losses that are caused by, arise out of or are
attributable to:
(a) any and all liabilities associated with the former ownership by
MAPCO Coal Inc. of Martiki Coal Corporation including, but not limited to any
indemnification obligations of any of the Partnership Entities arising under
Section 8.1 of the Martiki Sale Agreement; provided, however, that ARH shall not
be obligated to indemnify the Partnership Entities against any such Losses
unless and until (i) the Partnership Entities have sought to receive
indemnification from Coal Ventures Holding Company, Inc. provided in Section 8.2
of the Martiki Sale Agreement and such relief has been denied by final
adjudication of a court of competent jurisdiction or (ii) the MGP, on behalf of
the MLP, reasonably determines that the Loss for which indemnification is sought
is not within the scope of the indemnification provided in Section 8.2 of the
Martiki Sale Agreement; and
(b) the former business and operations of MAPCO Coal International
Inc., an entity formed under the laws of Barbados, and Cari International
Mining, Inc., a Delaware corporation, and/or the dissolution of such entities
and the related distribution of their respective assets to their respective
shareholders.
3.3 INDEMNIFICATION PROCEDURES.
(a) As used in this Section 3.3: the term "Indemnifying Party" refers
to SGP, in the case of any indemnification obligation arising under Section 3.1,
and ARH, in the case of any indemnification obligation arising under Section
3.2; and the term "Indemnified Party" refers to the MGP, in the case of any
indemnification obligation arising under Section 3.1, and the Partnership
Entities, as applicable, in the case of any indemnification obligation arising
under Section 3.2.
(b) If any action, suit or proceeding shall be brought against an
Indemnified Party, or if the Indemnified Party should otherwise become aware of
facts giving rise to a claim for indemnification pursuant to Section 3.1 or 3.2,
as applicable, the Indemnified Party shall promptly notify the Indemnifying
Party in writing specifying the nature of and specific basis for such claim.
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<PAGE> 10
(c) The Indemnifying Party shall have the right to control all aspects
of the defense of (and any counterclaims with respect to) any claims brought
against the Indemnified Party that are covered by the indemnification set forth
in Section 3.1 or 3.2, as applicable, including, without limitation, the
selection of counsel, determination of whether to appeal any decision of any
court and the settling of any such matter or any issues relating thereto;
provided, however, that no such settlement shall be entered into without the
consent of the Indemnified Party unless it includes a full release of the
Indemnified Party from such matter or issues, as the case may be.
(d) The Indemnified Party agree, at their own cost and expense, to
cooperate fully with the Indemnifying Party with respect to all aspects of the
defense of any claims covered by the indemnification set forth in Section 3.1 or
3.2, as applicable, including, without limitation, the prompt furnishing to the
Indemnifying Party of any correspondence or other notice relating thereto that
the Indemnified Party may receive, permitting the name(s) of the Indemnified
Party to be utilized in connection with such defense, the making available to
the Indemnifying Party of any files, records or other information of the
Indemnified Party that the Indemnifying Party considers relevant to such defense
and the making available to the Indemnifying Party of any employees of the
Indemnified Party; provided, however, that in connection therewith the
Indemnifying Party agrees to use reasonable efforts to minimize the impact
thereof on the operations of such Indemnified Party. In no event shall the
obligation of the Indemnified Party to cooperate with the Indemnifying Party as
set forth in the immediately preceding sentence be construed as imposing upon
the Indemnified Party an obligation to hire and pay for counsel in connection
with the defense of any claims covered by the indemnification set forth in this
Article III; provided, however, that the Indemnified Party may, at their own
option, cost and expense, hire and pay for counsel in connection with any such
defense. The Indemnifying Party agrees to keep any such counsel hired by the
Indemnified Party reasonably informed as to the status of any such defense, but
the Indemnifying Party shall have the right to retain sole control over such
defense.
(e) In determining the amount of any loss, liability or expense for
which any Indemnified Party is entitled to indemnification under this Article
III, the gross amount thereof will be reduced by any insurance proceeds realized
or to be realized by such Indemnified Party, and such correlative insurance
benefit shall be net of any insurance premium that becomes due as a result of
such claim.
ARTICLE ASSIGNMENT IV
4.1 ASSIGNMENT OF RIGHTS BY PARTNERSHIP ENTITIES TO ARH . The Partnership
Entities hereby irrevocably assign, transfer and convey to ARH:
(a) all rights, credits, claims, judgments and awards that may be
received by the Partnership Entities under the pending litigation styled Arch
Mineral Corporation ,et al. v. ICI Explosive USA, Inc., et al., U.S. District
Court, S. D. Indiana, Indianapolis Division, Case No. IP96
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<PAGE> 11
- - 0754 C - LT#C00376, in which case certain predecessors of the Partnership
Entities are plaintiffs, as more completely identified in paragraph 1 of
Schedule 2.1(a) of the Martiki Sale Agreement; and
(b) all right, title, benefits and interest of such Partnership
Entities to any as of yet uncollected cash and receivables set forth as excluded
assets in paragraphs 5(a), 5(b), 5(c) and 5(d) of Schedule 2.1(a) of the Martiki
Sale Agreement.
ARTICLE V
MISCELLANEOUS
5.1 CHOICE OF LAW; SUBMISSION TO JURISDICTION . This Agreement shall be
subject to and governed by the laws of the State of Delaware, excluding any
conflicts-of-law rule or principle that might refer the construction or
interpretation of this Agreement to the laws of another state.
5.2 NOTICE . All notices or requests or consents provided for or permitted
to be given pursuant to this Agreement must be in writing and must be given by
depositing same in the United States mail, addressed to the Person to be
notified, postpaid, and registered or certified with return receipt requested or
by delivering such notice in person or by telecopier or telegram to such party.
Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All notices to be sent to a party
pursuant to this Agreement shall be sent to or made at the address set forth
below such party's signature to this Agreement, or at such other address as such
party may stipulate to the other parties in the manner provided in this Section
5.2.
5.3 ENTIRE AGREEMENT; SUPERSEDURE . This Agreement constitutes the entire
agreement of the parties relating to the matters contained herein, superseding
all prior contracts or agreements, whether oral or written, relating to the
matters contained herein.
5.4 EFFECT OF WAIVER OR CONSENT . No waiver or consent, express or implied,
by any party to or of any breach or default by any Person in the performance by
such Person of its obligations hereunder shall be deemed or construed to be a
consent or waiver to or of any other breach or default in the performance by
such Person of the same or any other obligations of such Person hereunder.
Failure on the part of a party to complain of any act of any Person or to
declare any Person in default, irrespective of how long such failure continues,
shall not constitute a waiver by such party of its rights hereunder until the
applicable statute of limitations period has run.
5.5 AMENDMENT OR MODIFICATION . This Agreement may be amended or modified
from time to time only by the written agreement of all the parties hereto;
provided, however, that the MLP may not, without the prior approval of the
Conflicts Committee, agree to any amendment or modification of this Agreement
that, in the reasonable discretion of the MGP, will adversely affect the holders
of
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<PAGE> 12
Common Units. Each such instrument shall be reduced to writing and shall be
designated on its face an "Amendment" or an "Addendum" to this Agreement.
5.6 ASSIGNMENT. No party shall have the right to assign its rights or
obligations under this Agreement without the consent of the other parties
hereto.
5.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all signatory parties had signed the
same document. All counterparts shall be construed together and shall constitute
one and the same instrument.
5.8 SEVERABILITY. If any provision of this agreement or the application
thereof to any person or circumstance shall be held invalid or unenforceable to
any extent, the remainder of this agreement and the application of such
provision to other persons or circumstances shall not be affected thereby and
shall be enforced to the greatest extent permitted by law.
5.9 GENDER, PARTS, ARTICLES AND SECTIONS. Whenever the context requires,
the gender of all words used in this Agreement shall include the masculine,
feminine and neuter, and the number of all words shall include the singular and
plural. All references to Article numbers and Section numbers refer to Parts,
Articles and Sections of this Agreement, unless the context otherwise requires.
5.10 FURTHER ASSURANCES. In connection with this Agreement and all
transactions contemplated by this Agreement, each signatory party hereto agrees
to execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions and conditions of this Agreement and
all such transactions.
5.11 WITHHOLDING OR GRANTING OF CONSENT. Each party may, with respect to
any consent or approval that it is entitled to grant pursuant to this Agreement,
grant or withhold such consent or approval in its sole and uncontrolled
discretion, with or without cause, and subject to such conditions as it shall
deem appropriate.
5.12 LAWS AND REGULATIONS. Notwithstanding any provision of this
Agreement to the contrary, no party hereto shall be required to take any act, or
fail to take any act, under this Agreement if the effect thereof would be to
cause such party to be in violation of any applicable law, statute, rule or
regulation.
5.13 NEGOTIATION OF RIGHTS OF LIMITED PARTNERS, ASSIGNEES, AND THIRD
PARTIES. The provisions of this Agreement are enforceable solely by the parties
to this Agreement, and no Limited Partner, Assignee or other Person shall have
the right, separate and apart from the MLP, to enforce any provision of this
Agreement or to compel any party to this Agreement to comply with the terms of
this Agreement.
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<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Agreement on, and
effective as of, the Closing Date.
ALLIANCE RESOURCE HOLDINGS, INC.
By: /s/ THOMAS L. PEARSON
------------------------------------------
Name: Thomas L. Pearson
Title: Senior Vice President -- Law and
Administration, General Counsel and
Secretary
Address for Notice: 1717 South Boulder Avenue
Tulsa, Oklahoma 74119
Telecopy Number: (918) 295-7361
ALLIANCE RESOURCE PARTNERS, L.P.
By: ALLIANCE RESOURCE GP, LLC, its general
partner
By: /s/ THOMAS L. PEARSON
----------------------------------------
Name: Thomas L. Pearson
Title: Senior Vice President -- Law and
Administration, General Counsel and
Secretary
Address for Notice: 1717 South Boulder Avenue
Tulsa, Oklahoma 74119
Telecopy Number: (918) 295-7361
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<PAGE> 14
ALLIANCE RESOURCE MANAGEMENT GP, LLC
By: /s/ THOMAS L. PEARSON
------------------------------------------
Name: Thomas L. Pearson
Title: Senior Vice President -- Law and
Administration, General Counsel and
Secretary
Address for Notice: 1717 South Boulder Avenue
Tulsa, Oklahoma 74119
Telecopy Number: (918) 295-7361
ALLIANCE RESOURCE GP, LLC
By: /s/ THOMAS L. PEARSON
------------------------------------------
Name: Thomas L. Pearson
Title: Senior Vice President -- Law and
Administration, General Counsel and
Secretary
Address for Notice: 1717 South Boulder Avenue
Tulsa, Oklahoma 74119
Telecopy Number: (918) 295-7361
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<PAGE> 1
EXHIBIT 10.11
ALLIANCE RESOURCE MANAGEMENT GP, LLC
2000 LONG-TERM INCENTIVE PLAN
(AS AMENDED)
SECTION 1. Purpose of the Plan.
The Alliance Resource Management GP, LLC Long-Term Incentive Plan (the
"Plan") is intended to promote the interests of Alliance Resource Partners,
L.P., a Delaware limited partnership (the "Partnership"), by providing to
employees and directors of Alliance Resource Management GP, LLC (the "Company")
and its Affiliates who perform services for the Partnership incentive
compensation awards for superior performance that are based on Units. The Plan
is also contemplated to enhance the ability of the Company and its Affiliates to
attract and retain the services of individuals who are essential for the growth
and profitability of the Partnership and to encourage them to devote their best
efforts to the business of the Partnership, thereby advancing the interests of
the Partnership and its partners.
SECTION 2. Definitions.
As used in the Plan, the following terms shall have the meanings set
forth below:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"Award" means an Option or Restricted Unit granted under the Plan, and
shall include any tandem DERs granted with respect to such Award.
"Board" means the Board of Directors of the Company.
"Cause" means:
(i) fraud or embezzlement on the part of the Participant;
(ii) conviction of or the entry of a plea of nolo contendere
by the Participant to any felony;
(iii) gross insubordination or a material breach of, or the
willful failure or refusal by the Participant to perform and discharge
his duties, responsibilities or obligations (other than by reason of
disability or death) that is not corrected within thirty
<PAGE> 2
(30) days following written notice thereof to the Participant, such
notice to state with specificity the nature of the breach, failure or
refusal; or
(iv) any act of willful misconduct by the Participant which
(A) is intended to result in substantial personal enrichment of the
Participant at the expense of the Partnership, the Company or any of
their affiliates or (B) has a material adverse impact on the business
or reputation of the Partnership, the Company or any of their
affiliates (such determination to be made by the Partnership, the
Company or any of their affiliates in the good faith exercise of their
reasonable judgment).
"Change in Control" means, and shall be deemed to have occurred upon
the occurrence of one or more of the following events: (i) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company or the
Partnership to any Person or its Affiliates, unless immediately following such
sale, lease, exchange or other transfer such assets are owned, directly or
indirectly, by The Beacon Group, L.P. and its affiliated funds or the Company;
(ii) the consolidation or merger of the Company with or into another Person
pursuant to a transaction in which the outstanding voting interests of the
Company is changed into or exchanged for cash, securities or other property,
other than any such transaction where (a) the outstanding voting interests of
the Company is changed into or exchanged for voting stock or interests of the
surviving corporation or its parent and (b) the holders of the voting interests
of the Company immediately prior to such transaction own, directly or
indirectly, not less than a majority of the voting stock or interests of the
surviving corporation or its parent immediately after such transaction; or (iii)
a "person" or "group" (within the meaning of Sections 13(d) or 14(d)(2) of the
Exchange Act) being or becoming the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act) of more than 50% of all voting interests
of the Company then outstanding, other than (a) in a merger or consolidation
which would not constitute a Change of Control under clause (ii) above and (b)
The Beacon Group, LP and its affiliated funds.
"Committee" means the Compensation Committee of the Board or such other
committee of the Board appointed to administer the Plan.
"DER" means a contingent right, granted in tandem with a specific
Restricted Unit, to receive an amount in cash equal to the cash distributions
made by the Partnership with respect to a Unit during the period such Restricted
Unit is outstanding.
"Director" means a "non-employee director" of the Company, as defined
in Rule 16b-3.
"Employee" means any employee of the Company or an Affiliate, as
determined by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
<PAGE> 3
"Fair Market Value" means the closing sales price of a Unit on the
applicable date (or if there is no trading in the Units on such date, on the
next preceding date on which there was trading) as reported in The Wall Street
Journal (or other reporting service approved by the Committee). In the event
Units are not publicly traded at the time a determination of fair market value
is required to be made hereunder, the determination of fair market value shall
be made in good faith by the Committee.
"Good Reason," which shall mean:
(i) a reduction in the Participant's Base Salary;
(ii) failure to pay the Participant any compensation due
under an employment agreement, if any;
(iii) failure to continue to provide benefits substantially
similar to those then enjoyed by the Participant unless the
Partnership, the Company or their affiliates provide aggregate benefits
equivalent to those then in effect;
(iv) failure to continue a compensation plan or to continue
the Participant's participation in a plan on a basis not materially
less favorable to the Participant, subject to the power of the
Partnership, the Company or their affiliates to amend such plans in
their reasonable discretion;
(v) the Partnership, the Company or their affiliates purported
termination of the Participant's employment for Cause or disability not
pursuant to a procedure indicating the specific provision of the
definition of Cause contained in this Plan as the basis for such
termination of employment;
The Participant may not terminate for Good Reason unless he has given
written notice delivered to the Partnership, the Company or their affiliates, as
appropriate, of the action or inaction giving rise to Good Reason, and if such
action or inaction is not corrected within thirty (30) days thereafter, such
notice to state with specificity the nature of the breach, failure or refusal.
"Option" means an option to purchase Units granted under the Plan.
"Participant" means any Employee or Director granted an Award under the
Plan.
"Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of Alliance Resource Partners, L.P.
<PAGE> 4
"Person" means an individual or a corporation, limited liability
company, partnership, joint venture, trust, unincorporated organization,
association, government agency or political subdivision thereof or other entity.
"Restricted Period" means the period established by the Committee with
respect to an Award during which the Award either remains subject to forfeiture
or is not exercisable by or payable to the Participant. Notwithstanding anything
in the Plan to the contrary, the Restricted Period with respect to any Award
granted to an Employee may not terminate prior to the end of the Subordination
Period (as defined in the Partnership Agreement).
"Restricted Unit" means a phantom unit granted under the Plan which
upon or following vesting entitles the Participant to receive a Unit or an
equivalent amount of cash.
"Rule 16b-3" means Rule 16b-3 promulgated by the SEC under the Exchange
Act, or any successor rule or regulation thereto as in effect from time to time.
"SEC" means the Securities and Exchange Commission, or any successor
thereto.
"Unit" means a Common Unit of the Partnership.
SECTION 3. Administration.
The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum, and the acts of the members of the
Committee who are present at any meeting thereof at which a quorum is present,
or acts unanimously approved by the members of the Committee in writing, shall
be the acts of the Committee. Subject to the following, the Committee, in its
sole discretion, may delegate any or all of its powers and duties under the
Plan, including the power to grant Awards under the Plan, to the Chief Executive
Officer of the Company, subject to such limitations on such delegated powers and
duties as the Committee may impose. Upon any such delegation all references in
the Plan to the "Committee", other than in Section 7, shall be deemed to include
the Chief Executive Officer; provided, however, that such delegation shall not
limit the Chief Executive Officer's right to receive Awards under the Plan.
Notwithstanding the foregoing, the Chief Executive Officer may not grant Awards
to, or take any action with respect to any Award previously granted to, a person
who is an officer subject to Rule 16b-3 or a member of the Board. Subject to the
terms of the Plan and applicable law, and in addition to other express powers
and authorizations conferred on the Committee by the Plan, the Committee shall
have full power and authority to: (i) designate Participants; (ii) determine the
type or types of Awards to be granted to a Participant; (iii) determine the
number of Units to be covered by Awards; (iv) determine the terms and conditions
of any Award; (v) determine whether, to what extent, and under what
circumstances Awards may be settled, exercised, canceled, or forfeited;
(vi) interpret and administer the Plan and any instrument or agreement relating
to an Award made under the Plan; (vii) establish, amend, suspend, or waive such
rules and regulations and appoint such agents as it shall deem appropriate for
the proper administration of the Plan; and (viii) make any other determination
and take any other action that the Committee
<PAGE> 5
deems necessary or desirable for the administration of the Plan. Unless
otherwise expressly provided in the Plan, all designations, determinations,
interpretations, and other decisions under or with respect to the Plan or any
Award shall be within the sole discretion of the Committee, may be made at any
time and shall be final, conclusive, and binding upon all Persons, including the
Company, the Partnership, any Affiliate, any Participant, and any beneficiary of
any Award.
SECTION 4. Units
(a) Units Available. Subject to adjustment as provided in Section 4(c),
the number of Units with respect to which Options and Restricted Units may be
granted under the Plan is 600,000. If any Option or Restricted Unit is forfeited
or otherwise terminates or is canceled without the delivery of Units, then the
Units covered by such Award, to the extent of such forfeiture, termination or
cancellation, shall again be Units with respect to which Options or Restricted
Units may be granted.
(b) Sources of Units Deliverable Under Awards. Any Units delivered
pursuant to an Award shall consist, in whole or in part, of Units acquired in
the open market, from any Affiliate, the Partnership or any other Person, or any
combination of the foregoing, as determined by the Committee in its discretion.
(c) Adjustments. In the event that the Committee determines that any
distribution (whether in the form of cash, Units, other securities, or other
property), recapitalization, split, reverse split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of Units
or other securities of the Partnership, issuance of warrants or other rights to
purchase Units or other securities of the Partnership, or other similar
transaction or event affects the Units such that an adjustment is determined by
the Committee to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any or
all of (i) the number and type of Units (or other securities or property) with
respect to which Awards may be granted, (ii) the number and type of Units (or
other securities or property) subject to outstanding Awards, and (iii) the grant
or exercise price with respect to any Award or, if deemed appropriate, make
provision for a cash payment to the holder of an outstanding Award; provided,
that the number of Units subject to any Award shall always be a whole number.
SECTION 5. Eligibility.
Any Employee or Director shall be eligible to be designated a
Participant and receive an Award under the Plan.
SECTION 6. Awards.
(a) Options. The Committee shall have the authority to determine the
Employees and Directors to whom Options shall be granted, the number of Units to
be covered by each Option,
<PAGE> 6
the purchase price therefor and the conditions and limitations applicable to the
exercise of the Option, including the following terms and conditions and such
additional terms and conditions, as the Committee shall determine, that are not
inconsistent with the provisions of the Plan.
(i) Exercise Price. The purchase price per Unit purchasable
under an Option shall be determined by the Committee at the time the
Option is granted and may be more or less than its Fair Market Value
as of the date of grant.
(ii) Time and Method of Exercise. The Committee shall
determine the Restricted Period, i.e., the time or times at which an
Option may be exercised in whole or in part, and the method or methods
by which payment of the exercise price with respect thereto may be made
or deemed to have been made which may include, without limitation,
cash, check acceptable to the Company, a "cashless-broker" exercise
through procedures approved by the Company, other securities or other
property, a note from the Participant in a form acceptable to the
Company, or any combination thereof, having a Fair Market Value on the
exercise date equal to the relevant exercise price.
(iii) Term. Subject to earlier termination as provided in the
grant agreement or the Plan, each Option shall expire on the 10th
anniversary of its date of grant.
(iv) Forfeiture. Except as otherwise provided in the terms of
the Option grant, upon termination of a Participant's employment with
the Company and its Affiliates or membership on the Board, whichever is
applicable, for any reason during the applicable Restricted Period, all
Options shall be forfeited by the Participant. The Committee may, in
its discretion, waive in whole or in part such forfeiture with respect
to a Participant's Options.
(b) Restricted Units. The Committee shall have the authority to
determine the Employees and Directors to whom Restricted Units shall be granted,
the number of Restricted Units to be granted to each such Participant, the
duration of the Restricted Period (if any), the conditions under which the
Restricted Units may become vested (which may be immediate upon grant) or
forfeited, and such other terms and conditions as the Committee may establish
with respect to such Awards, including whether DERs are granted with respect to
such Restricted Units.
(i) DERs. To the extent provided by the Committee, in its
discretion, a grant of Restricted Units may include a tandem DER grant,
which may provide that such DERs shall be paid directly to the
Participant, be credited to a bookkeeping account (with or without
interest in the discretion of the Committee) subject to the same
vesting restrictions as the tandem Award, or be subject to such other
provisions or restrictions as determined by the Committee in its
discretion. Notwithstanding the foregoing however, DERs shall not be
granted with respect to any Award prior to the end of the Subordination
Period.
<PAGE> 7
(ii) Forfeiture. Except as otherwise provided in the terms of
the Restricted Units grant, upon termination of a Participant's
employment with the Company and its Affiliates or membership on the
Board, whichever is applicable, for any reason during the applicable
Restricted Period, all Restricted Units shall be forfeited by the
Participant. The Committee may, in its discretion, waive in whole or in
part such forfeiture with respect to a Participant's Restricted Units.
(iii) Lapse of Restrictions. Upon or following the vesting of
each Restricted Unit, the Participant shall be entitled to receive from
the Company one Unit or cash equal to the Fair Market Value of one
Unit, as determined by the Committee, subject to the provisions of
Section 8(b).
(c) General.
(i) Awards May Be Granted Separately or Together. Awards may,
in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for any other Award
granted under the Plan or any award granted under any other plan of the
Company or any Affiliate. Awards granted in addition to or in tandem
with other Awards or awards granted under any other plan of the Company
or any Affiliate may be granted either at the same time as or at a
different time from the grant of such other Awards or awards.
(ii) Limits on Transfer of Awards.
(A) Except as provided in (C) below, each Option
shall be exercisable only by the Participant during the
Participant's lifetime, or by the person to whom the
Participant's rights shall pass by will or the laws of descent
and distribution.
(B) Except as provided in (C) below, no Award and no
right under any such Award may be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered
by a Participant and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance
shall be void and unenforceable against the Company or any
Affiliate.
(C) To the extent specifically provided by the
Committee with respect to an Award, an Award may be
transferred by a Participant without consideration to
immediate family members or related family trusts, limited
partnerships or similar entities or on such terms and
conditions as the Committee may from time to time establish.
In addition, Awards may be transferred by will and the laws of
descent and distribution.
(iii) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee.
<PAGE> 8
(iv) Unit Certificates. All certificates for Units or other
securities of the Partnership delivered under the Plan pursuant to any
Award or the exercise thereof shall be subject to such stop transfer
orders and other restrictions as the Committee may deem advisable
under the Plan or the rules, regulations, and other requirements of
the SEC, any stock exchange upon which such Units or other securities
are then listed, and any applicable federal or state laws, and the
Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(v) Consideration for Grants. Awards may be granted for no
cash consideration or for such consideration as the Committee
determines.
(vi) Delivery of Units or other Securities and Payment by
Participant of Consideration. Notwithstanding anything in the Plan or
any grant agreement to the contrary, delivery of Units pursuant to the
exercise or vesting of an Award may be deferred for any period during
which, in the good faith determination of the Committee, the Company is
not reasonably able to obtain Units to deliver pursuant to such Award
without violating the rules or regulations of any applicable law or
securities exchange. No Units or other securities shall be delivered
pursuant to any Award until payment in full of any amount required to
be paid pursuant to the Plan or the applicable Award grant agreement
(including, without limitation, any exercise price or tax withholding)
is received by the Company. Such payment may be made by such method or
methods and in such form or forms as the Committee shall determine,
including, without limitation, cash, other Awards, withholding of
Units, cashless-broker exercises with simultaneous sale, or any
combination thereof; provided that the combined value, as determined by
the Committee, of all cash and cash equivalents and the Fair Market
Value of any such Units or other property so tendered to the Company,
as of the date of such tender, is at least equal to the full amount
required to be paid to the Company pursuant to the Plan or the
applicable Award agreement.
(vii) Change in Control. Upon a Change in Control, all Awards
shall automatically vest and become payable or exercisable, as the case
may be, in full. In this regard, all Restricted Periods shall terminate
and all performance criteria, if any, shall be deemed to have been
achieved at the maximum level. Notwithstanding the foregoing however,
the Restricted Period may not terminate prior to the end of the
Subordination Period.
(viii) Sale of Significant Assets. In the event the
Partnership sells or otherwise dispose of a significant portion of the
assets under its control, (such significance to be determined by action
of the Board of the Company in its sole discretion) and as a
consequence of such disposition (a) a Participant's employment is
terminated by the Partnership, the Company or their affiliates without
Cause or by the Participant for Good Reason or (b) as a result of such
sale or disposition, the Participant's employer shall no longer be the
Partnership, the Company or one of their affiliates, then all of such
<PAGE> 9
Participant's Awards shall automatically vest and become payable or
exercisable, as the case may be, in full. In this regard, all
Restricted Periods shall terminate and all performance criteria, if
any, shall be deemed to have been achieved at the maximum level.
Notwithstanding the foregoing however, the Restricted Period may not
terminate prior to the end of the Subordination Period.
SECTION 7. Amendment and Termination.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award agreement or in the Plan:
(a) Amendments to the Plan. Except as required by applicable
law or the rules of the principal securities exchange on which the
Units are traded and subject to Section 7(b) below, the Board or the
Committee may amend, alter, suspend, discontinue, or terminate the Plan
in any manner, including increasing the number of Units available for
Awards under the Plan, without the consent of any partner, Participant,
other holder or beneficiary of an Award, or other Person; provided,
however, that no amendment may be made without the approval of a Unit
Majority (as defined in the Partnership Agreement) that would either
accelerate, with respect to an Award granted to an Employee, vesting to
a date prior to the end of the Subordination Period or permit DERs to
be granted prior to the end of the Subordination Period.
(b) Amendments to Awards. The Committee may waive any
conditions or rights under, amend any terms of, or alter any Award
theretofore granted, provided no change, other than pursuant to Section
7(c), in any Award shall materially reduce the benefit to Participant
without the consent of such Participant.
(c) Adjustment of Awards Upon the Occurrence of Certain
Unusual or Nonrecurring Events. The Committee is hereby authorized to
make adjustments in the terms and conditions of, and the criteria
included in, Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 4(c) of
the Plan) affecting the Partnership or the financial statements of the
Partnership, or of changes in applicable laws, regulations, or
accounting principles, whenever the Committee determines that such
adjustments are appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available
under the Plan.
SECTION 8. General Provisions.
(a) No Rights to Award. No Person shall have any claim to be granted
any Award under the Plan, and there is no obligation for uniformity of treatment
of participants. The terms and conditions of awards need not be the same with
respect to each recipient.
<PAGE> 10
(b) Withholding. The Company or any Affiliate is authorized to withhold
from any Award, from any payment due or transfer made under any Award or from
any compensation or other amount owing to a Participant the amount (in cash,
Units, other securities, Units that would otherwise be issued pursuant to such
Award or other property) of any applicable taxes payable in respect of the grant
of an Award, its exercise, the lapse of restrictions thereon, or any payment or
transfer under an Award or under the Plan and to take such other action as may
be necessary in the opinion of the Company to satisfy all obligations for the
payment of such taxes.
(c) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate or to remain on the Board, as applicable. Further, the
Company or an Affiliate may at any time dismiss a Participant from employment,
free from any liability or any claim under the Plan, unless otherwise expressly
provided in the Plan or in any Award agreement.
(d) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware and applicable federal law.
(e) Severability. If any provision of the Plan or any award is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the Plan or any
award under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award, such provision shall be
stricken as to such jurisdiction, person or award and the remainder of the Plan
and any such Award shall remain in full force and effect.
(f) Other Laws. The Committee may refuse to issue or transfer any Units
or other consideration under an Award if, in its sole discretion, it determines
that the issuance or transfer or such Units or such other consideration might
violate any applicable law or regulation, the rules of the principal securities
exchange on which the Units are then traded, or entitle the Partnership or an
Affiliate to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary.
(g) No Trust or Fund Created. Neither the Plan nor any award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any participating Affiliate and a
Participant or any other Person. To the extent that any Person acquires a right
to receive payments from the Company or any participating Affiliate pursuant to
an award, such right shall be no greater than the right of any general unsecured
creditor of the Company or any participating Affiliate.
<PAGE> 11
(h) No Fractional Units. No fractional Units shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Units or whether such fractional Units or any rights
thereto shall be canceled, terminated, or otherwise eliminated.
(i) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
(j) Facility Payment. Any amounts payable hereunder to any person under
legal disability or who, in the judgment of the Committee, is unable to properly
manage his financial affairs, may be paid to the legal representative of such
person, or may be applied for the benefit of such person in any manner which the
Committee may select, and the Company shall be relieved of any further liability
for payment of such amounts.
(k) Gender and Number. Words in the masculine gender shall include the
feminine gender, the plural shall include the singular and the singular shall
include the plural.
SECTION 9. Term of the Plan.
The Plan shall be effective on the date of its approval by the Board
and shall continue until the date terminated by the Board or Units are no longer
available for grants of Awards under the Plan, whichever occurs first. However,
unless otherwise expressly provided in the Plan or in an applicable Award
Agreement, any Award granted prior to such termination, and the authority of the
Board or the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Award or to waive any conditions or rights under such Award,
shall extend beyond such termination date.
<PAGE> 1
EXHIBIT 10.12
ALLIANCE RESOURCE MANAGEMENT GP, LLC
SHORT-TERM INCENTIVE PLAN
1. INTENT.
The purpose of the Short-Term Incentive Plan (the "Plan") is to
motivate the employees of Alliance Resource Management GP, LLC (the "Company")
and its affiliates who perform services for Alliance Resource Partners, L.P., a
Delaware limited partnership, and its subsidiaries (the "Partnership") to
collectively produce outstanding results, encourage superior performance,
increase productivity, and aid in the retention of key employees.
2. PLAN GUIDELINES.
The administration of the Plan and any potential financial renumeration
to come as a result of its implementation is subject to the determination by the
Company's Board of Directors and/or its Compensation Committee (collectively,
the "Compensation Committee") that the performance goals for the applicable
period have been achieved. The Plan is an additional compensation program
designated to encourage Plan Participants (designated by the Company's
Compensation Committee) to exceed specified projected performance levels for
designated periods. The Plan's pay-out pool will be approved by the Company's
Compensation Committee after reviewing the Partnership's performance results for
the designated period.
3. PERFORMANCE TARGETS.
3.1 Designation of Performance Targets. The Compensation Committee
shall determine the "performance measure" and "standard performance target" to
be used for each calendar/fiscal year (a "Plan Year") for determining the pool
of dollars to be distributed as a result of this Plan. Satisfactory results as
determined by the Compensation Committee in its sole discretion must be achieved
in order for a performance pay-out distribution to occur under the Plan.
3.2 Equitable Adjustment to Performance Targets. The performance
criteria for a Plan Year shall be subject to equitable adjustment at the sole
discretion of the Compensation Committee to reflect the occurrence of any
significant events during the Plan Year.
4. PARTICIPANTS.
Designated employees of the Company and its affiliates are eligible to
participate in the Plan to share in the rewards of outstanding performance as it
is linked to individual performance, as
-1-
<PAGE> 2
determined by the Compensation Committee, in consultation with the Company's
President and Chief Executive officer ("CEO").
5. PERFORMANCE PAY.
The size of any performance pay-out distribution pool and a
Participant's designated level of participation in such pool will be determined
under criteria established or approved by the Compensation Committee for that
Plan Year.
6. PROCESS FOR PERFORMANCE PAY-OUT.
6.1 Procedure. After the aggregate performance pay-out distribution
pool for the Plan Year has been determined, the Company's CEO may allocate a
portion of the aggregate performance pay-out pool to each of the Company's
and/or participating affiliates' senior vice presidents, vice presidents and/or
department heads. Such individual's responsibility will be to further allocate,
subject to the CEO's review and approval, the apportioned performance pay-out
distribution pool to Participants assigned within such individual's area of
responsibility based upon the Participant's individual performance during the
Plan Year.
6.2 Communication to Participants. Care will be used in communicating
to any Participant his individual level assignment and potential performance
pay-out distribution amount. Each Participant may or may not receive the
allocated performance pay-out distribution amount depending upon the Company's
performance, department or regional performance, and discretionary allocations
from the Company's Compensation Committee, or its designee(s).
7. DISCRETIONARY PAYMENTS OUTSIDE THE PLAN.
In the event that any Participant's exceptional individual performance
is demonstrated to substantially exceed standard expectations and
responsibilities, the Company's CEO (or his designee(s)) may award and
distribute a discretionary bonus to a Participant. The Company's CEO shall have
the authority to make such discretionary bonus pay-outs; provided, however, if a
discretionary bonus is to be paid to a Participant who also participates in the
Company's Long-Term Incentive Plan such pay-out must be approved in advance by
the Compensation Committee unless and to the extent such advance approval
requirement has been waived by the Compensation Committee.
8. TERMINATION OF EMPLOYMENT.
Termination of employment of a Participant for any reason prior to a
performance pay-out distribution will result in the Participant's forfeiture of
any right, title or interest in a performance pay-out distribution under the
Plan, unless and to the extent waived by the Compensation Committee in its
discretion.
-2-
<PAGE> 3
9. AMENDMENT AND TERMINATION.
The Company's Compensation Committee, at its sole discretion, reserves
the right to amend the Plan and to terminate the Plan at any time.
10. ADMINISTRATION OF PLAN.
10.1 Administration. The Compensation Committee may delegate the
responsibility for the day-to-day administration and operation of the Plan to
the CEO (or his designee(s)) of the Company or any participating affiliate. The
Compensation Committee (or the entity or individual to which administrative
authority has been delegated) shall have the authority to interpret and construe
any and all provisions of the Plan. Any determination made by the Compensation
Committee (or the entity or individual to which administrative authority has
been delegated) shall be final and conclusive.
10.2 Indemnification. Neither the Company, any participating affiliate,
nor the Board of Directors, or any member or any committee thereof, of the
Company or any participating affiliate, nor any employee of the Company or any
participating affiliate shall be liable for any act, omission, interpretation,
construction or determination made in connection with the Plan in good faith;
and the members of the Company's Board of Directors, the Compensation Committee
and/or the employees of the Company or any participating affiliate shall be
entitled to indemnification and reimbursement by the Company to the maximum
extent permitted by law in respect of any claim, loss, damage or expense
(including counsel's fees) arising from their acts, omission and conduct in
their official capacity with respect to the Plan.
11. GENERAL PROVISIONS.
11.1 Non-Guarantee of Employment. Nothing contained in this Plan shall
be construed as a contract of employment between the Company and/or a
participating affiliate and a Participant, and nothing in this Plan shall confer
upon any Participant any right to continued employment with the Company or a
participating affiliate, or to interfere with the right of the Company or a
participating affiliate to discharge a Participant, with or without cause.
11.2 Interests Not Transferable. Except as to withholding of any tax
under the laws of the United States or any state or locality, no benefits under
the Plan shall be subject in any manner to alienation, sale, transfer,
assignment, pledge, attachment or other legal process, or encumbrance of any
kind, and any attempt to do so shall be void.
11.3 Facility Payment. Any amounts payable hereunder to any person
under legal disability or who, in the judgment of the Company's Board of
Directors and/or the Compensation Committee, is unable to properly manage his
financial affairs, may be paid to the legal representative of such person, or
may be applied for the benefit of such person in any manner which the Company's
-3-
<PAGE> 4
Board of Directors and/or the Compensation Committee may select, and each
participating affiliate shall be relieved of any further liability for payment
of such amounts.
11.4 Tax Withholding. The Company and/or any participating affiliate
may deduct from any payments otherwise due under this Plan to a Participant (or
beneficiary) amounts required by law to be withheld for purposes of federal,
state or local taxes.
11.5 Gender and Number. Words in the masculine gender shall include the
feminine gender, the plural shall include the singular and the singular shall
include the plural.
11.6 Controlling Law. To the extent not superseded by federal law, the
law of the State of Delaware shall be controlling in all matters relating to the
Plan.
11.7 No Rights to Award. No person shall have any claim to be granted
any award under the Plan, and there is no obligation for uniformity of treatment
of participants. The terms and conditions of awards need not be the same with
respect to each recipient.
11.8 Severability. If any provision of the Plan or any award is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any person or award, or would disqualify the Plan or any
award under the law deemed applicable by the Compensation Committee, such
provision shall be construed or deemed amended to conform to the applicable
laws, or if it cannot be construed or deemed amended without, in the
determination of the Compensation Committee, materially altering the intent of
the Plan or the award, such provision shall be stricken as to such jurisdiction,
person or award and the remainder of the Plan and any such award shall remain in
full force and effect.
11.9 No Trust or Fund Created. Neither the Plan nor any award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any participating affiliate and a
participant or any other person. To the extent that any person acquires a right
to receive payments from the Company or any participating affiliate pursuant to
an award, such right shall be no greater than the right of any general unsecured
creditor of the Company or any participating affiliate.
11.10 Headings. Headings are given to the Sections of the Plan solely
as a convenience to facilitate reference. Such headings shall not be deemed in
any way material or relevant to the construction or interpretation of the Plan
or any provision thereof.
-4-
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
First Tier Subsidiary:
Alliance Resource Operating Partners, L.P. ("AROP") (98.9999% limited partner
interest)
Second Tier Subsidiary:
Alliance Coal, LLC ("ALLC") (AROP holds a 99.999% non-managing
membership interest)
Third Tier Subsidiaries: (ALLC holds a 100% membership interest in each of the
third-tier subsidiaries)
Alliance Land, LLC
Alliance Properties, LLC
Backbone Mountain, LLC
Excel Mining, LLC
Gibson County Coal, LLC
Hopkins County Coal, LLC
MC Mining, LLC
Mettiki Coal, LLC
Mettiki Coal (WV), LLC
Mt. Vernon Transfer Terminal, LLC
Pontiki Coal, LLC
Toptiki Coal, LLC
Webster County Coal, LLC
White County Coal, LLC
All of the above entities are formed under the laws of the state of Delaware.
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 4-MOS 8-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> AUG-20-1999 JAN-01-1999
<PERIOD-END> DEC-31-1999 AUG-19-1999
<CASH> 8,000 0
<SECURITIES> 42,339 0
<RECEIVABLES> 33,056 37,789
<ALLOWANCES> 0 0
<INVENTORY> 21,130 20,426
<CURRENT-ASSETS> 107,005 60,631
<PP&E> 278,221 260,143
<DEPRECIATION> (102,709) (89,595)
<TOTAL-ASSETS> 314,814 262,762
<CURRENT-LIABILITIES> 46,313 50,179
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (15,928) 151,615
<TOTAL-LIABILITY-AND-EQUITY> 314,814 262,762
<SALES> 128,860 217,033
<TOTAL-REVENUES> 129,218 217,610
<CGS> 96,374 169,804
<TOTAL-COSTS> 123,587 203,438
<OTHER-EXPENSES> 641 531
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,887 100
<INCOME-PRETAX> 6,272 14,703
<INCOME-TAX> 0 4,498
<INCOME-CONTINUING> 6,272 10,205
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