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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 12)*
Westmoreland Coal Company
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $2.50 per share par value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
960878-10-6
----------------------
(CUSIP Number)
Beverly Cole McGuire
c/o Penn Virginia Corporation
One Radnor Corporate Center
Suite 200
100 Matsonford Road
Radnor, PA 1908 610-687-8900
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
May 14 and 15, 1996
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement / /. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of less than five percent of such
class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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This Amendment No. 12 amends and supplements the Statement on
Schedule 13D filed with the Securities and Exchange Commission (the
"Commission") on November 1, 1978 (the "Initial Statement"), as amended by
Amendments Nos. 1-11 filed with the Commission from time to time thereafter
(the Initial Statement and Amendment Nos. 1-11 inclusive, the "Statement"), by
Penn Virginia Equities Corporation, a Delaware corporation ("PVEC"), relating
to the common stock, par value $2.50 per share of Westmoreland Coal Company, a
Delaware corporation ("Westmoreland").
The undersigned hereby amends and supplements Items 4, 6 and 7
of the Statement by adding the following information (capitalized terms used
herein without definition shall have the same meaning as set forth in the
Statement):
Item 4. Purpose of Transaction.
Item 4 is hereby amended by the addition of the following:
On May 14, 1996, PVEC, Penn Virginia Coal Company, a Virginia
corporation ("PVCC"), and Westmoreland entered into an Agreement (the
"Agreement") providing for the partial termination of the lease between PVCC
and Westmoreland (the "Lease") covering certain coal properties in Virginia and
Kentucky. PVEC and PVCC are wholly owned subsidiaries of Penn Virginia
Corporation, a Virginia corporation. In connection with the partial
termination (which was completed on May 15, 1996), PVCC paid Westmoreland $10.8
million cash and agreed to lease some of the coal properties covered by the
partial termination, and some other coal properties, to coal operators who will
assume certain obligations of Westmoreland with respect to the coal properties.
Pursuant to the Agreement, PVEC has granted Westmoreland an option to purchase
for $3 million all of PVEC's equity interest in Westmoreland Resources, Inc.
("WRI"), which represents approximately 16% of the equity of WRI.
The foregoing description of the transaction is qualified in
its entirety by reference to the Agreement, Amended and Restated Lease, dated
May 15, 1996, between PVCC and Westmoreland, and the Stock Option Agreement,
dated May 15, 1996, between PVEC and Westmoreland, which are filed as Exhibits
N, O and P hereto, respectively, and are incorporated herein by reference.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
See Item 4 above.
Item 7. Materials to Be Filed As Exhibits.
<TABLE>
<S> <C>
Exhibit N Agreement, dated May 14, 1996, among Penn Virginia Equities Corporation, Penn Virginia Coal
Company and Westmoreland Coal Company (without schedules or exhibits).
Exhibit O Amended and Restated Lease, dated May 15, 1996, between Penn Virginia Coal Company and
Westmoreland Coal Company (without schedules or exhibits).
Exhibit P Stock Option Agreement, dated May 15, 1996, between Penn Virginia Equities Corporation
and Westmoreland Coal Company.
</TABLE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
PENN VIRGINIA EQUITIES CORPORATION
By: /s/ Beverly Cole McGuire
Beverly Cole McGuire, Secretary
Dated: May 21, 1996
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
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<S> <C> <C>
N Agreement, dated May 14, 1996, among Penn Virginia Equities Corporation , Penn Virginia Coal Company
and Westmoreland Coal Company (without schedules or exhibits) 4
O Amended and Restated Lease, dated May 15, 1996, between Penn Virginia Coal Company and
Westmoreland Coal Company (without schedules or exhibits) 28
P Stock Option Agreement, dated May 15, 1996, between Penn Virginia Equities Corporation
and Westmoreland Coal Company 59
</TABLE>
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EXHIBIT N
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AGREEMENT
AMONG
PENN VIRGINIA COAL COMPANY
PENN VIRGINIA EQUITIES CORPORATION
AND
WESTMORELAND COAL COMPANY
Page 5 of 63
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
TERMS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1. The Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3. Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4. Conditions Precedent to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6. Operations Pending Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9. Litigation Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12. Post-Closing Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
13. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
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LIST OF SCHEDULES
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Schedule A: Lease Amendments
Schedule 2.1(d): Agreements and Consents
Schedule 2.1(f): Litigation
Schedule 2.1(g): Environmental Matters
Schedule 2.2(g): Certain Agreements Affecting WRI Stock
</TABLE>
LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A: Form of RFM Transfer and Assumption of Agreement
Exhibit B: Form of Termination Agreement
Exhibit C: RFM Leased Premises
Exhibit D: Form of SMP Transfer and Assumption of Agreement
Exhibit E: SMP Leased Premises
Exhibit F: Premises Map
Exhibit G: Form of WCC Amended and Restated Lease
Exhibit H: Form of Matt Termination Agreement
Exhibit I: Form of FI Termination Agreement
Exhibit J: Form of Stock Option Agreement
Exhibit K: Form of Acknowledgement
Exhibit L: Form of Release Agreement
Exhibit M: Form of Opinion of Winthrop, Stimson, Putnam & Roberts
Exhibit N: Form of Opinion of WCC General Counsel
Exhibit O: Form of Form of Certificate of Corporate Officer of WCC
Exhibit P: Form of Opinion of Dechert Price & Rhoads
Exhibit Q: Form of Certificate of Corporate Officer of PVCC
Exhibit R: Form of Certificate of Corporate Officer of PVEC
Exhibit S: Definitions
</TABLE>
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<PAGE> 8
AGREEMENT
THIS AGREEMENT (the "Agreement") is dated this 14th day of
May, 1996, among PENN VIRGINIA COAL COMPANY, INC., a Virginia corporation
("PVCC"), PENN VIRGINIA EQUITIES CORPORATION, a Delaware corporation ("PVEC"),
and WESTMORELAND COAL COMPANY, a Delaware corporation ("WCC").
BACKGROUND
A. PVCC (as successor-in-interest to Penn Virginia Resources
Corporation, a Virginia corporation) and WCC are parties to an Amendment and
Restatement of Lease, effective as of July 1, 1988, which lease was amended by
certain amendments set forth on Schedule A attached hereto (as so amended, the
"Existing Lease"), pursuant to which WCC leased, for coal mining purposes,
certain rights and interests in certain lands owned by PVCC and located in Lee
and Wise Counties, Virginia, and Harlan and Letcher Counties, Kentucky,
identified more particularly in the Existing Lease (collectively, the "Original
Leased Premises").
B. PVCC has alleged that WCC has defaulted under the Existing
Lease, and PVCC believes that it is entitled to forfeiture of the Existing
Lease based on lack of diligent mining of the coal located on the Original
Leased Premises.
C. WCC, which disputes and denies such assertion, has ceased
certain of its mining operations on portions of the Original Leased Premises
and has determined that there are areas of the Original Leased Premises which
cannot be mined efficiently and economically and which, therefore, WCC no
longer desires to mine. WCC has determined that it would be beneficial to WCC
to terminate its leasehold interest in the Existing Lease, insofar as the
Existing Lease relates to certain portions of the Original Leased Premises, and
to transfer to third parties its leasehold interest in the Existing Lease,
insofar as the Existing Lease relates to certain other portions of the Original
Leased Premises, in order to improve its cash flow position and in order to be
released from some of its burdensome reclamation obligations thereunder. Under
the Existing Lease, WCC is required to obtain the consent of PVCC in connection
with such transfers.
D. WCC also desires to acquire an option to purchase all of
PVEC's stock interest in Westmoreland Resources, Inc., a Delaware corporation
(the "WRI Stock"), which stock interest is currently approximately 16% of the
common stock thereof.
E. In resolution of the claimed defaults under the Existing
Lease, without any admission or determination thereof, and in consideration for
the other transactions contemplated by this Agreement, and subject to the terms
and conditions set forth herein, (a) PVCC desires to: (i) acknowledge the
continuing effectiveness of the Existing Lease, (ii) accept the partial
termination of the Existing Lease, (iii) provide its consent to WCC's partial
transfers of the Existing Lease, (iv) release WCC from certain obligations
under the Existing Lease, (v) pay to WCC cash consideration of $10,800,000,
(vi) grant WCC access across and additional reserves with respect to certain
portions of the property of PVCC, and (vii) grant the transferees of WCC
certain other rights with respect to the property of PVCC, and (b) PVEC desires
to grant WCC an option to purchase the WRI Stock.
TERMS AND CONDITIONS
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:
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1. The Transaction. At the Closing (as defined hereunder) of
this Agreement:
1.1. Partial Termination of Existing Lease.
(a) WCC shall cause Pine Branch Mining Inc., a
Delaware corporation and its wholly owned subsidiary ("PBMI"), to transfer to
Roaring Fork Mining, Inc., a Virginia corporation ("RFM"), all of PBMI's right,
title and interest in and to the PBMI Sublease (as defined hereunder), which
transfer shall be evidenced by a Transfer and Assumption of Sublease Agreement
in the form attached hereto as Exhibit A (the "RFM Transfer and Assumption
Agreement"). WCC subleased to PBMI, a certain portion of the Original Leased
Premises cross-hatched in red on Exhibit C attached hereto and identified
thereon as "Area of Pine Branch Mining Incorporated 1991 Amended Sublease
reassigned to Roaring Fork Mining Inc." (the "RFM Leased Premises") pursuant to
a Sublease Agreement dated November 1, 1991, as amended (the "PBMI Sublease").
(b) WCC and PVCC shall terminate the Existing
Lease, and WCC's leasehold interest thereunder, insofar as the Existing Lease
relates to all of the Original Leased Premises (including the RFM Leased
Premises), except for that portion of the Original Leased Premises
cross-hatched in red on Exhibit F-1 through and including Exhibit F-7 attached
hereto and identified thereon as "Area Leased to Westmoreland Coal Company
pursuant to the 1996 Amended Lease" (such portion of the Original Leased
Premises cross-hatched in red on Exhibit F-1 through and including Exhibit F-7,
hereinafter referred to as the "WCC Leased Premises"; and such portion of the
Original Leased Premises not cross-hatched in red on Exhibit F-1 through and
including Exhibit F-7, excluding the RFM Leased Premises, hereinafter referred
to as the "PV Terminated Leased Premises"), which termination shall be
evidenced by a Termination Agreement in the form attached hereto as Exhibit B
(the "Termination Agreement").
1.2. Partial Transfer and Assumption of Existing Lease.
(a) WCC will transfer to Stonega Mining and
Processing Company, a Virginia corporation ("SMP"), all of its right, title and
interest in to the Existing Lease, insofar as the Existing Lease relates to a
certain portion of the Original Leased Premises in cross-hatched in red on
Exhibit E attached hereto and identified thereon as "Area of Westmoreland Coal
Co. 1988 Amended Lease Reassigned to Stonega Mining and Processing Company"
(the "SMP Leased Premises"), which transfer shall be evidenced by a Partial
Transfer and Assumption of Lease Agreement in the form attached hereto as
Exhibit D (the "SMP Transfer and Assumption Agreement").
(b) PVCC will consent to the transfers set forth
in each of the Transfer and Assumption Agreements (as defined hereunder), which
consents shall be evidenced by the PVCC Joinder and Consent attached to the
Transfer and Assumption Agreements (the "PVCC Consent to Transfer") and WCC
will consent to the RFM Transfer and Assumption Agreement, which consent shall
be evidenced by the WCC Joinder and Consent attached to the RFM Transfer and
Assumption Agreement (the "WCC Consent to Transfer").
(c) The RFM Transfer and Assumption Agreement and
the SMP Transfer and Assumption Agreement are sometimes referred to herein
together as the "Transfer and Assumption Agreements." The PV Terminated Leased
Premises and the RFM Leased Premises are sometimes referred to hereinafter
together as the "Terminated Leased Premises." The SMP Leased Premises and the
Terminated Leased Premises are sometimes referred to hereinafter together as
the "Released Premises."
1.3. Amendment and Restatement of the Existing Lease. WCC
and PVCC will amend and restate the Existing Lease insofar as the Existing
Lease relates to the WCC Leased Premises, which amendment and restatement shall
be in the form of the Amendment and Restatement of Virginia Lease attached
hereto as Exhibit G (the "WCC Amended and Restated Lease").
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1.4. Termination of Subleases.
(a) WCC will terminate its sublease with Matt
Mining, Inc., dated May 31, 1988, which termination shall be evidenced by a
Sublease Termination Agreement in the form attached hereto as Exhibit H (the
"Matt Termination Agreement").
(b) WCC will terminate its sublease with Fraley's
Inc., dated April 7, 1986, which termination shall be evidenced by a Sublease
Termination Agreement in the form attached hereto as Exhibit I (the "FI
Termination Agreement").
2. Representations and Warranties.
2.1. Representations and Warranties of WCC. WCC
represents, warrants and covenants to PVCC and PVEC as follows:
(a) Organization and Existence. WCC is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware. WCC is authorized to do business and is in good standing
under the laws of Virginia and Kentucky.
(b) Power and Authority. WCC has the corporate
power and authority to execute, deliver and perform this Agreement and each of
the other agreements, instruments and documents to be delivered by WCC to PVCC
and PVEC and all other third parties in connection with this Agreement
(collectively, the "WCC Ancillary Agreements"), and to consummate the
transactions contemplated by this Agreement and by the WCC Ancillary
Agreements.
(c) Authorization. The execution and delivery by
WCC of this Agreement and the WCC Ancillary Agreements and the performance by
WCC of its obligations hereunder and thereunder have been duly and validly
authorized as required by applicable law.
(d) Absence of Conflicting Agreement; Consents.
Except as set forth on Schedule 2.1(d), the execution and delivery by WCC of
this Agreement and of the WCC Ancillary Agreements, including without
limitation, the SMP APA (as defined hereunder) and the RFM APA (as defined
hereunder), and the performance by WCC of the transactions contemplated hereby
and thereby do not (x) violate, conflict with or constitute a breach of, or
default under (either immediately or upon notice, lapse of time or both), (i)
the Certificate of Incorporation or By-laws of WCC, (ii) any foreign, federal,
state or local laws, statutes, regulations, rules, codes or ordinances enacted,
adopted, issued or promulgated by any foreign, federal, state, local or other
governmental authority or regulatory body (collectively, "Governmental Body"),
including, without limitation, those pertaining to electrical, building,
zoning, environmental, mining, and occupational safety and health requirements
and all common law liabilities and obligations related thereto (collectively
"Requirements of Law"), or any judgment, order, writ, injunction, or decree of
any court in effect at the date of this Agreement or on the date of Closing (as
defined hereunder) or, (iii) any agreement, indenture, instrument, covenant,
contract, note, mortgage, lease, license, franchise, permit or other
authorization, right, restriction or obligation to which WCC is a party or any
of its assets is subject or by which WCC is bound, or (y) except for each
Consent to Transfer required under this Agreement, require the consent,
approval, qualification, order or authorization of, or filing with any
Governmental Body, or consent or approval of any Person (as defined hereunder).
(e) Binding Agreement. This Agreement and the
WCC Ancillary Agreements constitute the legal, valid and binding obligation of
WCC, enforceable against WCC in accordance with their respective terms.
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(f) Litigation. Except as set forth on Schedule
2.1(f) attached hereto, there are no lawsuits, claims, suits, proceedings, or
investigations pending or, to the Knowledge of WCC, threatened against or
affecting WCC with respect to the Released Premises nor, to the Knowledge of
WCC, is there any basis for any of the same, and there are no lawsuits, claims,
suits, proceedings, or investigations in which WCC is the plaintiff or claimant
which relate to the Released Premises. WCC is not in default with respect to
any order, writ, injunction or decree of any court or any Governmental Body to
which any or all of the Released Premises is or may be subject and which would
materially adversely affect any of the RFM Leased Premises, the SMP Leased
Premises or the PV Terminated Leased Premises.
(g) Environmental Matters. To the Knowledge of
WCC, and except as set forth on Schedule 2.1(g) attached hereto:
(i) The operations of WCC with respect
to the Released Premises comply in all material respects with all applicable
Requirements of Law derived from or relating to all federal, state, and local
laws or regulations relating to, regulating, imposing liability or standards of
conduct concerning, or addressing the environment, pollution, mining, human
health or safety, including, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Clean Water Act of 1977
(the "Clean Water Act"), the Clean Air Act (the "Clean Air Act"), the Surface
Mining Control and Reclamation Act of 1977 ("SMCRA"), the Toxic Substances
Control Act ("TSCA"), the Federal Mine Safety and Health Act of 1977 ("MSHA"),
and the Resource Conservation and Recovery Act of 1976 ("RCRA") and any state
equivalent thereof and all common law liabilities and obligations related to
the environment, pollution, mining, health or safety (collectively,
"Environmental or Mining Law").
(ii) WCC has obtained all environmental,
health and safety, licenses, franchises, permits, privileges, immunities,
approvals and all other authorizations from any Governmental Body necessary for
its operation with respect to the Released Premises (collectively,
"Governmental Permits") and, regarding current operations with respect to, or
the current condition of, the Released Premises, all such Governmental Permits
are in good standing. WCC is in compliance in all material respects with all
terms and conditions of such Governmental Permits and, with respect to the PV
Terminated Leased Premises, all reclamation required under such Governmental
Permits and under all Environmental or Mining Law has been completed.
(iii) WCC is not, with respect to the
Released Premises, subject to any on-going proceeding or investigation by order
from, or agreement with any individual, corporation, limited liability
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated association or other organization, or Governmental Body
(a "Person") (including, without limitation, any prior owner or operator of the
Released Premises) respecting (a) any Environmental or Mining Law, (b) any
action required to: (1) cleanup, remove, treat or in any other way address any
waste, pollutant, hazardous or toxic substance, petroleum, petroleum-based
substance or waste, special waste or any constituent of any such substance or
waste (collectively, a "Contaminant") in the indoor or outdoor environment, (2)
prevent the release, spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration of a Contaminant into the
indoor or outdoor environment or into or out of the Original Leased Premises,
including the movement of Contaminants through or in the air, soil, surface
water, ground water or the Original Leased Premises (a "Release") or threatened
Release or minimize the further Release of a Contaminant, or (3) investigate
and determine if a remedial response is needed to design such a response and
post-remedial investigation, monitoring, operation and maintenance and care (a
"Remedial Action"), or (c) any claim of loss, cost, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges ("Losses") arising from the Release or threatened
Release of a Contaminant into the environment.
(iv) Other than matters affecting the
mining industry generally, WCC, with respect to the Released Premises, is not
subject to any judicial or administrative proceeding, order,
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<PAGE> 12
judgment, decree, or settlement alleging or addressing a violation of, or
liability under any Environmental or Mining Law.
(v) WCC has not, with respect to the
Released Premises: (A) reported a Release of a hazardous substance pursuant to
CERCLA or any state equivalent; (B) filed a notice pursuant to Section 103(c)
of CERCLA; (C) filed a notice pursuant to Section 3010 of RCRA, indicating the
generation of any hazardous waste, as that term is defined under 40 CFR Part
261 or any state equivalent; or (D) filed any notice under any applicable
Environmental or Mining Law reporting a substantial violation of any applicable
Environmental or Mining Law; and with respect to the Released Premises, and
each of the matters set forth in this subsection, no event has occurred that
would have required WCC to have reported such Release or filed such notice
where WCC failed to do so.
(vi) There is not either on or in the
Released Premises: (A) any treatment, recycling, storage, or disposal of any
hazardous waste, as that term is defined under 40 CFR Part 261 or any state
equivalent that requires or required a Governmental Permit pursuant to Section
3005 of RCRA, or any state equivalent; or (B) any underground storage tank or
surface impoundment.
(vii) There are not on or in the Released
Premises any polychlorinated biphenyls (PCB) used in pigments, hydraulic oils,
electrical transformers, or other equipment.
(viii) WCC has not received any notice or
claim to the effect that it is or may be liable to any Person as a result of
the Release or threatened Release of a Contaminant into the environment from or
on the Released Premises.
(ix) WCC has not, with respect to the
Released Premises, received any request for information in an enforcement
context pursuant to Section 114 of the Clean Air Act, Section 1267 of SMCRA,
Sections 308 and 402 of the Clean Water Act, Sections 8 and 11 of the TSCA,
Sections 3004(u), 3007, 3008, 3010 and 3013 of RCRA, Section 104(e) of CERCLA,
Section 103 of MSHA and similar provisions of applicable state law that have
not been either responded to or abated.
(x) Except for the Governmental Permits,
no lien, claim, charge, security interest, mortgage, pledge, easement,
conditional sale or other title retention agreement, defect in title, covenant
or other restriction of any kind (an "Encumbrance") in favor of any Person for:
(a) any liability under any Environmental or Mining Law or health or safety
Requirements of Law, or (b) damages arising from, or costs incurred by such
Person in response to, a Release or threatened Release of a Contaminant into
the environment (an "Environmental Encumbrance") has attached to the Released
Premises.
(h) Compliance with Existing Lease. The Released
Premises has been used by WCC only in compliance with the terms of the Existing
Lease. Except for the Governmental Permits and the Permitted Encumbrances (as
defined hereunder), WCC has not transferred, assigned, pledged, mortgaged, or
encumbered in any manner the Released Premises or any part thereof.
(i) Title. WCC has not created any Encumbrances
that are currently in effect with respect to any of the RFM Leased Premises,
the SMP Leased Premises or the PV Terminated Leased Premises except: (i) liens
for real property taxes and severance taxes with respect to the Released
Premises not yet due and payable, (ii) easements, rights of way, liens or
imperfections on property which are not material in amount or do not materially
detract from the value of or materially impair the existing use of the property
affected by such lien or imperfection, and (iii) liens of landlords, carriers,
warehousemen, mechanics and materialmen arising in the ordinary course of
business for sums not yet due and payable and (iv) matters which will not
materially adversely affect the value of any of the RFM Leased Premises, the
SMP Leased Premises or the PV Terminated Leased Premises or PVCC's ability to
lease any of the RFM Leased Premises, the SMP
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<PAGE> 13
Leased Premises or the PV Terminated Leased Premises for mining (collectively,
the "Permitted Encumbrances").
(j) Accuracy. No representation or warranty by
WCC in this Agreement and no information in any statement, certificate,
exhibit, or other document furnished or to be furnished to PVCC or PVEC
pursuant hereto or in connection with the transactions contemplated hereby
contains, or at Closing will contain, any untrue statement of a material fact
or omits to state a material fact necessary to make such disclosure not
misleading in the light of the circumstances under which it was made.
(k) WCC Board Committee Action. The Committee of
Independent Directors of the Board of Directors of WCC, at a meeting duly
called and held, determined that the transactions contemplated hereby are fair
and reasonable to WCC.
2.2. Representations and Warranties of PVCC and PVEC.
PVCC and PVEC each represent, warrant and covenant to WCC (with respect only to
itself) as follows:
(a) Organization and Existence. PVCC is a
corporation duly organized, validly existing and in good standing under the
laws of Virginia. PVCC is authorized to do business and is in good standing
under the laws of Kentucky. PVEC is a corporation duly organized, validly
existing and in good standing under the laws of Delaware.
(b) Power and Authority. Each of PVCC and PVEC
has the corporate power and authority to execute, deliver and perform this
Agreement and each of the other agreements, instruments and documents to be
delivered by PVCC or PVEC to WCC in connection with this Agreement
(collectively, the "PV Ancillary Agreements"), and to consummate the
transactions contemplated by this Agreement and by the PV Ancillary Agreements.
(c) Authorization. The execution and delivery by
PVCC and PVEC of this Agreement and the PV Ancillary Agreements and the
performance by PVCC and PVEC of their respective obligations hereunder and
thereunder have been duly and validly authorized by PVCC and PVEC as required
by applicable law.
(d) Absence of Conflicting Agreement; Consents.
The execution and delivery by PVCC and PVEC of this Agreement and the PV
Ancillary Agreements and the performance by PVCC and PVEC of the transactions
contemplated hereby and thereby, do not (x) violate, conflict with, or
constitute a breach of, or default under (either immediately or upon notice,
lapse of time or both), (i) the Certificate of Incorporation or By-laws of PVCC
or PVEC, (ii) any Requirement of Law or any judgment, order, writ, injunction
or decree of any court in effect at the date of this Agreement or on the date
of Closing, or (iii) any agreement, indenture, instrument, covenant, contract,
note, mortgage, lease, license, franchise, permit or other authorization,
right, restriction or obligation to which PVCC or PVEC is a party or any of its
assets is subject or by which it is bound or (y) require the consent, approval,
qualification, order or authorization of, or filing with any Governmental Body,
or consent or approval of any Person.
(e) Binding Agreement. This Agreement and the PV
Ancillary Agreements constitute legal, valid and binding obligations of PVCC
and PVEC, enforceable against each in accordance with their respective terms.
(f) Litigation. There is no pending or, to the
Knowledge of PVCC or PVEC, threatened suit, claim, action, litigation, or
administrative, arbitration or other proceeding or governmental inquiry or
investigation to which PVCC or PVEC is, or may be made a party questioning the
validity of this Agreement, any of the PV Ancillary Documents or the
transactions contemplated hereby or thereby.
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<PAGE> 14
(g) Ownership of Stock. PVEC owns the WRI Stock
free and clear of all Encumbrances other than those imposed by Requirements of
Law and by the agreements set forth on Schedule 2.2(g) attached hereto.
3. Consideration. For and in consideration of the transactions
contemplated by this Agreement, at Closing:
3.1. Cash Purchase Price. PVCC shall pay to WCC the sum
of Ten Million Eight Hundred Thousand Dollars ($10,800,000) (the "Cash
Purchase Price") by wire transfer of immediately available federal funds as
follows: Westmoreland Coal Company, PNC Bank, Philadelphia, Pennsylvania, ABA
No. 031000053, Account No. 85-5835-4373.
3.2. Consents to Transfer. PVCC shall deliver a Consent
to Transfer in connection with each Transfer and Assumption Agreement.
3.3. Termination Agreement. PVCC shall deliver its
counterpart of the Termination Agreement.
3.4. WRI Stock Option. PVEC shall grant to WCC an option
to purchase the WRI Stock, which option shall be in the form of the Stock
Option Agreement attached hereto as Exhibit J (the "Stock Option Agreement").
3.5. Acknowledgement. PVCC shall acknowledge that the
Existing Lease is in full force and effect, which acknowledgement shall be in
the form of the Acknowledgement attached hereto as Exhibit K (the
"Acknowledgement").
3.6. Release Agreement. PVCC shall each release WCC from
certain obligations and liabilities, which release shall be in the form of the
Release Agreement attached hereto as Exhibit L (the "Release Agreement").
3.7. Access.
(a) PVCC shall grant to WCC certain additional
access and mining rights with respect to Stone Mountain Reserve as set forth in
and as evidenced by the WCC Amended and Restated Lease.
(b) PVCC shall grant to RFM and SMP certain
additional access and mining rights as set forth in and as evidenced by
separate lease agreements between PVCC and RFM, and PVCC and SMP, respectively.
4. Conditions Precedent to Closing.
4.1. Conditions Precedent to PVCC's and PVEC's
Obligations. All of PVCC's and PVEC's obligations under this Agreement are
expressly conditioned upon the satisfaction at or before the time of Closing
hereunder of each of the following conditions (any one or more of which may be
waived in writing in full or in part by PVCC or PVEC at their option):
(a) Asset Purchase Agreements.
(i) PBMI and RFM shall have entered into
an asset purchase agreement in form and substance satisfactory to PVCC in its
sole discretion (the "RFM APA").
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<PAGE> 15
(ii) WCC and SMP shall have entered into
an asset purchase agreement in form and substance satisfactory to PVCC in its
sole discretion (the "SMP APA").
(iii) Closings under each of the RFM APA
and the SMP APA shall have occurred, without waivers of any conditions thereto,
except as agreed to in writing by PVCC in its sole discretion.
(b) Amendment of Existing Lease.
(i) RFM and PVCC shall have entered into
an Amendment and Restatement of Lease Agreement in form and substance
satisfactory to PVCC in its sole discretion (the "RFM Amended and Restated
Lease").
(ii) SMP and PVCC shall have entered into
an Amendment and Restatement of Lease Agreement in form and substance
satisfactory to PVCC in its sole discretion (the "SMP Amended and Restated
Lease").
(c) No Changes or Destruction of Released
Premises. Between the date hereof and the Closing Date, there shall have been
(i) no material adverse change in any of the RFM Leased Premises, the SMP
Leased Premises or the PV Terminated Leased Premises; (ii) no material adverse
federal or state legislative or regulatory change affecting any of the RFM
Leased Premises, the SMP Leased Premises or the PV Terminated Leased Premises;
and (iii) no material damage to any of the RFM Leased Premises, the SMP Leased
Premises or the PV Terminated Leased Premises by fire, flood, casualty, act of
God or the public enemy, or other cause, regardless of insurance coverage for
such damage.
(d) No Litigation. No action, claim, suit, or
proceeding shall have been instituted or threatened to restrain or prohibit or
otherwise challenge the legality or validity of the transactions contemplated
hereby.
(e) Representations and Warranties. Each of the
representations and warranties of WCC contained or referred to in this
Agreement shall be true and correct on the Closing Date as though made on and
as of the Closing Date, except for changes therein specifically permitted in
this Agreement or resulting from any transaction expressly consented to in
writing by PVCC and PVEC.
(f) Performance. WCC shall have performed,
observed and complied with all covenants, agreements and conditions required by
this Agreement to be performed, observed and complied with on its part prior to
or as of the Closing Date.
(g) Documents and Deliveries. All instruments
and documents required on WCC's part to effect this Agreement and the
transactions contemplated hereby shall be delivered to PVCC and PVEC and shall
be in form and substance consistent with the requirements of this Agreement and
otherwise reasonably satisfactory to PVCC, PVEC and its counsel.
4.2. Conditions Precedent to WCC's Obligations. All of
WCC's obligations under this Agreement are expressly conditioned on the
satisfaction at or before the time of Closing hereunder of each of the
following conditions (any one or more of which may be waived in writing in
whole or in part by WCC, at WCC's option):
(a) Asset Purchase Agreement.
(i) WCC and RFM shall have entered into
the RFM APA.
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<PAGE> 16
(ii) WCC and SMP shall have entered into
the SMP APA.
(iii) Closings under each of the RFM APA
and the SMP APA shall have occurred, without waivers of any conditions thereto,
except as agreed to in writing by PVCC, in its sole discretion.
(b) No Litigation. No action, claim, suit or
proceeding shall have been instituted or threatened to restrain, prohibit or
otherwise challenge the legality or validity of the transactions contemplated
hereby.
(c) Representations and Warranties. Each of the
representations and warranties of PVCC and PVEC contained or referred to in
this Agreement shall be true and correct on the Closing Date as though made on
and as of the Closing Date, except for changes therein specifically permitted
in this Agreement or resulting from any transaction expressly consented to in
writing by WCC.
(d) Performance. PVCC and PVEC shall have
performed, observed and complied with all covenants, agreements and conditions
required by this Agreement to be performed, observed and complied with on its
part prior to or as of the Closing Date.
(e) Documents and Deliveries. All instruments
and documents required on PVCC's and PVEC's part to effect this Agreement and
the transactions contemplated hereby shall be delivered to WCC and shall be in
form and substance consistent with the requirements of this Agreement and
otherwise reasonably satisfactory to WCC and its counsel.
5. Closing.
5.1. Time and Place. The closing of the transactions
contemplated by this Agreement (the "Closing") shall occur at 9:00 a.m. on May
14, 1996, or on such date and at such time as may be mutually agreed to by the
parties hereto (the "Closing Date"), at the offices of Winthrop, Stimson,
Putnam & Roberts, 1133 Connecticut Avenue, N.W., Washington, D.C. 20036. Any
party hereto may terminate this Agreement by written notice to the other
parties hereto if the Closing shall not have occurred on or before May 14,
1996.
5.2. Deliveries by WCC. Subject to the satisfaction or
waiver of the conditions precedent set forth in Section 4.2 hereinabove, at
Closing, WCC shall deliver, or cause to be delivered, to PVCC and PVEC the
following (all in form and substance reasonably satisfactory to WCC and WCC's
counsel):
(a) Fully executed originals of each Transfer and
Assumption Agreement.
(b) An original executed WCC Consent to Transfer
for the RFM Transfer and Assumption Agreement.
(c) An original executed counterpart of the
Termination Agreement.
(d) An original executed counterpart of the WCC
Amended and Restated Lease.
(e) An original executed counterpart of the
Release Agreement.
(f) An original executed counterpart of the Stock
Option Agreement.
(g) Fully executed copies of each of the RFM APA
and the SMP APA, certified by a duly authorized officer of WCC to be true,
complete and correct.
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<PAGE> 17
(h) A fully executed copy of the Matt Termination
Agreement.
(i) A fully executed copy of the FI Termination
Agreement.
(j) An opinion of counsel from Winthrop, Stimson,
Putnam & Roberts, which opinion shall be to the effect set forth on Exhibit M
attached hereto.
(k) An opinion of the general counsel of WCC,
which opinion shall be to the effect set forth on Exhibit N attached hereto.
(l) A fully executed original certificate of a
corporate officer of WCC, which certificate shall be in the form of the
Certificate of Corporate Officer attached hereto as Exhibit O.
(m) Any monies due and owing to PVCC under the
terms of the Existing Lease which are ascertainable or subject to good-faith
estimation as of the date of Closing. WCC may, at its election, pay such sums
to PVCC at Closing in immediately available federal funds or cause such amount
to be deducted from the Cash Purchase to be delivered by PVCC to WCC pursuant
to Section 3.1 of this Agreement.
(n) Such other documents, instruments and
writings as PVCC or PVEC may reasonably request in order to consummate the
transactions contemplated by this Agreement.
5.3. Deliveries by PVCC. Subject to the satisfaction or
waiver of the conditions set forth in Section 4.1 hereinabove, at Closing, PVCC
shall deliver, or cause to be delivered, to WCC the following (all in form and
substance reasonably satisfactory to PVCC and PVCC's counsel):
(a) Payment of the Cash Purchase Price.
(b) An original executed counterpart of the
Termination Agreement.
(c) An original executed PVCC Consent to Transfer
for each Transfer and Assumption Agreement.
(d) An original executed counterpart of the WCC
Amended and Restated Lease.
(e) A fully executed original of the
Acknowledgement.
(f) An original executed counterpart of the
Release Agreement.
(g) An opinion of counsel from Dechert Price &
Rhoads, which opinion shall be to the effect set forth on Exhibit P attached
hereto.
(h) A fully executed original certificate of a
corporate officer of PVCC, which certificate shall be in the form of the
Certificate of Corporate Officer attached hereto as Exhibit Q.
5.4. Deliveries of PVEC. Subject to the satisfaction or
waiver of the conditions set forth in Section 4.1 hereinabove, at Closing, PVEC
shall deliver, or cause to be delivered, to WCC the following (all in form and
substance reasonably satisfactory to PVEC and PVEC's counsel):
(a) An original executed counterpart of the Stock
Option Agreement.
(b) An opinion of counsel from Dechert Price &
Rhoads, which opinion shall be to the effect set forth on Exhibit P attached
hereto.
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<PAGE> 18
(c) A fully executed original certificate of a
corporate officer of PVEC, which certificate shall be in the form of the
Certificate of Corporate Officer attached hereto as Exhibit R.
6. Operations Pending Closing. Except as contemplated by this
Agreement, or except with the express written approval of PVCC, between the
date of this Agreement and the date of Closing, WCC: (a) shall perform all of
its obligations under the Existing Lease (including but not limited to the
payment of any royalties and amounts at least due thereunder); and (b) shall
use its best efforts to maintain the Released Premises in at least its present
condition; and (c) shall not enter into any contract for the sale, lease, or
contract mining of any of the Released Premises or exercise any option to
extend any lease for any portion thereof; and (d) shall not sell, lease (as
lessor), transfer, or otherwise dispose of (including, without limitation, any
transfers from WCC to any Person that directly or indirectly controls, is
controlled by, or is under common control with (an "Affiliate"), WCC), or
mortgage or pledge, or impose or suffer to be imposed, any Encumbrance on all
or any portion of the Released Premises, except for the Permitted Encumbrances.
7. Expenses. Each of the parties shall be responsible for and
shall pay all costs and expenses incurred by it in connection with this
Agreement and the transactions contemplated hereby, including, without
limitation, all fees, expenses, and disbursements of the counsel, accountants,
investment advisors, valuation firms, and others it has retained and any other
expenses incident to its negotiation and preparation of this Agreement and to
its performance and compliance with all agreements and conditions contained
herein on its part to be performed or complied with.
8. Further Assurances. In addition to the obligations required
to be performed hereunder by WCC, PVCC and PVEC at Closing, each party hereto
will perform such other acts, and execute, acknowledge and deliver, subsequent
to Closing, such other instruments, documents and other materials as any of the
parties may reasonably request and as shall be necessary in order to more fully
effect the consummation of the transactions contemplated hereby. Each party
will use its best efforts to cause the conditions under its control to its
obligations hereunder to be satisfied.
9. Litigation Assistance. Following the Closing, PVCC shall
provide to WCC, and WCC shall provide to PVC, such information and documents,
from any time prior to the date of Closing, as may be reasonably requested in
connection with any suit, claim, investigation, or proceeding, pending or
threatened, that relates to the Released Premises and in connection therewith
each party shall, without limitation, make available to the other party during
normal business hours (i) all books and records relating thereto in its
possession, and (ii) all employees of such party or its Affiliates having
knowledge of the matters in controversy. Such access shall be afforded upon
receipt of reasonable advance notice and shall not unreasonably interfere with
the operations of the party being requested to furnish the information. The
party requesting the information shall be responsible for all costs or expenses
incurred by the party furnishing the information pursuant to this Section 9.
10. Indemnification.
10.1. Indemnification by PVCC and PVEC. PVCC and PVEC
(individually and not jointly and severally) each agree to indemnify and hold
harmless WCC and its Affiliates, and their respective successors and assigns
(each, a "WCC Indemnified Party"), from and against, and reimburse any WCC
Indemnified Party with respect to, any and all claims, suits, demands, Losses,
damages, costs, expenses and deficiencies, judgments and liabilities,
(including reasonable legal fees and other costs and expenses related thereto)
(collectively, a "Liability") incurred by any WCC Indemnified Party by reason
of, or arising out of, or in connection with a breach of any representation,
warranty or covenant made by PVCC or PVEC in, or PVCC's or PVEC's failure to
perform any obligation required by, this Agreement or the PV Ancillary
Agreements. PVCC's and PVEC's indemnity obligations under this Section 10.1
shall terminate on the day prior to the third (3rd) anniversary of the date of
Closing with respect to all of the representations and warranties set forth in
Section 2.2 of this Agreement, except for such indemnity obligations related to
those
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<PAGE> 19
representations and warranties set forth in Sections 2.2(a), (b), (c), (d) and
(e), as to which no time limitation shall apply. Notwithstanding the
foregoing, PVCC's and PVEC's indemnification obligations under this Section
10.1 shall continue as to any Liability of which any WCC Indemnified Party has
notified PVCC and PVEC in accordance with the requirements of Section 10.3
hereunder on or prior to the date such indemnification would otherwise
terminate in accordance with this Section 10.1, as to which the obligation of
PVCC and PVEC shall continue until the liability of PVCC and PVEC shall have
been determined pursuant to this Section 10.1, and PVCC and PVEC shall have
reimbursed all WCC Indemnified Parties for the full amount of such Liability in
accordance with this Section 10.1.
10.2. Indemnification by WCC. WCC agrees to indemnify and
hold harmless PVCC, PVEC and their respective Affiliates and each of their
respective successors and assigns (each, a "PV Indemnified Party") from and
against, and reimburse any PV Indemnified Party with respect to any Liability
incurred by any PV Indemnified Party by reason of, or arising out of, or in
connection with, a breach of any representation, warranty or covenant made by
WCC in, or WCC's failure to perform any obligation required by, this Agreement
or the WCC Ancillary Agreements or any failure of WCC to obtain any Required
Consents prior to Closing. WCC's indemnity obligations under this Section 10.2
shall terminate on the day prior to the third (3rd) anniversary of the date of
Closing with respect to all of the representations and warranties set forth in
Section 2.1 of this Agreement, except for such indemnity obligations related to
those representations and warranties set forth in Sections 2.1(a), (b), (c),
(d) and (e), as to which no time limitation shall apply. Notwithstanding the
foregoing, WCC's indemnification obligations under this Section 10.2 shall
continue as to any Liability of which any PV Indemnified Party has notified WCC
in accordance with the requirements of Section 10.3 hereunder on or prior to
the date such indemnification would otherwise terminate in accordance with this
Section 10.2, as to which the obligation of WCC shall continue until the
liability of WCC shall have been determined pursuant to this Section 10.2, and
WCC shall have reimbursed all PV Indemnified Parties for the full amount of
such Liability in accordance with this Section 10.2.
10.3. Indemnification Procedure.
(a) Any PV Indemnified Party or WCC Indemnified
Party (the "Indemnified Party") seeking indemnification hereunder shall give to
the party obligated to provide indemnification to such Indemnified Party (the
"Indemnitor") a notice (a "Liability Notice") describing in reasonable detail
the facts giving rise to any Liability for indemnification hereunder and shall
include in such Liability Notice (if then known) the amount or the method of
computation of the amount of such Liability and a reference to the provision of
this Agreement or any other agreement, document or instrument executed
hereunder or in connection herewith upon which such Liability is based;
provided that a Liability Notice in respect of any action at law or suit in
equity by or against a third Person as to which indemnification will be sought
shall be given promptly after the action or suit is commenced; and provided,
further, that failure to give such notice shall not relieve the Indemnitor of
its obligations hereunder except to the extent it shall have been prejudiced by
such failure.
(b) After the giving of any Liability Notice
pursuant hereto, the amount of indemnification to which an Indemnified Party
shall be entitled under this Section 10 shall be determined: (i) by the
written agreement between the Indemnified Party and the Indemnitor; (ii) by a
final judgment or decree of any court of competent jurisdiction; or (iii) by
any other means to which the Indemnified Party and the Indemnitor shall agree.
The judgment or decree of a court shall be deemed final when the time for
appeal, if any, shall have expired and no appeal shall have been taken or when
all appeals taken shall have been finally determined. The Indemnified Party
shall have the burden of proof in establishing the amount of Liability suffered
by it.
(c) The Indemnified Party shall have the right to
conduct and control, through counsel of its choosing, the defense, compromise,
or settlement of any third Person Liability, action, or suit against such
Indemnified Party as to which indemnification will be sought by any Indemnified
Party from any
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<PAGE> 20
Indemnitor hereunder, and in any such case the Indemnitor shall cooperate in
connection therewith and shall furnish such records, information and testimony,
and attend such conferences, discovery proceedings, hearings, trials and
appeals as may be reasonably requested by the Indemnified Party in connection
therewith; provided, that the Indemnitor may participate, through counsel
chosen by it and at its own expense, in the defense of any such Liability as to
which the Indemnified Party has so elected to conduct and control the defense
thereof; and provided, further, that the Indemnified Party shall not, without
the written consent of the Indemnitor (which written consent shall not be
unreasonably withheld), pay, compromise or settle any such Liability except
that no such consent shall be required if, following a written request from the
Indemnified Party, the Indemnitor shall fail, within fourteen (14) days after
the making of such request, to acknowledge and agree in writing that, if such
Liability shall be adversely determined, such Indemnitor has an obligation to
provide indemnification hereunder to such Indemnified Party. The rights of
indemnification conferred in this Section are not intended to modify, diminish
or supersede in any respect any other indemnification rights to which any of
the parties hereto may be entitled.
10.4. Representations, Warranties and Covenants of the
Parties to be Continuing. All representations, warranties, agreements,
covenants and indemnification of the parties contained in this Agreement shall
survive the execution and delivery of this Agreement, except as may be
specifically provided in this Section 10.
11. Notices. All notices and other communications hereunder shall
be in writing (whether or not a writing is expressly required hereby), and
shall be deemed to have been given (i) if hand delivered or sent by an express
mail service or by courier, then if and when delivered to and received by the
respective parties at the below addresses (or at such other address as a party
may hereafter designate for itself by notice to the other party as required
hereby), (ii) if mailed, then on the third business day following the date on
which such communication is deposited in the United States Mail, by first class
certified mail, return receipt requested, postage prepaid, and addressed to the
respective parties at the below addresses (or at such other address as a party
may hereafter designate for itself by notice to the other party as required
hereby), or (iii) if sent by telecopy, on the date shown on the confirmation of
receipt received by the transmitting party:
11.1. If to PVCC:
U.S. Highway 58 & 421 West
P.O. Box 386
Duffield Industrial Park
Duffield, VA 24244
Attention: Keith D. Horton
Telecopy Number: (540) 431-4132
11.2. If to PVEC:
Hand Delivery/Express Mail/Telecopy:
1105 North Market Street
Suite 1300
Wilmington, DE 19801
Attention: A. James Dearlove
Telecopy Number: (302) 427-7388
U.S. Mail:
P.O. Box 8985
Wilmington, DE 19899
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11.3. If to WCC:
14th Floor
2 North Cascade Avenue
Colorado Springs, CO 80803
Attention: President
Telecopy Number: (719) 448-5825
12. Post-Closing Adjustments.
12.1. Items to Be Prorated. WCC shall have the benefit of
any income from the PV Terminated Leased Premises which accrued prior to the
date of Closing (the "Valuation Date"). WCC shall be responsible for and shall
pay for all of the expenses and liabilities which accrued with respect to the
Released Premises prior to the Valuation Date. Without limiting the generality
of the foregoing, WCC shall be responsible for all real property taxes,
including all assessments ("Property Taxes"), attributable to the Released
Premises for the period prior to the Valuation Date. PVCC shall be responsible
for all Property Taxes attributable to the PV Terminated Leased Premises for
the period from and after the Valuation Date. WCC and PVCC shall each pay half
of any recording, transfer, sales, and similar taxes required to be paid in
connection with the termination of the Existing Lease, insofar as the Existing
Lease relates to the PV Terminated Leased Premises set forth herein.
12.2. Procedure for Post-Closing Adjustment. WCC shall,
within thirty (30) days after Closing, prepare and deliver to PVCC a notice
(the "Notice") setting forth its calculation of all monies due and owing to
PVCC under the terms of the Existing Lease but which were not ascertainable as
of the date of Closing and pursuant to Section 12.1 above (the "Revenues") and
specifying, in reasonable detail, the basis for such calculation, including any
set-offs or credits which WCC may claim (the Revenues with such deductions
being the "Post-Closing Adjustment"). PVCC shall, within thirty (30) days
after its receipt of the Notice, respond in writing to WCC either to accept
WCC's calculation of the Post-Closing Adjustment or, if its disagrees with such
calculation, specify in reasonable detail those items or amounts in the Notice
with which its disagrees (the "Disagreement Notice"). PVCC and WCC shall use
their best efforts to reach agreement on the disputed items or amounts in order
to determine the Post-Closing Adjustment. If the parties do not resolve all
disputed items within ten (10) business days after delivery of the Disagreement
Notice, this Agreement and the disputed items and amounts will be submitted to
binding arbitration in Philadelphia, Pennsylvania under the Commercial
Arbitration Rules of the American Arbitration Association (the "Rules"), to be
arbitrated by a single arbitrator selected in accordance with the Rules, the
time periods for all proceedings in the arbitration shall be shortened if
necessary so that a decision shall be rendered within forty-five (45) days
after the submission of the matter to arbitration, and judgment on the arbitral
award may be entered and enforced in any court of competent jurisdiction.
Within ten (10) business days after the final determination of the Post-Closing
Adjustment, WCC will pay to PVCC in immediately available federal funds to an
account designated by PVCC, a sum of money equal to the Post-Closing
Adjustment, plus interest compounded annually at the prime rate announced from
time to time by Citibank, N.A., as in effect on the first day of each
applicable month, from the Closing Date to the date the payment is made.
Interest payable under the provisions of this Section 12.2 shall be computed on
the basis of a 360-day year and actual days elapsed. With respect to Property
Taxes attributable to the period prior to the Valuation Date, but for which a
bill has not been issued by the applicable taxing authorities, at Closing
hereunder, WCC shall pay to PVCC (or at WCC's election, WCC may cause such
amount to be deducted from the Cash Purchase Price) its proportionate share of
such Property Taxes based on all such Property Taxes assessed in the
immediately preceding tax year. PVCC shall notify WCC in writing after its
receipt of the actual bill for such Property Taxes, and WCC shall, within
thirty (30) days after its receipt of such notice, pay PVCC any additional
Property Tax due under the terms of this Section 12.
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13. Miscellaneous.
13.1. Retention of and Access to Records After Closing.
(a) For a period of seven (7) years after the
Closing Date, WCC and its representatives shall have reasonable access to all
of the books and records of PVCC relating to the Released Premises prior to the
date of Closing to the extent that such access may reasonably be required by
WCC in connection with matters relating to or affected by the Released Premises
prior to the Closing Date (including for the preparation of tax returns and
financial statements and other reasonable purposes). Such access shall be
afforded by PVCC upon receipt of reasonable advance written notice and during
normal business hours. WCC shall be solely responsible for any costs or
expenses incurred by it pursuant to this Section 13.1(a). If PVCC shall desire
to dispose of any of such books and records prior to the expiration of such
seven-year period, PVCC shall, prior to such disposition, give WCC a reasonable
opportunity, at WCC's expense, to segregate and remove such books and records
as WCC may select as permitted in accordance with this Section 13.1(a).
(b) For a period of seven (7) years after the
Closing Date, PVCC and its representatives shall have reasonable access to all
of the books and records of WCC relating to the Released Premises prior to the
date of Closing. Such access shall be afforded by WCC and its Affiliates upon
receipt of reasonable, advance written notice and during normal business hours.
PVCC shall be solely responsible for any costs and expenses incurred by it
pursuant to this Section 13.1(b). If WCC or any of its Affiliates shall desire
to dispose of any of such books and records prior to the expiration of such
seven-year period, WCC shall, prior to such disposition, give PVCC a reasonable
opportunity, at PVCC's expense, to segregate and remove such books and records
as PVCC may select as permitted in accordance with this Section 13.1(b).
13.2. Brokers. Each party represents to the other that
neither has made any agreement or taken any action which may cause any broker,
agent or Person to become entitled to a brokerage or other fee or commission
from such other party as a result of the transactions contemplated by this
Agreement. PVCC and WCC each hereby indemnifies and shall defend the other
from any and all claims, actual or threatened, for compensation by any third
Person by reason of such party's breach of its representation or warranty
contained in this Section 13.2.
13.3. Interpretation.
(a) The headings preceding the text of the
sections hereof (and in the Exhibits and Schedules hereto) are inserted solely
for convenience of reference and shall not constitute a part of this Agreement,
nor shall they affect its meaning, construction or effect.
(b) Words importing the singular include the
plural and words importing the plural include the singular and words importing
gender include the masculine, feminine and neuter genders.
(c) A reference to any law includes any amendment
or modification thereto and any successor statute, all rules and regulations
promulgated under such law, and all administrative and judicial authority
exercisable thereunder.
(d) A reference to any Person includes its
successors and permitted assigns.
(e) All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles.
(f) 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 all Exhibits and Schedules hereto, and not to
any particular provisions of this Agreement, and references to Sections,
Schedules, and Exhibits are to Sections, Schedules, and
Page 22 of 63
<PAGE> 23
Exhibits to this Agreement unless the context clearly requires otherwise.
13.4. Background Recitals; Exhibits; Schedules. The
recitals contained in the portion of this Agreement entitled "Background" and
the Exhibits and Schedules referenced herein are hereby incorporated into this
Agreement and made a part hereof.
13.5. Governing Law; Parties at Interest. This Agreement
shall be governed by Delaware law and (subject to Section 13.6 hereunder) will
bind and inure to the benefit of the parties hereto and their respective
successors and assigns.
13.6. Assignment. WCC may not assign all or any part of
its interest under this Agreement without the prior written consent of PVCC and
PVEC. PVCC may assign all or any portion of its interest under this Agreement
to a transferee of all or any portion of the Original Leased Premises and in
such event, WCC shall render performance of its obligations hereunder to the
applicable owner or owners of all or any portion of the Original Leased
Premises.
13.7. Recording. Neither this Agreement nor any of the PV
Ancillary Agreements or the WCC Ancillary Agreements shall be recorded in any
place of public record (except as the parties hereto shall be required in
connection with applicable securities laws and except only the Memorandum), and
if PVCC, PVEC or WCC shall record this Agreement or cause or permit the same to
be recorded without the prior written consent of the other party, such other
party may, at its option, elect to treat such act as a breach of this Agreement
and cause the same to be removed from record at the expense of the party
responsible for such recording.
13.8. Severability. Any provision in this Agreement or the
PV Ancillary Agreements or the WCC Ancillary Agreements that is unenforceable
or invalid in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such unenforceability or invalidity without affecting the
remaining provisions hereof or thereof or affecting the operation,
enforceability or validity of such provision in any other jurisdiction.
13.9. Effect of Permitted Termination. In the event that
this Agreement shall be terminated pursuant to any provision hereof permitting
such termination, all further obligations of the parties under this Agreement
(other than those set forth in Sections 7 and 13.17) shall be terminated
without further liability of any party to the other; provided that nothing
herein shall relieve any party from liability for its willful breach of this
Agreement.
13.10. Counterparts. This Agreement may be executed in
counterparts, which when assembled with the signatures of all parties hereto,
shall constitute an executed original of this Agreement.
13.11. Entire Agreement; Amendments. This Agreement and
the Exhibits and Schedules hereto set forth all of the promises, covenant and
supersede all prior and contemporaneous agreements and understandings,
inducements or conditions, express or implied, oral or written, except as
contained herein, unless otherwise provided therein. This Agreement may not be
changed orally but only by an agreement in writing, duly executed by or on
behalf of the party or parties against whom enforcement of any waiver, change,
modification, consent or discharge is sought. Any term or provision of this
Agreement may be waived, or the time for its performance may be extended, by
the party or parties entitled to the benefit thereof. Any such waiver shall be
validly and sufficiently authorized for the purposes of this Agreement if, as
to any party, it is authorized in writing by an authorized representative of
such party. The failure of any party hereto to enforce
Page 23 of 63
<PAGE> 24
at any time any provision of this Agreement shall not be construed to be a
waiver of such provision nor in any way to affect the validity of this
Agreement or any part hereof or the right of any party thereafter to enforce
each and every such provision. No waiver of any breach of this Agreement shall
be held to constitute a waiver of any other or subsequent breach.
13.12. No Other Beneficiaries. This Agreement is being
made and entered into solely for the benefit of WCC, PVCC and PVEC, and none of
WCC, PVCC or PVEC intends hereby to create any rights in favor of any other
person, as a third party beneficiary of this Agreement, or otherwise.
13.13. Definitions. For reference purposes, each of the
defined terms used throughout this Agreement has been listed in alphabetical
order, along with the section in which such term is defined, on Exhibit S
attached hereto and made a part hereof.
13.14. Joint Work Product. This Agreement is the joint
work product of the duly authorized representatives of the parties hereto and,
accordingly, in the event of ambiguity, no inferences shall be drawn against
any party.
13.15. Knowledge. The "Knowledge of WCC" shall mean the
actual knowledge of any officer of WCC and the "Knowledge of PVCC or PVEC"
shall mean the actual knowledge of any officer of PVCC or PVEC, respectively.
13.16. Completion of Reclamation. WCC covenants that, with
respect to unfinished reclamation on the PV Terminated Leased Premises as set
forth on Schedule 2.1(g), it shall diligently complete all reclamation required
under all Governmental Permits and under all Environmental or Mining Law.
13.17. Confidential Nature of Information. Each party
agrees that it will treat in confidence all documents, materials, and other
information that it shall have obtained regarding the other party during the
course of the negotiations leading to the consummation of the transactions
contemplated hereby (whether obtained before or after the date of this
Agreement), the investigation provided for herein, and the preparation of this
Agreement and other related documents, and, in the event the transactions
contemplated hereby shall not be consummated, each party will return to the
other party all copies of non-public documents and materials that have been
furnished in connection therewith. Such documents, materials and information
shall not be communicated to any third Person (other than, in the case of PVCC
and PVEC, to their respective counsel, accountants, financial advisors, lenders
and, in the case of WCC, to its counsel, accountants or financial advisors).
No party hereto shall use any confidential information in any manner whatsoever
except solely for the purpose of evaluating the transactions contemplated
hereby and no party hereto shall issue a press release regarding the
transactions contemplated under this Agreement unless and until Closing occurs;
provided, however, that after the Closing, PVCC may use or disclose any
confidential information related to the Released Premises and either party may
issue a press release regarding the transactions which occurred as a result of
Closing as long as it has sent to the other parties hereto a copy of any such
press release prior to its public release. The obligation of each party to
treat such documents, materials, and other information in confidence and to
refrain from issuing a press release as aforesaid shall not apply to any
information that (i) is or becomes available to a person from a source other
than such party, (ii) is or becomes available to the public other than as a
result of disclosure by such party or its agents, (iii) is required to be
disclosed under applicable law or judicial process, but only to the extent it
must be disclosed, as determined by the disclosing party in its reasonable
discretion, or (iv) such party reasonably deems necessary to consummate the
transactions contemplated hereby. Notwithstanding the foregoing, such
confidential information may be disclosed by WCC or PVCC and PVEC to RFM, SMP
and Morrison-Knudsen Company, Inc. ("MK") to the extent necessary in order to
carry out the transactions contemplated hereby and by the WCC Ancillary
Agreements and the PV Ancillary Agreements.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement on the date first above written.
Page 24 of 63
<PAGE> 25
PENN VIRGINIA COAL COMPANY
By: /s/ Keith D. Horton
President
PENN VIRGINIA EQUITIES CORPORATION
By: /s/ A. James Dearlove
President
WESTMORELAND COAL COMPANY
By: /s/ Robert J. Jaeger
Senior Vice President
Dated: May 14, 1996
Page 25 of 63
<PAGE> 26
EXHIBIT S TO THE AGREEMENT
DEFINITIONS
<TABLE>
<CAPTION>
SECTION
TERM DEFINED
- ---- -------
<S> <C>
Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6..(d)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
Cash Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(i)
Clean Air Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(i)
Clean Water Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(i)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1
Contaminant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(iii)
Disagreement Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
Encumbrance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(x)
Environmental Encumbrance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(x)
Environmental or Mining Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(i)
Existing Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Background
FI Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4.(b)
FI Termination Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4.(b)
Governmental Body . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(d)
Governmental Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(ii)
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3.(a)
Indemnitor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3.(a)
Knowledge of PVCC or PVEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.15
Knowledge of WCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.15
Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1
Liability Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3.(a)
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(iii)
Matt Termination Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4.(a)
MK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.17
MSHA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(i)
Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
Original Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Background
PBMI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
PBMI Sublease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.(a)
Permitted Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(i)
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(iii)
Post-Closing Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1
PV Ancillary Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.(b)
PV Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.2
PV Terminated Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.(b)
PVCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
PVCC Consent to Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2.(b)
PVEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(i)
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(iii)
Release Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6
</TABLE>
Page 26 of 63
<PAGE> 27
<TABLE>
<CAPTION>
SECTION
TERM DEFINED
- ---- -------
<S> <C>
Released Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2.(c)
Remedial Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(iii)
Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(e)
Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(d)
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
RFM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.(a)
RFM Amended and Restated Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.(b)..(i)
RFM APA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.(a)..(i)
RFM Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.(a)
RFM Termination Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4.(b)
RFM Transfer and Assumption Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.(a)
Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
SMCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(i)
SMP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2.(a)
SMP Amended and Restated Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.(b)..(ii)
SMP APA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.(a)..(ii)
SMP Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2.(a)
SMP Transfer and Assumption Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2.(a)
Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4
Terminated Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2.(c)
Termination Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.(b)
Transfer and Assumption Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2.(c)
TSCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(g)..(i)
Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1
WCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
WCC Amended and Restated Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
WCC Ancillary Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.(b)
WCC Consent to Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2.(b)
WCC Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1
WCC Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.(b)
WRI Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Background
</TABLE>
Page 27 of 63
<PAGE> 28
EXHIBIT O
Page 28 of 63
<PAGE> 29
AMENDMENT AND RESTATEMENT
OF
VIRGINIA LEASE
Page 29 of 63
<PAGE> 30
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C>
BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1. PREMISES LEASED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2. LESSEE'S RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3. LESSOR'S RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(a) Minerals, Oil and Gas Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(b) Water Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(c) Timber Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(d) Railroad Rights-of-Way Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(e) Coal Bed Methane Extraction Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(f) Other Lessees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4. TERM OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5. QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(a) Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(b) Ton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(c) Workable and Merchantable Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(d) Auger Method of Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(e) Highwall Method of Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7. ROYALTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(a) Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(b) Royalty Computation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(c) Terms for Royalty Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(d) Coal Excepted from Royalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(e) Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8. MINIMUM MONTHLY RENTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9. REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10. MINING OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(a) Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(b) Coal Left Standing for Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(c) Coal Left Standing Upon Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(d) Settlement of Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(e) Maps of Existing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(f) Proposed Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(g) Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11. DISPUTE SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
Page 30 of 63
<PAGE> 31
Table of Contents (cont'd)
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C> <C>
12. INSPECTIONS AND TRESPASS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
13. TERMINATION OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(a) Date of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(b) Condition of the Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(c) Valuation of Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
14. COKE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15. TRANSPORTATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(a) Lessee's Rights Without Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(b) Lessor's Rights Without Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(c) Lessee's Rights Subject to Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(d) Lessor's Rights Subject to Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(e) Reports and Payments by Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(f) Reports and Payments by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
16. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
17. BLACK LUNG BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
18. ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
19. FORFEITURE CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
20. RIGHTS OF SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
21. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
22. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
23. COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
24. FIRE DAMAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
25. DAMAGE TO OTHER COAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
26. PRE-1924 AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
Page 31 of 63
<PAGE> 32
AMENDMENT AND RESTATEMENT OF
VIRGINIA LEASE
THIS IS AN AMENDMENT AND RESTATEMENT OF VIRGINIA LEASE (the "Lease")
dated May 15, 1996, between PENN VIRGINIA COAL COMPANY, a Virginia corporation
("Lessor"), and WESTMORELAND COAL COMPANY, a Delaware corporation ("Lessee").
BACKGROUND
A. Lessee and Lessor (as successor-in-interest to Penn Virginia
Resources Corporation, a Virginia corporation) are parties to a certain
Amendment and Restatement of Lease, effective as of July 1, 1988, as amended
(collectively, the "Original Lease"), pursuant to which Lessee leased, for coal
mining purposes, certain parcels of land situated in Lee and Wise Counties,
Virginia and Harlan and Letcher Counties, Kentucky, as more particularly
described in the Original Lease.
B. Lessee and Lessor now wish to amend and restate the Original
Lease pursuant to the terms and conditions hereunder.
For good and valuable consideration and intending to be legally bound,
Lessor and Lessee hereby agree that the Original Lease is amended and restated
in its entirety to read as follows:
ARTICLE 1. PREMISES LEASED.
Lessor, in consideration of the rent to be paid and the other promises
of Lessee, as set forth below, agrees to lease to Lessee, commencing January 1,
1924, the tracts or parcels of land situated in Lee County and Wise County,
Virginia and in Harlan County and Letcher County, Kentucky as cross-hatched in
red on seven (7) maps set forth as Exhibit F 1 through and including F 7
attached hereto and shaded in magenta on Exhibit F-7, all bearing the legend
"Agreement Among Penn Virginia Coal Company, Penn Virginia Equities Corporation
and Westmoreland Coal Company, dated May 14, 1996" (collectively, the "Lease
Map"), which tracts or parcels of land are identified on the Lease Map as "Area
Leased by Westmoreland Coal Company pursuant to the 1996 Amended Restated
Lease" (sometimes hereinafter referred to as "premises" or "leased premises").
Page 32 of 63
<PAGE> 33
Lessor also leases to Lessee all structures on the leased premises,
not specifically excepted in this Lease, including coke ovens, tipples,
buildings and other improvements. Should Lessor subsequently acquire any other
interest in the premises, those interests will also come under this Lease and
be transferred to Lessee.
ARTICLE 2. LESSEE'S RIGHTS.
This Lease is for coal mining purposes. Lessee shall have the
exclusive right to mine, prepare and take away the coal from the seams
identified within the leased premises shown on the Lease Map, by any deep
method of mining, surface method of mining, auger method of mining, highwall
method of mining or any other method of mining. Lessee agrees that it will
always exhibit due regard for the value of the remaining and adjacent areas as
mineral bearing properties.
The Lessee is granted the right to use the surface of the leased
premises necessary for mining or processing including the right to deposit
refuse, mud, slack, dirt, coke, sawdust and other such materials in such
locations as Lessee and Lessor may agree upon; together with the necessary or
convenient ingress and egress to the leased premises and to other property and
reserves owned or controlled by Lessee as of the date hereof over and through
Lessor's property including underground reserves at locations mutually
acceptable to both Lessor and Lessee.
The Lessee is granted the right to cut, clear and dispose of all
timber, brush, vegetation, etc. on the leased premises necessary or convenient
for Lessee's coal mining purposes hereunder (and not for commercial timbering
purposes) but only after having given Lessor reasonable notice of the areas to
be cut or cleared;
The Lessee is granted the right to use stone, sand and loam from the
leased premises and the right to use any water for mining or processing
purposes originating on or flowing over, through or under the leased premises,
except as reserved to Lessor hereinafter so long as Lessee's use does not
unreasonably interfere with the Lessor's operations. Lessee and Lessor shall
conduct their operations and use of the surface to the mutual benefit of both
Lessee and Lessor, and shall endeavor to cooperate in a manner so as to
minimize, to the extent possible, the effects of mining and surface use upon
the operations above, below and adjacent to the leased premises.
Page 33 of 63
<PAGE> 34
Lessee and Lessor recognize there will be multiple coal lessees
operating on Lessor's property, as well as timber, oil and gas operations.
Recognizing there will be increased demand for surface areas and roads on the
Lessor's property, Lessee and Lessor agree to cooperate with each other and
their permitted assigns to coordinate and plan the development and use of the
coal, surface and roads, and oil and gas pipelines so the interference to the
operations of each is minimized. Nothing in this Lease shall be deemed or
interpreted to abrogate or diminish Lessee's rights under State or Federal law
with respect to oil and gas regulations, to consent to or approval of any use
of the premises.
Lessee shall have the right to use the surface of certain property of
Lessor identified below (which property has not heretofore been identified as
the "leased premises" in this Lease), and the right of ingress and egress in
connection with such property for the purposes described below:
1. for the purposes of reclamation and maintenance in
connection with work required to be performed by Lessee under the
permits listed on Exhibit A attached hereto, the property subject to
such permits for the respective time periods set forth thereon;
2. for the purpose of transportation of coal in
connection with Lessee's operations on the leased premises, each
existing rail line of Lessee on Lessor's properties adjacent to the
leased premises until such time as Lessee no longer reasonably
requires such rail lines for its operations on the leased premises;
3. for the purpose of obtaining power in connection with
Lessee's operations on the leased premises and in connection with
Lessee's obligations to maintain certain power lines, such power lines
of Lessee as presently exist on Lessor's properties adjacent to the
leased premises until termination of the Lease; and
4. for the purpose of continuing Lessee's use of certain
facilities in connection with Lessee's operations on the leased
premises, such buildings and improvements as set forth on Exhibit B
attached hereto for the respective time periods set forth thereon.
All of the above-described surface areas shall be deemed to be
part of the "premises" or "leased premises" for purposes of Articles 3, 5,
10(g), 11, 12, 13, 16, 17, 18, 19, 20, 21, 22, 23 and 24 of this Lease.
Page 34 of 63
<PAGE> 35
Subject to the provisions of Article 18 hereunder, including
without limitation the provisions requiring Lessor's reasonable consent, Lessee
may assign its rights under this Lease independently from its other rights
under this Lease, insofar as this Lease relates to the following two portions
of the leased premises: (1) that portion shaded in magenta on Exhibit F-7
attached hereto and identified thereon as "Addition to 1996 Amended Restated
Lease"; and (2) that portion cross-hatched in red on Exhibit F-7 attached
hereto and identified thereon as "Upper Parsons Seam - 16.0 Acres."
ARTICLE 3. LESSOR'S RIGHTS.
(a) MINERALS, OIL AND GAS RIGHTS. Lessor reserves the exclusive
right to all minerals (except the coal leased hereunder), oil and gas in, under
or upon the leased premises. This includes the full right of ingress and
egress and all other rights necessary for the efficient discovery, production,
removal, processing, preparation and transportation of such minerals, oil and
gas. Lessor may use as much of the surface of the premises as is necessary to
carry out its operations involving such minerals, oil and gas. Lessor may
assign all or any part of these mineral, oil and gas rights, or any interest
therein, to any other person or entity. Lessor reserves, for itself or for
anyone to whom it assigns its rights, the right-of-way for power lines and
telephone lines and the right to set up or install buildings or machinery on
the premises for its mineral, oil and gas operations. Lessor agrees to consult
with Lessee before placing or locating any such right-of-way and/or buildings
or machinery on the premises.
(b) WATER RIGHTS. Lessor reserves the right to use as much of the
water originating on or flowing through or under the leased premises as may be
required for Lessor's timber, mineral, oil or gas operations on the premises.
However, Lessee shall have the exclusive right to use water from any wells that
it drills on the premises.
(c) TIMBER RIGHTS. Lessor reserves the right to go onto the
premises and to use as much thereof as is necessary for the cutting, processing
and transportation of the timber on the leased premises. This shall include
the right to erect sawmills and other buildings and to store timber and logs on
the premises for the purpose of exercising such rights. Lessor also reserves
the right to construct and operate roads and railways of any kind on the
premises for the purpose of exercising such rights. Lessor may assign to any
person or entity
Page 35 of 63
<PAGE> 36
these rights relating to the surface of the premises. Lessor agrees to give
Lessee reasonable notice of its or any assignee's intentions to exercise any
right reserved under this Article and agrees to cooperate in good faith with
Lessee in the exercise of any such rights to the mutual benefit of both Lessor
and Lessee.
(d) RAILROAD RIGHTS-OF-WAY RIGHTS. Lessor reserves the right to
grant to any railroad rights-of-way to as much of the surface of the premises
as may be required for the railroad to reach points on or beyond the premises.
Lessor may also grant rights-of-way to such railroad for yards, stations,
sidings and similar purposes. These rights, however, may only be exercised
after consultation with Lessee.
(e) COAL BED METHANE EXTRACTION RIGHTS. Lessor reserves the right
to extract methane for commercial purposes from the leased premises; however,
such right shall not in any manner limit or restrict Lessee from venting and
releasing methane as a part of its mining operations and activities.
(f) OTHER LESSEES. Lessee and Lessor have acknowledged the
probability that multiple lessees will have leasehold rights on Lessor's
property above, below and adjacent to the leased premises. Lessor agrees that
in connection with such other current or future leasehold estates, Lessor shall
not grant to any other lessee a dominant estate in connection with such other
lessee's leasehold interest. Lessee acknowledges and agrees that its leasehold
interest and estate created hereby is neither dominant nor subservient to the
interest or estate of any such other current or future lessee of Lessor's
property above, below and adjacent to the leased premises and shall be subject
to and benefit from the cooperation provisions of Article 2 above.
ARTICLE 4. TERM OF LEASE.
Lessee's rights to the leased premises, as set forth in this Lease,
shall continue until all the workable and merchantable coal (as defined in
Article 6) on or under the premises has been exhausted, unless either party's
failure to comply with any of the terms and conditions of this Lease leads to
an earlier termination.
ARTICLE 5. QUIET ENJOYMENT.
Lessor promises that as long as the rental is paid and the other terms
of this Lease are fulfilled, Lessee, or anyone who lawfully succeeds to
Lessee's interest, shall be able peacefully to enjoy, possess and use the
premises without interruption or disturbance from any other persons.
Page 36 of 63
<PAGE> 37
ARTICLE 6. DEFINITIONS.
(a) YEAR. A year, as used in this Lease, will begin on the 1st
day of January and end on the 31st day of December, unless the context
indicates otherwise.
(b) TON. A ton of coal or coke, as referred to in this Lease,
contains two thousand pounds, avoirdupois weight.
(c) WORKABLE AND MERCHANTABLE COAL. Workable and merchantable
coal means coal which, when reached in the prosecution of Lessee's operations
hereunder, can be ordinarily mined and sold at a profit by the use of such then
current modern mining methods and cleaning machinery and equipment as are
reasonably adapted to practical, efficient and economical mining under the
conditions found and in conformity with prudent mining practices and diligent
and skillful management.
(d) AUGER METHOD OF MINING. A method of mining used in
conjunction with strip mining which utilizes a machine on the surface which
mechanically powers a fixed cutter head which bores into the exposed coal seam
and conveys the coal to the surface by means of spiraled steel (auger). A
Salem auger with single, double or triple heads is an example (as of July 1,
1988) of a machine utilized in the auger method of mining.
(e) HIGHWALL METHOD OF MINING. A method of mining which utilizes
a machine placed on and operated from the surface with an independent cutting
device (generally similar to a continuous miner head) which is electrically or
hydraulically powered from the surface. The machine is used to excavate into a
coal seam which has been exposed (usually by strip mining) and to recover coal
without further removal of overburden. The Thin Seam Miner, Video Miner,
Vacuum Miner and Satellite Miner are examples (as of July 1, 1988) of machines
utilized in the highwall method of mining.
ARTICLE 7. ROYALTIES.
(a) SCHEDULES. On or before the 25th day of each calendar month,
Lessee shall pay to Lessor at its office in Duffield, Virginia (or any other
place that Lessor may designate in writing), a royalty on the coal mined from
the leased premises that was either shipped from the premises or sold for
consumption on the premises during the preceding calendar month. The royalty
shall be determined by multiplying the gross sales
Page 37 of 63
<PAGE> 38
proceeds, as adjusted under Section (b) of this Article, by the applicable
percentage from the following schedules:
<TABLE>
<S> <C>
SCHEDULE 1. On coal mined by strip and auger methods:
July 1, 1988 through 9.0%
June 30, 1998
SCHEDULE 2. On coal mined by the deep method, except from the seams described in Schedule 3
below:
July 1, 1988 through 7.0%
June 30, 1998
SCHEDULE 3. On coal mined by the deep method from the Marker Seam (which involves high mining
costs):
July 1, 1988 through 6.0%
June 30, 1993
SCHEDULE 4. On coal mined by the highwall method:
July 1, 1988 through 8.0%
June 30, 1998
</TABLE>
Notwithstanding the foregoing percentages or the royalty computation
calculated pursuant to Article 7, Section (b), the minimum royalty to be paid
to Lessor shall be $1.50 per ton. However, this per ton minimum shall not
apply to the royalty computation on coal mined by the deep method from the
Marker Seam from July 1, 1988 through June 30, 1993.
With respect to that portion of the leased premises shown in red on
Exhibit E attached hereto and identified as Drawing Number BULSE-AB.Dwg, dated
August, 1994, in lieu of the royalties set forth in this Article 7(a), Lessee
shall pay to Lessor a flat royalty rate of $1.75 per clean ton of coal sold for
all coal mined from such portion of the leased premises and either shipped from
the premises or sold for consumption on the premises during the preceding
calendar month, and such payments shall otherwise be made in the manner set
forth in this Lease.
(b) ROYALTY COMPUTATION. The royalty payment shall be calculated
monthly on a mine-by-mine basis by applying the applicable percentage royalty
rate for the seam and method of mining to the remainder of the gross sales
proceeds (i.e., amount billed to the purchaser) for the month after deduction
of the following items:
Page 38 of 63
<PAGE> 39
1. The total cost of railroad transportation for the month from
the mines to Lessee's Appalachia Transloader facility. This deduction applies
only to coal shipped from the Transloader and applies whether or not the
selling price of such coal expressly includes such cost. If the selling price
of any other coal from the premises includes any freight or transportation
charges, those charges shall be deducted from the price of that coal.
2. The total fee charged for use of Lessee's Appalachia
Transloader facility. This deduction applies only to coal shipped from the
Transloader and applies whether or not the selling price of such coal expressly
excludes such cost.
3. The total amount of those federal, state and local taxes paid
by Lessee with respect to the coal, which are either measured directly by such
coal or by the gross proceeds of such coal (such as severance taxes,
reclamation taxes and fees, and black lung assessments) or which are
substantially unique to the energy industry. These deductions shall not
include general, real or personal property taxes; general taxes on income,
earnings or net proceeds; general business or license taxes (except those
license taxes which are in lieu of severance taxes); general sales taxes; or
social security, employment or similar taxes. Deductions for taxes shall be
made under this subsection whether or not the selling price of such coal
expressly includes such taxes.
4. A royalty deduction component calculated by multiplying the
gross sales proceeds by the applicable royalty percentage rate for the seam and
method of mining.
If any at any time during the term in which these royalty rates are in
effect, the structure of taxes applicable to Lessee becomes significantly
different than it was on July 1, 1988, so that the ratio of taxes deductible
from the selling price (Item 3 above) to the taxes not so deductible is
significantly changed, the parties will attempt in good faith to renegotiate
the provisions of that subsection. If they are unable to do so within thirty
(30) days after notice to one party by the other, either party may refer the
matter to arbitration as provided in Article 21. The arbitrators may be asked
to determine whether or not a renegotiation is justified or what the change in
the deduction should be or both.
(c) TERMS FOR ROYALTY RATES. The royalty rate schedules and the
per ton minimum in Section (a) above will be effective for ten (10) years (that
is, until June 30, 1998), with the exception of the rate in Schedule 3 above
("high cost" coal) which will remain effective until June 30, 1993. Lessee may
request
Page 39 of 63
<PAGE> 40
Lessor to extend the term of any of the schedules in Section (a) above as to a
specific tonnage of coal where such extension is reasonably necessary to
effectuate a mutually beneficial, advantageous long-term sales agreement with a
third party for such coal. Lessee may make such request to Lessor's President
in Duffield, Virginia (or such other representative as Lessor may hereafter
designate), and accompany it with sufficient detail so that it can be properly
analyzed. Lessor's President (or other representative as the case may be)
shall approve, disapprove or modify the request within ten (10) working days.
If he disapproves it, or modifies it in a way that is unacceptable to Lessee,
Lessee may refer the request to the chief executive officers of Lessee and Penn
Virginia Corporation, the parent company of Lessor, who shall consider the
request in good faith for an additional five (5) working days. If they cannot
agree, the request shall be deemed disapproved.
At any time within one (1) year prior to the final dates in the
royalty rate schedules (that is, after June 30, 1997 for all but the high cost
coal and after June 30, 1992 for the high cost coal) either party to this Lease
may call for negotiation to set new rate schedules to take effect at the
conclusion of the present rate schedules.
If the royalty rate schedules in this Lease terminate before the
parties can reach agreement on subsequent rates, the rates in effect at that
time shall continue in effect until the parties can agree on new royalty rates.
If the parties are unable to agree on new royalty provisions within ninety (90)
days after a call for negotiations, the dispute shall be submitted to
arbitrators as provided in Article 21, who shall fix such royalty rates at what
in their judgment would be fair and reasonable provisions in a lease then made
of the leased premises, without reference to the royalty provisions previously
in effect. New royalty rates agreed to by the parties or fixed by the
arbitrators shall apply retroactively to all coal shipped since the termination
date of the old rates, and suitable adjustments in the royalty payments shall
be made.
(d) COAL EXCEPTED FROM ROYALTY. Lessee may use a reasonable
quantity of coal on the premises in order to carry out its operations without
paying any royalty on that coal. Also, there shall be no royalty on any coal
disposed of as a waste product of Lessee's operations unless and until it is
later reclaimed and sold. Regular royalties shall be paid on any coal mined
from the premises that is consumed or shipped by anyone other than Lessee.
Page 40 of 63
<PAGE> 41
(e) INTEREST. Lessee shall pay interest to Lessor at the rate of
six percent (6%) per year compounded quarterly on all amounts not paid when
due.
ARTICLE 8. MINIMUM MONTHLY RENTAL.
(a) Lessee shall pay to Lessor at its office in Duffield,
Virginia, or at any other place that Lessor may designate in writing, each
calendar month the sum of FIFTEEN THOUSAND THREE HUNDRED FIFTY DOLLARS
($15,350.00) in cash as a minimum monthly fixed rent for the leased premises.
This sum shall be due each month regardless of whether or not Lessee mines any
coal from the premises during the month, subject to the suspension provisions
in Sections (c) and (d) below. Payment for each calendar month shall be made
on or before the 25th day of the succeeding month. Interest shall accrue at
the rate of six percent (6%) per year compounded quarterly on any sum not paid
when due.
(b) Each month production royalties for that month shall be
credited against this minimum rental so that no minimum rental payment shall be
due in any month where production royalties equal or exceed the minimum rental.
In any month where the production royalties fall short of the minimum rental,
the difference between the minimum rental paid and the production royalties for
that month shall be credited to Lessee's account for subsequent months. Lessee
shall then have the right to produce and ship, without paying any royalty, such
quantities of coal as would produce, at the royalty rates prevailing at that
time, a royalty amount equal to that credit. This right must be exercised in
the same calendar year as the credit accrues or within two (2) calendar years
thereafter. However, this right shall be limited by the termination of this
Lease, by expiration or otherwise.
(c) If Lessee, at any time, claims that the merchantable and
workable coal in the leased premises has been exhausted or that there remains
an insufficient amount of such coal that can be mined, using the methods
contemplated in this Lease, to produce at the prevailing royalty rate the
minimum monthly rental, then, upon verification of that claim, the minimum
monthly rental shall be reduced to an amount which can be produced by the
diligent mining efforts of Lessee, or this Lease shall be terminated. If
Lessor and Lessee cannot agree on these matters, the dispute will be settled by
arbitrators as provided in Article 21, in which event
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the arbitrators shall decide what reduction, if any, should be made in the
minimum monthly rental, or whether the Lease should be terminated.
(d) If, because of force majeure, Lessee's coal operations on the
leased premises are at any time, for a period exceeding ninety (90) consecutive
days, suspended or reduced to a tonnage insufficient to pay the minimum rental,
the minimum monthly rental provisions described above shall thereafter be
suspended until the force majeure ends. If there is a dispute between Lessee
and Lessor as to whether or not a force majeure has occurred or is continuing,
or as to whether or not Lessee has used all reasonable possible means to avoid,
end or mitigate the force majeure, the dispute shall be referred to arbitration
as provided in Article 21 of this Lease. As used in this Section, "force
majeure" means any act or occurrence, beyond Lessee's control, that reasonably
prevents the mining, processing, transportation or delivery of coal, including,
but not limited to, the following: acts of God, legislation or regulations of
any governmental body, court orders or judgments, fire, flood, explosion or
other casualty, strikes, labor disputes or shortages, sabotage, acts of the
public enemy, riots, civil commotion, acts of any civil or military authority,
wars, major mine, plant, facility or equipment damage or failure, including
such failures caused by negligence of employees, materials shortages, embargoes
or unavailability of transportation facilities, faults in coal seams or acts on
the part of Lessor.
ARTICLE 9. REPORTS.
(a) Lessee shall accompany each payment of royalties or rentals
under Articles 7 and 8 with a detailed report showing all sales of coal,
calculation of selling prices, calculation of deductions to determine the
royalty base, calculation of royalties and such other information as Lessor may
reasonably request to verify the accuracy of the payments.
(b) On or before the 25th day of each month, Lessee shall deliver
to Lessor accurate reports showing the total tonnage and source of all coal
shipped from or sold for consumption on the property of Lessee's Virginia
Division during the preceding calendar month. Such reports shall also show the
tonnage of highwall mined coal, the tonnage of surface-mined and auger-mined
coal and the tonnage of deep-mined coal produced from each mine on the leased
premises for which a tonnage royalty is payable to Lessor that has been so
shipped or sold during the preceding calendar month. These reports shall be in
a form satisfactory to the
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Lessor and shall be delivered to Lessor's office at Duffield, Virginia (or any
other place that Lessor may designate in writing).
(c) Upon Lessor's written request, Lessee shall furnish monthly
railroad certificates which accurately show the quantity of coal and coke
shipped from the leased premises during the preceding calendar month. These
certificates will be signed by the weightmaster, or other appropriate officer
of any railroad company transporting coal or coke from the leased premises, and
will be delivered to Lessor's office on or before the 15th day of each month.
Lessee agrees to conform to any other reasonable requirements of Lessor to
assure the accurate ascertainment of the weight of any coal shipped from or
sold for consumption on the premises.
(d) Lessee's books and records pertaining to the mining and
disposition of coal from the leased premises shall be available for inspection
and copying by Lessor at all reasonable times, and shall be kept in a manner
satisfactory to Lessor.
ARTICLE 10. MINING OPERATIONS.
(a) METHODS. Henceforth the parties will communicate and
cooperate in all respects so that the viewpoints and interests of both are
taken into account.
Lessee shall continue to develop the leased premises in an orderly
manner to remove and process the coal as completely and as efficiently as
possible. Lessee will mine the workable and merchantable coal in the leased
premises in the most diligent and workmanlike manner consistent with
established mining practices and methods for conditions encountered, taking
into account available capital; the advisability of utilization of the
particular method, considering access to labor, necessary expertise, and sound
management practices; operating risks and safety and environmental
considerations; and the projected profitability of the particular method.
Lessee will not neglect or abandon any workable and merchantable coal that
could be removed in such a manner.
Lessee shall mine through portions of the coal seams that are faulty
or would yield unmerchantable coal, if the amount and quality of coal lying
beyond the fault appear economically justifiable. Any disputes with regard to
the placement of headings or airways shall be resolved in the manner described
in Article 11. Lessee
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will leave adequate pillars and supports of coal to provide full
security for all mine openings and workings, but it will not leave any more
workable and merchantable coal in those pillars and supports than is necessary
for such security.
The suitable, approved methods of mining include the deep method of
mining, surface method of mining, auger method of mining and highwall method of
mining. Lessor expressly approves the use of these methods. If Lessee
proposes to mine any area or areas by either the auger method of mining or the
highwall method of mining, Lessee must first obtain Lessor's written consent;
however, Lessor shall not unreasonably withhold such consent. Lessee shall be
responsible for all costs, charges or assessments resulting from the use of
these methods, including those imposed by any existing or future legislation
requiring the restoration of the surface. Lessee shall reimburse and otherwise
protect Lessor from any such costs that might be assessed against Lessor.
(b) COAL LEFT STANDING FOR SUPPORT. Lessee shall have the
privilege of leaving unmined pillars of coal which are necessary to support
existing or planned surface features such as roads, railroads, streams,
pipelines, buildings or other structures on the leased premises. There shall
be no royalty payment on coal left for these support pillars.
(c) COAL LEFT STANDING UPON ABANDONMENT. If Lessee, in abandoning
any portion of a mine, leaves standing any coal which is workable and
merchantable according to those criteria enumerated in Section (a) above which
Lessor believes is not necessary for the security of the mine, Lessor may give
Lessee a written notice requesting Lessee to remove that coal. If Lessee has
not notified Lessor of its intent to remove or has not commenced such removal
within thirty (30) days after having received notice, the question of the
necessity of leaving the coal standing shall be resolved under the procedures
described in Article 11. If it is determined that Lessee could safely remove
any of the coal left standing, then within a period determined by the parties
or the arbitrators, as the case may be, Lessee shall either mine that coal or
pay Lessor the royalty that would have been due had the coal been mined and
shipped.
(d) SETTLEMENT OF DISPUTES. If Lessor at any time believes that
any mine on the leased premises is not being worked in a proper manner, or is
being worked in a manner that would be harmful to the future production from it
or any other seam on the leased premises, or if there are any disputes as to
what coal is
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workable and merchantable, all such questions shall be resolved in the manner
provided for in Article 11 of this Lease.
(e) MAPS OF EXISTING OPERATIONS. Lessee shall furnish to Lessor
maps and/or drawings which accurately show the workings and extensions of
Lessee's mining operations on the leased premises through June 30 and December
31 of each year. In addition, they shall include any other reasonable
information requested by Lessor. The maps and/or drawings shall be on an
acceptable scale and shall be certified by a registered engineer. The maps
and/or drawings shall be delivered to Lessor at its office in Duffield,
Virginia (or such place as it may designate in writing) at the time such
material is submitted to the Mine Safety and Health Administration of the U.S.
Department of Labor but in no event later than March 15 and September 15 of
each year. Lessor shall also have the right to examine at reasonable times all
other maps of Lessee pertaining to the leased premises and to make copies of
them.
(f) PROPOSED PLANS. Upon request by Lessor at any time, Lessee
shall prepare and make available for inspection and copying by Lessor, at the
appropriate office of Lessee, plans it may have for the projection of its
mining and other operations including reclamation and conservation plans during
the next six (6) months, and such other long-range plans that shall have been
completed, and all similar plans of its contractors and sublessees. These
plans shall show, in the case of mining operations, the proposed methods of
haulage, ventilation, drainage and roof support in the areas proposed to be
mined, including entries, haulways, airways and rooms, with specifications and
dimensions. Such plans shall also include any other reasonable information or
explanation requested by Lessor, and they shall be certified by a registered
engineer.
Lessee shall promptly notify Lessor of any proposed material changes
in its mining, reclamation or conservation plans or practices, or those of its
contractors and sublessees, and Lessee shall consult with Lessor before any
plan or change is adopted.
Lessor may at any time request that any plans or changes proposed by
Lessee or any of its contractors or sublessees be modified in order to conform
to any law, regulation or sound principle of mining, to increase coal
production and recovery or otherwise to conform to any provision of this Lease.
Lessee shall consider any such request and shall promptly communicate its
response to Lessor. If the parties are unable to agree on such modifications,
the dispute shall be settled in accordance with the procedures set forth in
Article 11.
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Lessee agrees to give Lessor reasonable notice of its or any
contractor or sublessee's intentions to permit (under applicable state law) any
area on or in the leased premises and agrees to cooperate in good faith with
Lessor in this regard to the mutual benefit of both Lessor and Lessee.
(g) MAINTENANCE OF PROPERTY. Lessee will maintain the leased
premises in an orderly and safe condition and will maintain all improvements on
the premises in good working order and condition at all times. Lessee will
make all repairs, renovations, additions and improvements necessary or
desirable to maintain the proper condition of the premises and to assure that
Lessee's coal operations will always be carried out in an efficient, safe and
businesslike manner and in substantial compliance with all applicable laws.
Lessee will either remove all unused structures or maintain them (or any area
from which they are removed) in a safe, orderly condition.
ARTICLE 11. DISPUTE SETTLEMENT.
Any dispute which is to be settled under this Article shall in the
first instance be reviewed by the respective chief mining engineers of the
parties. If the chief mining engineers cannot resolve the dispute within
thirty (30) days after one party notifies the other party of the dispute, the
matter will be referred to Lessee's Senior Vice President-Coal Mining and
Lessor's President (or to the persons succeeding to the responsibilities of
such persons). If those officers cannot agree within a further period of
thirty (30) days, the matter will be referred to a committee consisting of
representatives from the Boards of Directors of Lessee and Lessor for
resolution. If the dispute remains unresolved for sixty (60) days after
referral to that committee, it shall be settled by arbitration as provided in
Article 21 of this Lease.
ARTICLE 12. INSPECTIONS AND TRESPASS.
(a) Lessor, or any persons acting on its behalf, shall have the
right to enter at all reasonable times the leased premises, including the mines
and buildings of Lessee and all areas on or below the surface, for the purpose
of inspecting, surveying or examining any aspect of Lessee's operations on the
premises. Lessee will furnish Lessor with all convenient means of access to
inspect the premises, without cost to Lessor.
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(b) Lessor, or any person acting on its behalf, shall also have
the right to enter the premises at all reasonable times to inspect for or
prevent any trespass. Lessee will use its best efforts to keep trespassers off
the premises, and will take, when appropriate, legal action to prosecute any
trespassers.
ARTICLE 13. TERMINATION OF LEASE.
(a) DATE OF TERMINATION. Unless terminated at an earlier date
because of forfeiture, breach or other reason, this Lease shall terminate when
all the workable and merchantable coal has been mined from the leased premises.
This fact may be determined either by agreement between Lessor and Lessee, or
if they cannot agree, by arbitration as provided in Article 21 of this Lease.
(b) CONDITION OF THE PREMISES. At the termination of this Lease
for any reason other than the exhaustion of coal, Lessee shall leave the
drifts, shafts, slopes and all other openings, headings and chambers in a
secure and proper state, consistent with good mining practice. However, Lessee
shall have the right, in the course of its mining operations, to rob pillars in
accordance with the methods of mining contemplated by this Lease. Any disputes
as to whether the mines have been left in the proper condition shall be settled
by arbitration as provided by Article 21.
(c) VALUATION OF IMPROVEMENTS. Within thirty (30) days after the
termination of this Lease (except in the case of termination by forfeiture,
when these provisions shall not apply), Lessor may give Lessee written notice
of its desire to have all the improvements on the premises appraised. Lessee
shall not remove any improvements from the premises until Lessor has had the
opportunity to exercise its rights of appraisal and retention, as provided in
this Section.
When Lessor gives notice of its desire for appraisal, three competent
appraisers shall be appointed in the manner provided for appointing arbitrators
in Article 21 of this Lease. These appraisers shall, as soon as possible,
furnish Lessor and Lessee with a detailed report showing the appraised value of
each article appraised and the total appraised value of all such articles.
Except as provided in the following paragraph, the valuation by the appraisers,
or by a majority of them, shall be conclusive of the value of the property.
Lessor shall have the right to retain the appraised property, or any
article of it, if within thirty (30) days after the receipt of the appraisers
report, Lessor gives written notice to Lessee of its intention to retain the
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items. Lessor shall pay to Lessee the appraised value of any items so
retained, less any rents, royalties or other sums due from Lessee at that time.
However, if Lessee believes that Lessor's retention of certain improvements
would reduce the value of any articles not retained, Lessee may object to
Lessor's selection of improvements to be retained. If the parties cannot
resolve the dispute, it shall be submitted to arbitration, as provided in
Article 21, to determine whether additional compensation is due to Lessee.
Lessor shall also have the right, if it notifies Lessee in writing at
least one (1) month before the expiration of this Lease, to use any or all of
the property and improvements on the premises, for a period of up to four (4)
months after the expiration of the Lease, provided Lessor compensates Lessee
for the fair value of such use as agreed upon by the parties or as fixed by the
arbitrators as provided in Article 21.
If Lessor declines to retain or use any of Lessee's property, Lessee
may remove that property from the premises at any time within eight (8) months
after the expiration of this Lease, provided that Lessee has paid all
royalties, rents and other sums due Lessor. If Lessor has exercised its rights
to use any of Lessee's property for up to four (4) months, as described above,
Lessee may remove that property from the premises at any time within (8) months
after Lessor has ceased using it, again provided that Lessee has paid all sums
due Lessor under this Lease.
ARTICLE 14. COKE.
Nothing contained in this Lease shall prevent Lessee from engaging in
coking operations on the leased premises, but before engaging in any coking
operations, Lessee shall notify Lessor of its intention to do so. The parties
shall then determine a reasonable royalty to be paid for the coal used in coke
manufacturing on the leased premises. If the parties cannot agree on such a
royalty within ninety (90) days after Lessee's notification to Lessor, the
royalty shall be fixed at such fair and reasonable level as shall be determined
by arbitration as provided in Article 21 of this Lease. Once set, either by
agreement or arbitration, the royalty on coke shall remain in effect until the
termination of the coal royalty rate schedules in Schedules 1, 2, 3 or 4
(depending on the source of the coal coked) of Section (a) of Article 7 are
renegotiated, and it shall then be renegotiated under the same conditions that
apply to the renegotiation of such coal royalties under Section (c) of that
Article.
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Nothing in this Lease shall prevent Lessee from removing coal mined on
the leased premises to be coked elsewhere. When coal mined on the leased
premises is shipped elsewhere for coking, the coal royalties provided in
Article 7 shall apply to that coal and no coke royalty shall be payable.
Lessee shall conform to the reasonable requirements of Lessor to
assure the accurate ascertainment of the weight of coal used in coke
manufacturing on the leased premises.
ARTICLE 15. TRANSPORTATION RIGHTS.
(a) LESSEE'S RIGHTS WITHOUT CHARGE. Lessor, to the extent it has
the power to do so and subject to the cooperation provisions of Article 2
above, grants to Lessee (i) the right to transport coal and coke mined, removed
or produced from any lands, wherever located, which are owned or controlled by
either Lessor or Lessee (even if such lands may be leased to others) as of the
date hereof, onto, across and/or through the leased premises and (ii) the right
to transport coal and coke from the leased premises onto, across and/or through
any lands, wherever located, owned or controlled by Lessor as of the date
hereof. There shall be no charge for any such transportation of coal and coke.
(b) LESSOR'S RIGHTS WITHOUT CHARGE. Lessee, to the extent it has
the power to do so, grants to Lessor the right to transport coal and coke
mined, removed or produced for any lands, wherever located, which are owned or
controlled by either Lessor or Lessee (even if such lands may be leased to
others) as of the date hereof, onto, across and/or through any lands owned or
controlled by Lessee as of the date hereof. There shall be no charge for any
such transportation of coal and coke.
(c) LESSEE'S RIGHTS SUBJECT TO CHARGE. Lessor, to the extent it
has the power to do so and subject to the cooperation provisions of Article 2
above, grants to Lessee the right to transport coal and coke mined, removed or
produced from any lands, wherever located, which are not owned or controlled by
either Lessor or Lessee onto, across and/or through the leased premises and/or
any lands, wherever located, owned or controlled by Lessor as of the date
hereof. Lessor also grants Lessee the right to prepare this coal and coke on
the leased premises and/or such lands and to ship it from such premises and/or
lands.
There may be a charge for the transportation of coal and coke covered
by this Section (c) effective as of January 1, 1990. This charge shall be one
percent (1%) of the purchase price of such coal or coke or
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Twenty-Five Cents ($0.25) for each ton of such coal or coke, whichever is
higher, unless the Lessor and Lessee otherwise agree. These provisions
notwithstanding, no such charge shall be imposed on any coal mined or removed
by Lessee from lands being sublet by Lessee from Blue Diamond Coal Company
under an agreement dated March 28, 1969.
(d) LESSOR'S RIGHTS SUBJECT TO CHARGE. Lessee, to the extent it
has the power to do so, grants to Lessor the right to transport coal and coke
mined, removed or produced from any lands, wherever located, which are not
owned or controlled by either Lessor or Lessee onto, across and/or through any
lands, wherever located, owned or controlled by Lessee as of the date hereof.
Lessee also grants Lessor the right to prepare this coal and coke on such lands
and to ship it from such lands.
There may be a charge for the transportation of coal and coke covered
by this Section (d) effective as of January 1, 1990. This charge shall be one
percent (1%) of the purchase price of such coal or coke or Twenty-Five Cents
($0.25) for each ton of such coal or coke, whichever is higher, unless the
Lessor and Lessee otherwise agree.
(e) REPORTS AND PAYMENTS BY LESSEE. On or before the 25th day of
each calendar month, Lessee shall deliver to Lessor at its office in Duffield,
Virginia (or any other place that Lessor may designate in writing) a statement
of the tonnage of all coal and coke transported onto, across and/or through
either the leased premises or any of the applicable lands specified in Sections
(a) and (c) of this Article during the preceding calendar month, whether or not
subject to charge, indicating the origin and the destination of such coal and
coke. This statement shall be in a form that Lessor finds satisfactory, and
Lessor shall have the right to examine Lessee's books for the purpose of
verifying the statement. Lessee agrees to conform to any other reasonable
requirements of Lessor for assuring the accurate ascertainment of the weight of
this coal and coke.
On or before the 25th day of each calendar month, Lessee shall pay to
Lessor at its office in Duffield, Virginia (or any other place that Lessor may
designate in writing) the appropriate charges, if any, on coal or coke
transported onto, across and/or through either the leased premises or any of
the applicable lands during the preceding calendar month under the provisions
of Section (c) of this Article.
(f) REPORTS AND PAYMENTS BY LESSOR. On or before the 25th day of
each calendar month, Lessor shall deliver to Lessee at its appropriate office a
statement of the tonnage of all coal and coke transported onto,
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across and/or through any of the applicable lands specified in Sections (b) and
(d) of this Article during the preceding calendar month, whether or not subject
to charge, indicating the origin and the destination of such coal and coke.
This statement shall be in a form that Lessee finds satisfactory, and Lessee
shall have the right to examine Lessor's books for the purpose of verifying the
statement. Lessor agrees to conform to any other reasonable requirements of
Lessee for assuring the accurate ascertainment of the weight of this coal and
coke.
On or before the 25th day of each calendar month, Lessor shall pay to
Lessee at its appropriate office the appropriate charges, if any, on coal or
coke transported onto, across and/or through any of the applicable lands during
the preceding calendar month under the provisions of Section (d) of this
Article.
ARTICLE 16. TAXES.
While this Lease is in force, Lessee shall pay all severance and
personal property taxes and assessments imposed by any governmental body with
respect to improvements or personal property placed or erected on the leased
premises or with respect to the coal mined therefrom. Lessee shall reimburse
Lessor for real property taxes and assessments imposed on the premises, which
taxes shall be payable in the first instance by Lessor. However, Lessor, not
Lessee, shall pay all taxes or assessments on any timber, mineral, oil and gas
rights reserved by Lessor.
If Lessee is delinquent in paying any of the taxes or assessments for
which it is responsible, Lessor may make the required payments. In that event
Lessee shall promptly reimburse Lessor for such payments, including any fines
or extra expenses incurred by Lessor with respect to the payments, together
with interest at the rate of six percent (6%) per year compounded quarterly.
ARTICLE 17. BLACK LUNG BENEFITS.
Lessee agrees that it shall comply with all of the valid terms and
provisions of the Black Lung Benefits Act; Title IV of the Federal Mine Safety
and Health Act of 1977; the Internal Revenue Code, 26 U.S.C. 1 et seq.; Black
Lung Benefits Reform Act of 1977; Black Lung Benefits Revenue Act of 1981; and
Black Lung Benefits Amendments of 1981, as now or hereafter amended, and all
valid rules and regulations adopted pursuant thereto.
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Upon Lessor's request, Lessee shall provide appropriate but reasonable
certification that it has provided security in compliance with all applicable
laws, rules and regulations for the payment of those benefits for which it is
lawfully obligated to provide under such laws, rules and regulations.
Lessee agrees that it will indemnify and hold Lessor harmless for
liability or expenses, including reasonable attorneys fees and expenses, which
Lessor may suffer as a result of or with respect to any claim for black lung
benefits for which Lessee is liable under the applicable laws, rules and
regulations.
ARTICLE 18. ASSIGNMENTS.
(a) Lessee shall not transfer, assign, mortgage or encumber with
any type of lien its rights, or any portion of them, in the leased premises or
any of the improvements on the premises, without the prior written consent of
Lessor. Lessee shall not sublet the premises, or any portion of the premises
(except dwelling houses, stores, farm buildings and farm lands), to anyone
without the prior written consent of Lessor. Lessee shall, however, have the
right to contract for the mining of coal from the leased premises without
obtaining the prior approval of Lessor. No judgment, judicial sale, or other
legal or equitable proceeding or operation of any law shall have the effect of
transferring any interest Lessee has in the premises, or in any portion of it ,
or in any of the improvements on the premises, to another person or entity, for
any period, without the prior written consent of Lessor. In any case where
Lessor's prior written consent is required, such consent will not be
unreasonably withheld.
It is recognized that prior to the effective date of this Lease,
Lessee had subleased or contracted certain portions of the premises with the
oral consent of Lessor. These earlier actions are ratified by this Lease.
(b) Should any of Lessee's rights or interests under this Lease be
transferred, assigned or sublet in any way, without Lessor's prior written
consent, Lessor shall have all remedies available to it for breach of this
Lease by Lessee, and shall have the option to affirm the attempted transfer and
to require the person or entity acquiring those interests or rights to be
subject to all the terms and conditions of this Lease.
(c) Any transferee from Lessee with Lessor's prior written consent
shall take and hold its interest subject to all of the terms of this Lease.
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ARTICLE 19. FORFEITURE CLAUSE.
(a) The commission of any of the following acts by Lessee shall be
considered an act of forfeiture under this Lease: executing any mortgage or
making any assignments for the benefit of creditors involving or affecting this
Lease, entering a composition with creditors involving or affecting this Lease,
or any other act of bankruptcy without the written consent of Lessor. If any
of these acts of forfeiture takes place, Lessor may give notice to Lessee, by
registered letter addressed to Lessee's office in Big Stone Gap, Virginia (or
to such other address as Lessee may designate in writing), that it forthwith
cancels this Lease.
(b) If Lessee fails to make any rent or royalty payment for sixty
(60) days after it comes due, or if Lessee violates any other term or condition
of this Lease, Lessor may notify Lessee, by registered mail as specified in
Section (a) of this Article that Lessee has breached this Lease (specifying the
breach) and that if the breach is not rectified within thirty (30) days, the
Lease will be cancelled and terminated. If it is determined that more than
thirty (30) days is reasonably necessary to rectify the breach, a reasonable
period for rectifying it shall be set, either by agreement between the parties
or by arbitration. If at the end of thirty (30) days, or whatever longer
period is set, after the mailing of the notice, the breach has not been
remedied, this Lease shall immediately terminate without further notice.
(c) In any case where Lessor terminates this Lease because of
Lessee's forfeiture or breach, Lessor may enter the premises covered by this
Lease and seize for its own use the premises and all improvements and other
personal property on the premises, notwithstanding any provisions of this Lease
to the contrary.
(d) It is understood that termination of this Lease or recovery of
possession of the premises will not deprive Lessor of its right to sue Lessee
for any damages for breach of any of the provisions of this Lease or for any
royalties, rent or other sums due Lessor. The remedies in this Article shall
not be construed to be exclusive of any other remedies Lessor may have at law
or equity. Any delay or omission by Lessor in exercising any of its rights
under this Lease shall not be construed to be a waiver of those rights or any
other rights in respect to existing or subsequent defaults by Lessee. However,
in the case of any matter subject to arbitration under the provisions of this
Lease, Lessor's right to give notice of termination of the Lease shall not take
effect until ten (10) days after the time fixed by the Board of Arbitrators for
the performance of its award.
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ARTICLE 20. RIGHTS OF SUCCESSORS.
All the rights and obligations given or imposed by this Lease shall
extend to and bind the successors and assigns of either Lessor or Lessee.
However, in the case of any transfer by Lessee, Lessor must have given its
written consent to the assignment pursuant to Article 18.
ARTICLE 21. ARBITRATION.
If at any time during the continuance of this Lease, a dispute shall
arise between Lessor and Lessee over any matter which cannot be resolved by the
parties, the dispute shall be referred to a Board of Arbitrators (subject to
the provisions in Article 11 for procedures prior to arbitration in certain
cases). This Board shall be composed of a representative of Lessor and a
representative of Lessee, to be selected by them respectively, and a third
person to be chosen by these first two arbitrators. If the two arbitrators are
unable to agree upon a third arbitrator within ten (10) days, the American
Arbitration Association shall designate a disinterested person to act as the
third arbitrator. Should either of the parties fail to select its
representative and to identify its selection in writing to the other party
within ten (10) days after receipt of the first notice calling for arbitration
(as described below), then the American Arbitration Association shall designate
two disinterested persons, who will join the representative of the party which
did select its representative to form the Board.
Either party may at any time deliver to the other a notice setting
forth the point or points on which arbitration is desired. The other party may
then, within ten (10) days after receiving the notice, deliver a counter-notice
specifying any additional point, eligible for arbitration, on which it desires
a decision. Once formed, the Board shall give the parties ten (10) days'
written notice of the time and place of its hearing.
The Board shall consider the questions submitted to it for
arbitration, and shall make its decision and award in writing. The decision of
a majority of the arbitrators shall be final and binding on the parties and
their successors and assigns, and there shall be no appeal. Lessor and Lessee
hereby agree to abide by and promptly comply with each decision and award.
If the arbitrators' award declares that there has been a violation or
default under this Lease, it shall also state the time within which the
defaulting party must perform the award and rectify the default.
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The costs of arbitration proceedings shall initially be paid by the
party requesting the arbitration, but if that party substantially prevails in
the proceeding, it shall be reimbursed by the other party. Any question of
costs shall be determined by the arbitrators in the course of their decision
and award. Notwithstanding these provisions, the cost of arbitration with
regard to the setting of royalties, minimum rentals and valuation upon
termination shall be shared equally by the parties.
ARTICLE 22. INDEMNIFICATION.
Lessee agrees to indemnify and protect Lessor against all claims
arising from operation of the leased premises or otherwise related to the
leased premises. This shall include, but not be limited to, indemnification
against claims arising from any of the following: the working or management of
the premises; any condition of the land or the improvements on it; any breach
or default by Lessee under this Lease; any act of negligence by Lessee,
Lessee's subtenant, contractor or other occupant, or any of their agents,
contractors or the like; and any accident, injury or damages from any cause
(except where caused by Lessor's negligence). This indemnification shall also
cover all costs and other liabilities incurred in connection with any of these
claims. Lessee agrees that upon request from Lessor it will defend any claim
or action and will employ counsel which is reasonably satisfactory to Lessor.
This indemnification shall apply only to claims asserted during the
term of this Lease or within two (2) years after the termination of this Lease,
except for claims arising from the condition of the premises or improvements on
it. In the case of claims arising from the condition of the premises or
improvements, the indemnification shall apply to claims asserted within five
(5) years after termination if such claims are asserted within two (2) years of
the time Lessor became aware, or reasonably should have become aware, of such
condition.
ARTICLE 23. COMPLIANCE WITH LAWS.
Lessee promises that throughout the term of this Lease it will
substantially comply with all laws, regulations, ordinances, orders or other
requirements (including those relating to mine safety and environmental
quality) of all branches of federal, state and local governments which may be
applicable to the leased premises or any of the operations carried out on the
premises. This compliance will be solely at Lessee's expense.
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Lessee may contest by appropriate means, in its own name or in Lessor's name or
both, the validity or application of any of these governmental requirements,
but such contesting action shall be solely at Lessee's expense. If Lessee
challenges a governmental requirement, and if compliance with the requirement
may be legally postponed while the challenge is pending without incurring a
lien or charge on the leased premises or any other injury or expense to Lessor,
Lessee may postpone its compliance until the final determination of the
disputed issues. Lessor agrees to furnish any papers which may be necessary or
proper to permit Lessee to contest the government requirement. If Lessee fails
to comply in a timely fashion with any law, regulation or other requirement, as
required under this Article, Lessor shall have the option to perform such
compliance itself and to collect from Lessee the cost of the compliance.
ARTICLE 24. FIRE DAMAGE.
If any of the buildings or structures on the leased premises is
damaged by fire or other casualty, and if Lessor decides that it is necessary
or desirable for continued operations that the damage should be repaired, it
will be repaired by Lessee at its own expense. If a building repaired by
Lessee was covered by fire insurance, Lessee shall receive the proceeds of the
insurance to apply to the repairs. If Lessee disputes the necessity or
desirability of rebuilding any damaged structure, and Lessor and Lessee cannot
resolve the matter, it shall be settled by arbitration as provided by Article
21 of this Lease.
ARTICLE 25. DAMAGE TO OTHER COAL.
If Lessee mines any coal from directly underneath any workable and
merchantable portion of the Imboden or Taggart Seams and, by doing so, damages
or renders unworkable the coal in those overlying Seams, Lessee shall
compensate Lessor for any such damage. Notwithstanding the previous sentence,
Lessee shall not have to compensate Lessor and shall not be liable for damages
to either of the following: (1) the portions of the Imboden or Taggart Seams
above the areas in which Lessee mines coal if those portions of the Imboden or
Taggart Seams are being or have already been mined or (2) that portion of the
Taggart Seam above the Imboden Seam leased by Lessor to Blue Diamond Coal
Company. If Lessee mines any coal from underneath any other overlying seam or
seams and such other seam or seams are damaged or rendered
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unworkable by Lessee's mining operations, carried out in the usual and proper
manner, Lessee shall not be required to pay any compensation to Lessor.
ARTICLE 26. PRE-1924 AGREEMENTS.
(a) This Lease supersedes the following agreements concerning the
leasing by Lessor to Lessee of certain lands in Lee County and Wise County,
Virginia, and Harlan County and Letcher County, Kentucky:
1. Agreement dated June 10, 1910, leasing what are known as the
Callahan Block, the Imboden Block and the Keokee Block;
2. Agreement dated October 5, 1912, leasing various small parcels
of land lying in Harlan County, Kentucky;
3. Agreement dated June 1, 1917, leasing what is known as the
Exeter Block;
4. Agreement dated September 2, 1919, by which two tracts of
land, known as Parcel A and Parcel B, were added to the Stonega Reservation,
and leased to the Lessee;
5. Agreement dated September 2, 1919, leasing what is known as
the Dunbar Reservation;
6. Agreement dated September 20, 1923, leasing what is known as
the Two Hundred Eighteen (218) Acre Tract.
Those agreements have been cancelled as of January 1, 1924. However,
all obligations incurred by either party under any of those agreements have
continued and shall continue in force and shall be discharged according to
their terms.
(b) This Lease does not affect any previous agreements between the
parties by which Lessor sold to Lessee timber from lands in Wise County or Lee
County, Virginia. It does not affect any contracts between the parties to this
Lease or between the parties and any third party relating to railroad
rights-of-way or railroad operations. It also does not affect any other
contracts involving third parties.
(c) This Lease does not affect a certain agreement between its
parties, dated October 1, 1910, by which it was agreed, among other things,
that Lessee in certain cases might sue trespassers in its own name, in Lessor's
name or both. That agreement remains in full force and effect and its terms
shall apply to the lands covered by this Lease, as well as the lands referred
to in that agreement.
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(d) Except as described in the following sentence, this Lease does
not affect an agreement between the parties dated January 2, 1923, by which
Lessor, among other things, sold Lessee all the improvements connected with the
mining, coking and manufacturing operations on the Stonega Reservation and all
the personal property on the Stonega and Dunbar Reservations. Lessee's holding
of the Stonega and Dunbar Reservations will no longer be governed by the terms
and conditions set out in paragraph seventh of that January 2, 1923 agreement,
but instead will be governed by the terms and conditions of this Lease.
IN THE PRESENCE of the persons whose signatures appear below, this
Amendment and Restatement of Lease has been properly executed by the respective
parties on the date first above written.
PENN VIRGINIA COAL COMPANY
By: /s/ Kenneth D. Horton
President
WESTMORELAND COAL COMPANY
By: /s/ Gregory M. Daniels
President
Virginia Division
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<PAGE> 59
EXHIBIT P
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STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (the "Stock Option Agreement"), is
made as of this 15th day of May, 1996, between PENN VIRGINIA EQUITIES
CORPORATION, a Delaware corporation ("PVEC"), and WESTMORELAND COAL COMPANY, a
Delaware corporation ("WCC").
BACKGROUND
A. PVEC, WCC and Morrison-Knudsen Company, Inc. ("MK")
each own shares of the common stock, par value $1 per share (the "Common
Stock"), of Westmoreland Resources, Inc., a Delaware corporation ("WRI").
B. PVEC, WCC and MK are parties to a stockholders
agreement dated September, 1976 (the "WRI Agreement") which restricts the
right of the shareholders of WRI to transfer their WRI stock freely.
C. PVEC and WCC and Penn Virginia Coal Company, a
Virginia corporation , have entered into an agreement (the "Agreement") dated
May 14, 1996, which Agreement, among other things provides that PVEC will grant
to WCC the option contained herein.
TERMS
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and in consideration
of the mutual covenants and agreements herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Grant of Option. PVEC hereby grants to WCC an option
(the "Purchase Option") to purchase 1600 shares of Class IV Common Stock owned
by PVEC (including any other capital stock of WRI or any successor or assign of
WRI (whether by merger, consolidation, sale of assets or otherwise) into which
such shares of Common Stock have been or may be converted, adjusted to reflect
and include any stock dividend or distribution payable upon, or split, reverse
split, recapitalization, reclassification, subdivision or combination of, any
such Common Stock, collectively, the "Option Shares") being all the stock or
shares of any kind, classification or denomination of WRI owned by PVEC, at an
exercise price of $3,000,000 (the "Exercise Price").
2. Duration and Exercise of Purchase Option. The
Purchase Option shall be exercisable commencing on the date hereof and
terminating on the eighteen (18) month anniversary of the date hereof (the
"Option Period"). The Purchase Option may be exercised in whole (but not in
part) at any time during the Option Period and may only be accomplished by
written notice to PVEC accompanied by payment in full of the Exercise Price
during the Option Period; provided, that in the event that, (a) the Purchase
Option is properly exercised during the Option Period and, (b) all notices
required to be given to the shareholders of WRI and/or all other actions
required to be taken under the WRI Agreement are timely given and taken as
provided in the WRI Agreement, the Purchase Option may be consummated after the
expiration of the Option Period but no later than three (3) business days after
any such shareholder's first refusal rights have expired without extension
thereof and; provided, further that PVEC shall not be required to deliver the
Option Shares to WCC if such delivery would constitute a violation of the
Securities Act of 1933 (the "Securities Act") or the securities laws of any
state or if PVEC has not theretofore received from MK (or its assignee of MK's
rights under the WRI Agreement) a waiver of its first refusal rights to
participate in the transfer of the Option Shares or an acknowledgment from WRI
that MK's first refusal rights have expired.
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3. Put Option. If at any time during the Option Period
and prior to the exercise of the Purchase Option, WCC acquires any shares of
Common Stock (a "New Acquisition"), WCC shall notify PVEC of such New
Acquisition in writing within ten (10) days after the date thereof. PVEC shall
have the right, exercisable within thirty (30) days after PVEC's receipt of
notice or other discovery that WCC has consummated a New Acquisition, to
require WCC to purchase the Option Shares at the Exercise Price (the "Put
Option"). The Put Option shall be exercised by written notice delivered by
PVEC to WCC. WCC shall deliver the Exercise Price to PVEC within ten (10) days
after receipt of such notice from PVEC.
4. Delivery of Certificate. Upon exercise of the
Purchase Option or the Put Option, and PVEC's receipt of the Exercise Price,
PVEC shall deliver a certificate or certificates representing the Option
Shares, together with a duly executed stock power, to WCC. At the time of
delivery the Option Shares shall be free and clear of all liens and
encumbrances other than those created by the securities laws or by the WRI
Agreement.
5. Purchase for Investment. WCC represents and warrants
as follows:
5.1 Upon exercise of the Purchase Option or Put
Option, the Option Shares will be purchased by WCC for investment, and not with
a view to any distribution thereof that would violate the Securities Act, or
the applicable securities laws of any state; and WCC will not distribute the
Option Shares in violation of the Securities Act or the applicable securities
laws of any state.
5.2 WCC understands that the Option Shares have
not been registered under the Securities Act or the securities laws of any
state and must be held indefinitely unless subsequently registered under the
Securities Act and any applicable state securities laws or unless an exemption
from such registration becomes or is available.
Upon exercise of the Purchase Option or the Put Option, WCC
shall deliver to PVEC a representation letter to the effects set forth in this
Section 5.
6. General. The following provisions are an integral
part of this Stock Option Agreement:
6.1 At any time, and from time to time, each
party will execute such additional instruments and take such action as may be
reasonably requested by the other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the intent and
purposes of this Stock Option Agreement.
6.2 Any failure on the part of any party hereto
to comply with any of its obligations, agreements or conditions hereunder may
be waived in writing by the party to whom such compliance is owed.
6.3 The section and subsection headings in this
Stock Option Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Stock Option Agreement.
6.4 This Stock Option Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
6.5 This Stock Option Agreement is the entire
agreement of the parties with respect to the subject matter hereof. There are
no oral promises, conditions, representations, understandings, interpretations
or terms of any kind as conditions or inducements to the execution hereof.
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6.6 This Stock Option Agreement shall be governed
by the laws of the State of Delaware without giving effect to any conflicts of
laws principles.
6.7 This Stock Option Agreement shall be binding
upon and shall inure to the benefit of the successors and assigns of the
parties hereto, provided, however, that the Purchase Option shall not be
assignable by PVEC, nor shall it be assignable by WCC except to a parent which
holds 100% of the outstanding stock of WCC (either directly or indirectly), a
wholly-owned subsidiary of WCC (whether direct or indirect) or an entity which
is wholly-owned by any such parent (either directly or indirectly).
6.8 If any provision of this Stock Option
Agreement shall be found to be void, voidable or unenforceable, the remaining
provisions shall nevertheless remain in force.
6.9 This Stock Option Agreement shall not be
modified except by an instrument in writing, signed by the parties hereto.
6.10 If either party shall breach this Stock
Option Agreement, the defaulting party shall pay reasonable attorney's fees and
costs to the prevailing party for the enforcement of this Stock Option
Agreement, whether or not legal process is commenced.
6.11 All notices or other communications required
or permitted to be given hereunder shall be in writing and shall be deemed
delivered: if hand delivered, when delivered; if mailed by registered or
certified mail, postage prepaid, five (5) days after deposited in the mail; if
by overnight express delivery service, the next business day; or if by
facsimile, upon receipt of electronic confirmation of delivery, at the
addresses set forth below, unless such address is changed by written notice
hereunder.
If to PVEC:
HAND DELIVERY/EXPRESS MAIL/TELECOPY:
1105 North Market Street
Suite 1300
Wilmington, DE 19801
Attention: A. James Dearlove
Telecopy Number: (302) 427-7388
U.S. MAIL:
P.O. Box 8985
Wilmington, DE 19899
If to WCC:
14th Floor
2 North Cascade Avenue
Colorado Springs, CO 80803
Attention: President
Telecopy Number: (719) 448-5875
6.12 Time is of the essence of this Stock Option
Agreement.
6.13 Either party may specifically enforce its rights
under this Agreement.
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7. Waiver of Rights. PVEC agrees that if at any time during the
Option Period WCC shall obtain the rights to acquire by option, purchase
agreement or otherwise, any Common Stock owned by any person other than PVEC,
PVEC hereby waives any rights it may have to participate in such a transaction
pursuant to the WRI Agreement either on behalf of WRI or in its capacity as a
shareholder of WRI.
IN WITNESS WHEREOF, the parties hereto have caused this Stock
Option Agreement to be duly executed and delivered on the day and year first
above written.
PENN VIRGINIA EQUITIES CORPORATION
By: /s/ A. James Dearlove
President
WESTMORELAND COAL COMPANY
By: /s/ Robert J. Jaeger
Senior Vice President
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