ASSET PURCHASE AGREEMENT

Exhibit 2.1

ASSET PURCHASE AGREEMENT

by and among

GALLUP TRANSPORTATION AND TRANSLOADING
COMPANY, LLC and
NATIONAL KING COAL LLC (together “Sellers”)

AND

NKC ACQUISITION, LLC (“Buyer”)

 

2.7

Bill of Sale, Assignment and Assumption Agreement, Deeds and Other Documents 14

 

EXHIBIT B EMPLOYMENT AGREEMENTSEXHIBIT C SELLERS CLOSING CERTIFICATEEXHIBIT D            GUARANTY
DISCLOSURE SCHEDULE

1

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (“Agreement”) is dated April 14, 2005, by and among GALLUP TRANSPORTATION AND TRANSLOADING COMPANY, LLC (“Gallup”), a New Mexico limited liability company, and NATIONAL KING COAL LLC (“NKC”) a Colorado limited liability company (Gallup and NKC being herein referred to together as “Sellers”), and NKC ACQUISITION, LLC, a Colorado limited liability company (“Buyer”). Sellers and Buyer shall be referred to in this Agreement together as the “Parties” and individually as a “Party”. Capitalized terms not otherwise defined in this Agreement have the meaning given such terms in Article I.

NOW THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements herein contained, the parties hereto, intending to be legally bound, agree as follows:

ARTICLE I
DEFINITIONS

For purposes of this Agreement, the following terms and variations thereof have the meanings specified or referred to in this Article I .

“Adverse Consequences” means, without duplication, all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys’ fees and expenses.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For purposes of this definition, the term “controls,” “is controlled by,” or “is under common control with” means the power to direct or cause the direction of the management and policies of a Person or entity, whether through the ownership of voting securities, by contract or otherwise.

“Allocation Schedule” has the meaning set forth in Section 2.11.

“Alpha” means Alpha Natural Resources, LLC, the indirect parent of Sellers.

“Assets” has the meaning set forth in Section 2.1 .

“Assumed Liabilities” has the following meaning:

(i) all Liabilities arising under applicable Workers’ Compensation Acts for or based upon the employment of the current and former Employees who are hired by the Buyer or one of Buyer’s Affiliates to work at the Assets, where the date of injury or the last increment of injurious exposure needed to give rise to the claim occurred after such Employees begin working for the Buyer or one of the Buyer’s Affiliates;

(ii) all Liabilities arising under the federal black lung Laws for or based upon the employment of the current and former Employees who are hired by the Buyer or one of Buyer’s Affiliates to work at the Assets, where the last increment of injurious exposure needed to give rise to the claim occurred after such Employees begin working for Buyer or one of Buyer’s Affiliates;

(iii) all Liabilities arising under ERISA, the Code, COBRA, HIPAA and other similar Laws, including all Liabilities of a fiduciary for breach of fiduciary duty or any other failure to act or comply in connection with the sponsorship or administration of any Employee Benefit Plan Buyer assumes from Sellers and that are attributable to acts, omissions or circumstances that occur after the Closing;

(iv) all Liabilities for salaries, wages, bonuses, overtime payments, vacation days, personal days and similar forms of leave or compensation for or based upon the employment of the current and former Employees Buyer or one of Buyer’s Affiliates hires to work at the Assets that are earned or become due or accrued after such Employees begin working for Buyer or one of its Affiliates;

(v) all Liabilities for accounts payable and related notes, trade payables and earned royalties incurred as a result of actions by the Sellers before the Closing for services provided, goods delivered and coal mined after the Closing Date;

(vi) all Liabilities arising out of compliance with Laws relating to equal employment opportunity, employment, leaves of absence, or labor relations for or based upon the rejection, employment, or termination, or any other action taken or not taken by Buyer with respect to (a) applicants for employment, including any current Employees who are not hired by Buyer or one of Buyer’s Affiliates, and (b) the current and former Employees who are hired by the Buyer or one of Buyer’s Affiliates to work at the Assets, but only with respect to periods after such Employees begin working for Buyer or one of its Affiliates;

(vii) all Liabilities for claims, legal actions, suits, litigation, arbitrations, grievances, disputes or investigations, if substantially all of the events or conditions upon which the same are based had not occurred or did not exist as of the Closing Date;

(viii) all Liabilities for unpaid Taxes with respect to any Tax year or portion thereof beginning before and ending after the Closing Date to the extent allocable to the portion of such period beginning after the Closing Date;

(ix) all Liabilities for any Environmental Matter or Environmental or Response Action except to the extent such Liability relates to or arises from (a) the ownership of the Real Property or the Assets by Sellers; or (b) any activity by Sellers on or through the use of the Real Property or the Assets; provided, however, in either case, only to the extent any such Liabilities are attributable to acts or omissions occurring, or circumstances existing, at, on or prior to the Closing of which the Sellers have Knowledge;

(x) all liabilities arising under the WARN Act with respect to the pre-Closing employment terminations contemplated by this Agreement, as well as any other employee terminations Buyer or Buyer’s Affiliates implement after the Closing with respect to the Business;

(xiv) all Liabilities to third parties for personal injury or damage to property (other than Liabilities for Environmental Matters or Environmental or Response Actions) attributable to or arising out of the ownership or operation of the Assets or the Business by Buyers after the Closing; and,

(xv) any other Liabilities attributable to or arising out of the ownership or operation of the Assets or the Business by Buyer after the Closing

“Basis” means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that forms or would be reasonably likely to form the foundation for any specified consequence.

“Books and Records” means the original or true and complete copies of all of the books and records of the Sellers, including, but not limited to, customer lists, employee records for those Employees hired by the Buyer immediately following the Closing Date, purchase orders and invoices, sales orders and sales order log books, credit and collection records, plats, drawings and specifications, environmental and mining reports and studies, correspondence and miscellaneous records with respect to customers and supply sources, lessors and lessees, maps, core logs, production reports, any records required by any Laws, including, without limitation, any mining Laws, advertising and marketing materials, equipment logs, engineering data, equipment maintenance records and all other general correspondence, records, books and files owned by the Sellers, but excluding any and all Tax Returns, books and records relating to the Retained Liabilities and corporate records of the Sellers.

“Breach” means any breach of, or any inaccuracy in, any representation or warranty or any breach of, or failure to perform or comply with, any covenant or obligation, in or of the applicable Contract or other agreement or instrument, or any event which, with the passing of time or the giving of notice, or both, would constitute such a breach, inaccuracy or failure or would give rise to a right to terminate such agreement or instrument.

“Business” means the mining, processing, loading and sale of coal and coal related products produced by Sellers using the Assets in the states of Colorado and New Mexico.

“Business Day” means any day other than a Saturday, a Sunday or a United States federal or Pennsylvania banking holiday.

“Buyer Closing Certificate” means the certificate of the Buyer substantially in the form of Exhibit A attached to this Agreement.

“Buyer Indemnitees” means, collectively, the Buyer and its Affiliates, and the officers, directors, employees and agents of the Buyer and its Affiliates.

“CERCLA” has the meaning set forth in the definition of “Environmental Laws.”

“CERCLIS” has the meaning set forth in Section 5.6(g) .

“Claim Notice” has the meaning set forth in Section 8.4 .

“Closing” means the closing of the transactions contemplated by this Agreement.

“Closing Date” means the date of the Closing.

“Closing Documents” means, with respect to a particular Party, all of the documents, instruments, closing certificates, disclosure schedules, agreements or other items to be executed by the designated Party for consummation of the transactions contemplated by this Agreement.

“Coal Inventory” means the stockpiles of marketable clean and raw coal owned by the Sellers and located at the end of the stacker conveyor on the Real Property in Hesperus, Colorado and on the Coal Loop.

“Coal Loop” means that certain Real Property located in McKinley County, New Mexico that is leased to Gallup by Gamerco Associates Limited, pursuant to a Lease and Throughput Agreement dated February 1, 1997.

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended.

“Code” means the Internal Revenue Code of 1986, and the rules and regulations promulgated thereunder, as amended, and any reference to a section of the Code shall include any successor section or provision of the Code.

“Contaminated” or “Contamination” means the presence or Release of one or more Hazardous Substances in such quantity or concentration as to: (i) violate any Environmental Law; (ii) require disclosure to any Governmental Authority; (iii) require remediation or removal pursuant to Environmental Law; (iv) interfere with or prevent the customary use of the Real Property owned by the Sellers or included in the Assets; or (v) create any Liability to fund the clean up of the Real Property.

“Contracts” shall mean all of the contracts or agreements, written and oral, of the Sellers relating to the Assets or the Business.

“Decree” means any injunction, judgment, order, decree or ruling of any applicable Governmental Authority.

“Deed of Trust” means that certain Deed of Trust, Mortgage, Security Agreement and Assignment dated June 30, 1995 (“Deed of Trust”) made by NKC LLC, a Colorado limited liability company, for the benefit of NS Resources, Inc. a Delaware corporation, and recorded with the Clerk and Recorder of La Plata County, Colorado on July 3, 1995 at Reception No. 689641

“Disclosure Schedule” means the disclosure schedules delivered by the Sellers to the Buyer and by the Buyer to the Sellers, as the case may be, concurrently with the execution and delivery of this Agreement. The information contained in the Disclosure Schedule constitutes (i) exceptions to particular representations, warranties, covenants and obligations of the Sellers as set forth in this Agreement, or (ii) descriptions or lists of assets and liabilities and other items referred to in this Agreement. For convenience of the Parties, the Disclosure Schedule shall be arranged in paragraphs corresponding to the lettered and numbered Sections contained in this Agreement.

“Dispute” has the meaning set forth in Section 12.12 .

“Employee” means any Person (i) employed by and rendering personal services for the Sellers, (ii) receiving short-term or long-term disability benefits from the Sellers under an Employee Benefit Plan, (iii) on vacation or an approved leave of absence, or (iv) off work and receiving or eligible to receive benefits under a Workers’ Compensation Act. The term “current and former Employees” means any Persons who fall within the term Employee at any time prior to the Closing.

“Employee Benefit Plans” shall have the meaning set forth in Section 5.10(a) .

“Employment Agreements” means those certain employment agreements agreed to between the Buyer, on the one hand, and each of Trent Peterson and Tom Bird, on the other, prior to the execution of this Agreement, the forms of which are attached to this Agreement as Exhibit B .

“Encumbrances” means any charge, claim, community or other marital property interest, encroachment, servitude, right of first option, right of first refusal, restriction on use, mortgage, pledge, lien, encumbrance, receipt of income, charge, restriction on transfer, other security or equity interest, or defect in title.

“Environment” means surface or ground water, water supply, soil or the ambient air.

“Environmental Laws” means collectively, all Laws enacted and in effect on or prior to the Closing Date that relate to (a) the prevention, abatement or elimination of pollution, or the protection of the Environment, including, without limitation, (i) Laws applicable to Mining Activities or related activities; and (ii) all Reclamation Laws, (b) the generation, handling, treatment, storage, disposal or transportation of waste materials, (c) the regulation of or exposure to Hazardous Substances, including, without limitation, the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. §§9601 et seq. (“CERCLA”); the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, as amended, 42 U.S.C. §§6901 et seq. (“RCRA”), the Clean Air Act, 42 U.S.C. §§7401 et seq., the Clean Water Act, 33 U.S.C. §§1251 et seq., the Toxic Substances Control Act, 15 U.S.C. §§2601 et seq. and the Emergency Planning and Community Right to Know Act, 42 U.S.C. §§11001 et seq.

“Environmental Matter” means any assertion of a violation, claim, Decree or directive by any Governmental Authority or any other Person for personal injury, damage to property or the Environment, nuisance, or Contamination, or for damages or restrictions resulting from or related to (i) the operation of the Business or the ownership, use or operation at or on any Real Property, Assets or other assets owned, operated or leased by the Sellers; or (ii) the existence or the continuation of a Release of, or exposure to, or the transportation, storage or treatment of any Hazardous Substance into the Environment from or related to any Real Property, Assets or assets currently or formerly owned, operated or leased by the Sellers or any activities on or operations thereof.

“Environmental or Response Action” means all actions required by a Governmental Authority with jurisdiction (i) to clean up or remove any Hazardous Substance or other substance; (ii) to prevent the Release or threat of Release, or minimize the further Release of any Hazardous Substance or other substance so it does not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor Environment; (iii) to perform pre-remedial studies and investigations or post-remedial monitoring and care; or (iv) to bring facilities on any Real Property owned, operated or leased by the Sellers into compliance with Environmental Laws and Reclamation Laws.

“EPA” has the meaning set forth in Section 5.6(d) .

“Equipment” means the material tangible machinery, vehicles, equipment, office equipment, computer hardware, supplies, materials, furniture, fixtures, furnishings, trailers, tools, parts and other personal property of every kind owned or leased by the Sellers.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means each entity that is treated as a single employer with Sellers for purposes of Code §414.

“Excluded Assets” has the meaning set forth in Section 2.2 .

“Financial Statements” has the meaning set forth in Section 5.2 .

“GAAP” means United States generally accepted accounting principles as in effect from time to time, consistently applied.

“Gallup” means Gallup Transportation and Transloading Company, LLC.

“Governmental Authority” means any agency, authority, board, bureau, commission, court, tribunal, department, office or instrumentality of any nature whatsoever or any governmental or quasi-governmental authority or unit, whether federal, state, county, district, city, other political subdivision, or taxing district, foreign or otherwise.

“Government Leases” shall have the meaning set forth in Section 6.3.

“Guaranty” has the meaning set forth in Section 7.2(k) .

“Hazardous Substances” means any substance, chemical, waste, solid, material, pollutant or contaminant that is defined or listed as hazardous or toxic under any applicable Environmental Laws. Without limiting the generality of the foregoing, it shall also include mine drainage, any radioactive material, including any naturally-occurring radioactive material, and any source, special or by-product material as defined in 42 U.S.C. 2011, et seq., any amendments or authorizations thereof, any polychlorinated biphenyls in any form or condition, radioactive waste, condensate, or derivatives or byproducts thereof or oil and petroleum products or by products and constituents thereof.

“Health and Safety Requirements” means all applicable federal, state, local and foreign Laws concerning public health and safety and worker health and safety each as in effect as of the Closing Date, other than Environmental Laws, but including, without limitation, the Mine Safety and Health Act of 1977, as amended.

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended, and all rules and regulations thereunder.

“Indemnifying Party” has the meaning set forth in Section 8.4 .

“Independent Surveyor” has the meaning set forth in Section 2.6(a).

“Insurance Policies” means those policies of insurance, including any arrangements for self-insurance, that the Sellers or any of their Affiliates maintained with respect to the Business and the Assets for periods on or prior to Closing.

“Intellectual Property” means all of the Sellers’ names, assumed fictitious business names, tradenames, registered and unregistered trademarks, service marks, patents and copyrights (including any registrations, applications, licenses or rights relating to any of the foregoing) technology, logos, trade secrets, confidential information, inventions, know-how, designs, technical data, drawings, customer and supplier lists, pricing and cost information, or computer programs and processes and all goodwill associated therewith and rights thereunder, remedies against infringements thereof, and rights to protection of interests therein under the laws of all jurisdictions owned or licensed or leased by Sellers.

“Key Employees” means Trent Peterson, Tom Bird and Brad Gosche.

“Knowledge” means, with respect to an individual and a particular fact or matter, actual knowledge without independent investigation. Without limiting the generality of the foregoing, Sellers will be deemed to have Knowledge of a particular fact or matter if any of the Key Employees has, or at any time had, Knowledge of that fact or other matter.

“Law” means any constitution, statute, code, ordinance, regulation, principle of common law or treaty of any applicable Governmental Authority.

“Liability” means any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including, without limitation, any liability for Taxes.

“Material Adverse Effect” means any event, change or occurrence that individually, or together with any other event, change or occurrence, has a material adverse impact on the Business, Assets, financial condition or results of operations, taken as a whole; provided that none of the following shall be deemed to constitute, and none of the following shall be taken into account in determining whether there has been, a Material Adverse Effect or Material Adverse Change: (a) any adverse change, event, development, or effect arising from or relating to (1) general business or economic conditions, including such conditions related to the Business, (2) national or international political or social conditions, including the engagement or continuation by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States, or any of its territories, possessions, or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, (3) financial, banking, or securities markets (including any disruption thereof and any decline in the price of any security or any market index), (4) changes in United States generally accepted accounting principles, (5) changes in Law or other binding directives issued by any Governmental Authority or (6) the taking of any action contemplated by this Agreement and the other agreements contemplated hereby, (b) any existing event, occurrence, or circumstance with respect to which Buyer has Knowledge as of the date hereof and (c) any adverse change in or effect on the Business that is cured by Sellers before the earlier of (1) the Closing Date and (2) the date on which this Agreement is terminated pursuant to Section 11.1 hereof..

“Mining Activities” means all activities of the Sellers related to the Assets that involve surface mining, underground mining and auger mining, processing, sale or transporting of coal and coal by-products. For the purpose of this definition, “Mining Activities” shall include, without limitation, any activities defined under the Surface Mining Control and Reclamation Act of 1977, as amended, as “surface coal mining operations”.

“Most Recent Financial Statements” has the meaning set forth in Section 5.2 .

“Most Recent Fiscal Year End” has the meaning set forth in Section 5.2 .

“MSHA” has the meaning set forth in Section 5.6(d) .

“Multiemployer Plan” has the meaning set forth in Section (3(37) of ERISA.

“NKC” means National King Coal LLC.

“Offer of Employment” means an offer by Buyer or one of its Affiliates to employ, at the sites at which the Business is conducted, an Employee of Sellers at a salary, in a position and with responsibilities substantially similar terms and conditions to the terms and conditions of such Employee’s existing employment with Sellers, which employment will commence not later than one (1) week after the Closing, subject to satisfactory completion of interviews and drug testing.

“Ordinary Course of Business” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

“Organizational Documents” means the articles of incorporation, certificate of incorporation, charter, bylaws, articles or certificate of formation, regulations, operating agreement, partnership agreement, and all other similar documents, instruments or certificates of a Person, including any amendments thereto.

“OSM” has the meaning set forth in Section 5.6(d) .

“Parts, Fuel and Supplies Inventory” means all inventories of Sellers (except Coal Inventory), wherever located, including all parts, fuel, supplies and materials to be used or consumed by the Sellers.

“Pension Plans” has the meaning set forth in Section 5.10(c) .

“Permits” means the written permits, consents, licenses, orders, certificates, registrations, approvals, ratifications, waivers and similar rights issued by a Governmental Authority and held by the Sellers.

“Permitted Encumbrances” means any of the following with regard to the Real Property: (a) real estate taxes, assessments and other levies, fees, or charges imposed by a Governmental Authority with respect to such Real Property that are (i) not due and payable as of the Closing Date or (ii) being contested by appropriate proceedings which, if adversely determined, would not have a Material Adverse Effect; (b) mechanics’ liens and similar liens for labor, materials, or supplies provided with respect to such Real Property incurred in the Ordinary Course of Business for amounts that are (i) not delinquent and that would not, in the aggregate, have a Material Adverse Effect or (ii) being contested by appropriate proceedings which, if adversely determined, would not have a Material Adverse Effect; (c) zoning, building codes, and other land use laws regulating the use or occupancy of such Real Property or the activities conducted thereon that are imposed by any Governmental Authority having jurisdiction over such Real Property; and (d) easements, covenants, conditions, restrictions and other similar matters affecting title to such Real Property, including, without limitation, the exceptions set forth on Exhibit B to the Special Warranty Deed being delivered to Buyer pursuant to the provisions of Section 5.4 (d) of this Agreement, and other encroachments and title and survey defects, all of which do not or would not materially impair the use or occupancy of such Real Property in the operation of the Business taken as a whole.

“Person” means any individual, general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, Governmental Authority, cooperative, association or any foreign trust or foreign business organization or any other entity of any kind whatsoever, as well as the heirs, executors, administrators, legal representatives, successors and assigns of such “person” where the context so requires.

“Post-Closing Period” means any taxable period beginning after the Closing Date.

“Pre-Closing Period” means any taxable period ending on or before the Closing Date.
“Purchase Price” has the meaning set forth in Section 2.5.

“RCRA” has the meaning set forth in the definition of “Environmental Laws.”

“Real Property” means the real property rights and interests owned, leased or subleased by the Sellers and any improvements, fixtures, easements, rights of way, and other rights appurtenant thereto (such as appurtenant rights in and to public streets).

“Reclamation Laws” means all Laws enacted and in effect on or prior to the Closing Date relating to reclamation Mining Activities or reclamation Liabilities including, without limitation, the Surface Mining Control and Reclamation Act of 1977.

“Release” shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, dumping or disposing into the Environment of Hazardous Substances.

“Retained Liabilities” means all Liabilities of the Sellers as of the Closing Date other than Assumed Liabilities.

“Sellers’ Closing Certificate” means the certificate of the Sellers substantially in the form of Exhibit C attached to this Agreement.

“Sellers Indemnitees” means, collectively, the Sellers and their Affiliates, and the officers, directors, Employees, agents and representatives of the Sellers and their Affiliates.

“SMCRA” has the meaning set forth in Section 5.6(e).

“Straddle Period” means a Tax period or year commencing before and ending after the Closing Date.

“Subsidiary” means with respect to any relevant Person, any Affiliate that is (directly or indirectly) controlled by such Person.

“Tax” or “Taxes” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code §59A), custom duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, whether computed on a separate or consolidated, unitary or combined basis or in any other manner, including any interest, penalty, or addition thereto, whether disputed or not and including any obligation to indemnify or otherwise assume or succeed to the Tax liability of any other Person.

“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Third Party Claim” has the meaning set forth in Section 8.4 .

“WARN Act” means the Worker Adjustment and Retraining Notification Act.

“Welfare Plans” has the meaning set forth in Section 5.10(c) .

“Workers’ Compensation Acts” means Laws that provide for awards to employees and their dependents for employment-related accidents and diseases.

ARTICLE II
PURCHASE AND SALE OF ASSETS

2.1 Assets to be Acquired . Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Sellers shall sell, convey, assign, transfer and deliver to the Buyer, and the Buyer shall purchase and acquire from the Sellers, free and clear of any Encumbrances other than Permitted Encumbrances, all of the Sellers’ right, title and interest in and to all of the Sellers’ property and assets, real, personal or mixed, tangible and intangible, of every kind and description, wherever located, including, without limitation, the following (but only excluding the Excluded Assets):

(a) all Real Property, including all of the Sellers’ owned Real Property identified in Section 5.3(a)(i) of the Disclosure Schedule and the leasehold interest in all of the Sellers’ leased or subleased Real Property identified in Section 5.3(a)(ii) of the Disclosure Schedule;

(b) all Equipment, including all of the Sellers’ owned Equipment identified in Section 2.1(b)(i) of the Disclosure Schedule and the leasehold interest in all of the Sellers’ leased Equipment identified in Section 2.1(b)(ii) of the Disclosure Schedule;

(c) all Parts, Fuel and Supplies Inventory;

(d) all Coal Inventory;

(e) all Contracts, including those listed in Section 5.8 of the Disclosure Schedule;

(f) all Permits and all pending applications therefore or renewals thereof, in each case to the extent transferable to the Buyer, identified in Section 5.6(b) of the Disclosure Schedule;

(g) all Books and Records;

(h) all intangible rights and property of the Sellers, including the Intellectual Property identified in Section 2.1(h) of the Disclosure Schedule, going concern value, goodwill, telephone, telecopy and email addresses, including rights to the use of the names Gallup Transportation and Transloading Company and National King Coal;

(i) all claims of the Sellers against third parties relating to the Assets or the Business, other than claims that pertain to a Retained Liability; and

(j) all rights of the Sellers relating to deposits and prepaid expenses, claims for refunds and rights to offset.

All of the property and assets to be transferred to the Buyer hereunder are herein referred to collectively as the “Assets.”

2.2 Excluded Assets . Notwithstanding anything to the contrary contained in Section 2.1 or elsewhere in this Agreement, the following assets of the Sellers (collectively, the “Excluded Assets”) are not part of the sale and purchase contemplated hereunder, are excluded from the Assets and shall remain the property of the Sellers after the Closing:

(a) all cash balances;

(b) all accounts receivable of the Sellers at the Closing determined in accordance with GAAP; and,

(c) the assets, properties and rights identified in Section 2.2(c) of the Disclosure Schedule.

2.3 Assumed Liabilities . On the Closing Date, Buyer shall assume all of the Assumed Liabilities.

2.4 Retained Liabilities . The Retained Liabilities shall remain the sole responsibility of and shall be retained, paid, performed and discharged solely by the Sellers.

2.5 Consideration . Buyer shall pay an aggregate of Four Million Four Hundred Thousand Dollars (US$4,400,000), plus the value of the coal inventory determined in accordance with Section 2.6 for the Assets, and subject to adjustments and prorations as provided in this Agreement (as so adjusted, the “Purchase Price”). The Purchase Price shall be payable by wire transfer as follows:

(a) at the Closing, Four Million Three Hundred Fifteen Thousand Dollars (US$4,315,000) shall be payable to an account designated by NKC by written notice to the Buyer no later than two (2) Business Days prior to Closing; and,

(b) at the Closing, Eighty Five Thousand Dollars (US$85,000) shall be payable to an account designated by Gallup by written notice to the Buyer no later than two (2) Business Days prior to Closing; and,

(c) the values of the Coal Inventory, determined in accordance with the provisions of Section 2.6 , shall be paid to NKC no later than five (5) days after the Closing.

2.6 Coal Inventory Value Determination .

(a) No later than two (2) Business Days prior to the Closing Date, the Sellers and the Buyer shall cause Stouder-Miller Associates, 2101 San Juan Blvd., Farmington, NM 87401 (the “Independent Surveyor”) to prepare and deliver to each of them a survey of all Coal Inventory of NKC as of the Closing, which survey shall be conducted in accordance with the principles set forth on and shall be in substantially the format attached hereto as part of Section 2.6(a) of the Disclosure Schedule and shall include the density of the various stockpiles that constitute the Coal Inventory. Such Coal Inventory shall be valued, in the case of Coal Inventory located on the Real Property in Hesperus, Colorado, at $21.13 per net ton (of 2,000 lbs.) and, in the case of Coal Inventory located at the Coal Loop, at $33.94 per net ton (of 2,000 lbs.). NKC and the Buyer shall cooperate with and make available any information reasonably requested by the Independent Surveyor in its preparation of its survey of the Coal Inventory. All determinations made by the Independent Surveyor in its survey of the Coal Inventory shall be final, binding and conclusive on the parties. NKC and the Buyer shall each bear fifty percent of the fees and costs of the Independent Surveyor and any other third party incurred in connection with the calculation of the Coal Inventory pursuant to this Section 2.6(a) .

(b) NKC will be responsible for the federal black lung excise tax, severance taxes, OSM reclamation fees, and any other Taxes due as a result of the sale of the Coal Inventory to Buyer.

2.7 Bill of Sale, Assignment and Assumption Agreement, Deeds and Other Documents . At the Closing, Sellers shall: (i) execute and deliver to Buyer the Bill of Sale, an Assignment and Assumption Agreement, the Deeds and such other documents as may be necessary to convey to the Buyer the Assets; (ii) perform its obligations under this Agreement to be performed at or before the Closing; and (iii) execute and deliver the Sellers Closing Certificate. At the Closing, the Buyer shall: (i) pay the Purchase Price by wire transfer to the Sellers in immediately available funds; (ii) execute and deliver to the Sellers the Buyer Closing Certificate; (iii) perform its obligations under this Agreement to be performed at or before the Closing; and (iv) execute and deliver the Employment Agreements.

2.8 Assumption of Liabilities . At the Closing, Buyer shall execute and deliver to the Sellers the Assignment and Assumption Agreement and such other documents and instruments as may be reasonably necessary for the Buyer to assume all of the Assumed Liabilities.

2.9 Proration of Liabilities . Sellers and Buyer shall cooperate with each other to provide for payments due with respect to the Assumed Liabilities and the Retained Liabilities during the payment period in which the Closing occurs with all such Liabilities prorated as of the Closing Date, if applicable. Without limiting the foregoing, if any of the non-exempt Employees Buyer or one of its Affiliates hires become entitled to overtime pay based on the total hours worked during the workweek that includes the Closing, then Buyer and Seller shall prorate the amount of the overtime pay, i.e., the extra 1/2 hour of pay at the Employee’s regular rate for each hour of overtime work performed after the Closing (Overtime Pay”), as follows: Sellers shall be responsible for reimbursing Buyer for any Overtime Pay for any hours a non-exempt Employee worked prior to the Closing in excess of eight hours in any twenty-four hour period, and Buyer shall be responsible for any Overtime Pay for any hours a non-exempt Employee worked after the Closing in excess of eight hours in any twenty-four hour period.

2.10 Additional Documents . At the closing, Sellers and Buyer shall execute and deliver all such other documents or instruments necessary or appropriate to effect the transactions contemplated by this Agreement.

2.11 Allocation of Purchase Price and Assumed Liabilities . The Purchase Price and Assumed Liabilities (to the extent it constitutes part of the amount realized for federal income Tax purposes) shall be allocated among the Assets in accordance with the allocation schedule (the “Allocation Schedule”) attached hereto as Section 2.11 of the Disclosure Schedule. The Allocation Schedule shall be final and binding on the Buyer and the Sellers and shall provide the Basis for Buyer and Sellers to complete IRS Form 8594. The allocation to the Assets is intended to comply with the requirements of Section 1060 of the Code. The Parties shall cooperate to comply with all substantive and procedural requirements of Section 1060, and except for any adjustment to the Purchase Price hereunder, such allocation schedule shall be adjusted only if and to the extent necessary to comply with such requirements of Section 1060. Buyer and Sellers agree that they will not take nor will they permit any Affiliate to take, for income Tax purposes, any position inconsistent with the Allocation Schedule to the Assets; provided , however , that (i) the Buyer’s cost for the Assets may differ from the total amount allocated hereunder to reflect the inclusion in the total cost of items (for example, capitalized acquisition costs) not included in the total amount so allocated and (ii) the amount realized by the Sellers may differ from the total amount allocated hereunder to reflect transaction costs that reduce the amount realized for federal income Tax purposes.

2.12 Closing . The purchase and sale provided for in this Agreement (the “Closing”) will take place at the offices of Buyers’ counsel in Denver, Colorado, commencing at 10:00 A.M. MST on April 14, 2005, or if all of the conditions to the obligations of the parties to consummate the transactions contemplated hereby have not been satisfied in full or waived by such date, on such mutually agreeable later date as soon as practicable (but in no event more than three (3) Business Days) after the first date on which the conditions to the obligations of the parties to consummate the transactions contemplated hereby have been satisfied or waived.

ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLERS REGARDING THE TRANSACTION

For the purpose of inducing the Buyer to enter into and perform this Agreement, the Sellers represent and warrant to the Buyer that, except as set forth in the Disclosure Schedule, the statements contained in this Article III are true, correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article III ).

3.1 Organization . Gallup is a limited liability company duly organized, validly existing, and in good standing under the Laws of the State of New Mexico. NKC is a limited liability company duly organized, validly existing, and in good standing under the Laws of the State of Colorado. Each Seller has full power and authority to conduct the Business as it is now being conducted, to own or use the Assets and other properties it purports to own and to perform all of its obligations under the Contracts. Each Seller is duly qualified to do business and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the Assets and other properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except where such failure to be so qualified would not have a Material Adverse Effect. Sellers have no Subsidiaries. Sellers own no shares of capital stock, partnership interests or other securities of any other Person.

3.2 Authorization of Transaction . Each Seller has full power and authority (including full power and authority as an organization) to execute, deliver and perform its obligations under this Agreement and each other agreement, document or instrument to which it is a party in connection with this Agreement. Each Seller’s execution, delivery and performance of this Agreement and all other agreements, documents and instruments in connection with this Agreement and the transactions contemplated under this Agreement have been duly authorized by all requisite action on the part of such Seller. This Agreement and all other agreements, documents or instruments executed and delivered by the Sellers in connection with this Agreement have been duly executed and delivered by the Sellers. This Agreement and all other agreements, documents or instruments executed and delivered by each Seller pursuant to this Agreement constitute the legal, valid and binding obligation of each Seller, enforceable in accordance with their terms and conditions, subject, however, to the effects of bankruptcy, insolvency and reorganization, and general equitable principles. Except as set forth in the Disclosure Schedule, no notices to, filings with, authorizations, consents, or approvals of any Governmental Authorities or any other third party or Person required to be made or obtained on the part of any Seller in order to consummate the transactions contemplated by this Agreement.

3.3 Noncontravention . Neither the execution, delivery or performance of this Agreement by Sellers nor the execution, delivery or performance by Sellers of each other agreement, document or instrument to which it is a party executed in connection with this Agreement or delivered pursuant to this Agreement, nor the consummation of the transactions contemplated hereby or thereby, will (i) violate any Law to which the Sellers are subject or any provision of their respective Organizational Documents, (ii) contravene, conflict with or result in a violation of any of the terms or requirements of, or result in any Governmental Authority revoking, withdrawing, suspending, canceling or terminating any material authorization or Permit issued by a Governmental Authority that is held by the Sellers that relates to the Assets, or (iii), conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, cancel or exercise any remedy or loss of rights, or result in the creation of any Encumbrance, except for Permitted Encumbrances or require any notice (in all such cases with or without the giving of notice and/or the passage of time) under any material Contract, lease, agreement, document, instrument or other arrangement to which either Seller is a party or by which it is bound or to which any of its assets is subject.

3.4 Brokers’ Fees . Sellers have no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Buyer could become liable or obligated.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE BUYER REGARDING THE TRANSACTION

For the purpose of inducing the Sellers to enter into and perform this Agreement, the Buyer represents and warrants to the Sellers that, except as set forth in the Disclosure Schedule, the statements contained in this Article IV are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article IV ).

4.1 Organization of the Buyer . The Buyer is a limited liability company that is duly organized, validly existing and in good standing under the Laws of the State of Colorado.

4.2 Authorization of Transaction The Buyer has full power and authority (including full power and authority as an organization) to execute, deliver and perform its obligations under this Agreement and each other agreement, document or instrument to which it is a party in connection with this Agreement. The Buyer’s execution, delivery and performance of this Agreement and all other agreements, documents and instruments in connection with this Agreement and the transactions contemplated under this Agreement have been duly authorized by all requisite action on the part of the Buyer. This Agreement and all other agreements, documents or instruments executed and delivered by the Buyer in connection with this Agreement have been duly executed and delivered by the Buyer. This Agreement and all other agreements, documents or instruments executed and delivered by the Buyer pursuant to this Agreement constitute the legal, valid and binding obligation of the Buyer, enforceable in accordance with their terms and conditions, subject, however, to the effects of bankruptcy, insolvency and reorganization, and general equitable principles. Except as set forth in the Disclosure Schedule, no notices to, filings with, authorizations, consents, or approvals of any Governmental Authorities or any other third party or Person required to be made or obtained on the part of the Buyer in order to consummate the transactions contemplated by this Agreement.

4.3 Noncontravention . Neither the execution, delivery or performance of this Agreement by the Buyer nor the execution, delivery or performance by the Buyer of each other agreement or instrument to which it is a party executed in connection with this Agreement or delivered pursuant to this Agreement, nor the consummation of the transactions contemplated hereby or thereby, will (i) violate any Law to which the Buyer is subject or any provision of its Organizational Documents, (ii) contravene, conflict with or result in a violation of any of the terms or requirements of, or result in any Governmental Authority revoking, withdrawing, suspending, canceling or terminating any material authorization or Permit issued by a Governmental Authority that is held by the Buyer that relates to the Assets, or (iii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any Party the right to accelerate, terminate, modify, or cancel or exercise any material remedy or loss of rights, or result in the creation of any Encumbrance, or require any notice (in all such cases with or without the giving of notice and/or the passage of time) under any material agreement, contract, lease, license, instrument, or other arrangement to which the Buyer is a party or by which it is bound or to which any of its assets is subject.

4.4 Qualified Buyer . The Buyer is qualified to obtain and, after the Closing, retain all Permits (including environmental permits) and to hold all coal land and leases owned by the Sellers or that are necessary for the Buyer to own, lease, maintain and operate the Assets, including, from and after the Closing Date. Neither the Buyer nor any Person “owned or controlled” by the Buyer, nor any Person which “owns or controls” the Buyer (collectively, “ Buyer Group ”), has been notified by the United States Office of Surface Mining Reclamation and Enforcement or the agency of any state administering the SMCRA or any comparable state statute, that it is: (i) ineligible to receive surface mining permits; or (ii) is under investigation to determine whether their eligibility to receive such permits should be revoked, i.e., “permit blocked”, nor, to the Knowledge of the Buyer, has any such notification been threatened. To the Knowledge of the Buyer, no facts exist that presently or upon the giving of notice or the lapse of time or otherwise would render any Person in Buyer Group ineligible to receive surface mining permits. As used herein, the terms “owned or controlled” and “owns or controls” shall be defined as set forth in SMCRA and the rules promulgated thereunder.

4.5 Available Funds . The Buyer has sufficient cash resources to enable it to make payment in immediately available funds of the Purchase Price when due and any other amounts to be paid by it under this Agreement.

4.6 Brokers’ Fees . The Buyer has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Sellers could become liable or obligated.

ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SELLERS REGARDING THE ASSETS

For the purpose of inducing the Buyer to enter into and perform this Agreement, Sellers represent and warrant to the Buyer that, except as set forth in the Disclosure Schedule, the statements contained in this Article V are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article V ).

5.1 Absence of Changes. Since December 31, 2004, neither Seller has with respect to the Assets and/or the Business, except as agreed to by Buyer:

(a) borrowed or agreed to borrow any funds or incurred, or become subject to, any Liability for borrowed money, or issued any note, bond or other debt security, or guaranteed any indebtedness for borrowed money or capitalized lease obligation, except Liabilities incurred in the Ordinary Course of Business;

(b) paid any Liability other than Liabilities in the Ordinary Course of Business;

(c) sold, transferred or otherwise disposed of, or agreed to sell, transfer or otherwise dispose of any of the Real Property, Equipment or any other Assets, or cancelled or otherwise terminated, or agreed to cancel or otherwise terminate, other than in the Ordinary Course of Business, any Permits;

(d) except in the Ordinary Course of Business, entered into any agreement, lease or license (or series of related agreements, contracts, leases and licenses) or made or permitted any material amendment to or termination, acceleration, modification or cancellation of any Contract or breached any provision of any Contract;

(e) merged or consolidated with any other Person;

(f) mortgaged, pledged or subjected to any Encumbrance (other than a Permitted Encumbrance) any of the Assets or any other assets or properties of the Sellers;

(g) made any capital expenditure (or series of related capital expenditures) either (x) involving more than Fifty Thousand Dollars ($50,000), (y) together with all other such capital expenditures, involving more than One Hundred Thousand Dollars ($100,000) in the aggregate or (z) outside the Ordinary Course of Business;

(h) made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans and acquisitions);

(i) delayed or postponed the payment of accounts payable and other Liabilities outside the Ordinary Course of Business;

(j) cancelled, compromised, waived or released any right or claim outside the Ordinary Course of Business involving more than One Hundred Thousand Dollars ($100,000) in the aggregate;

(k) except for contracts of employment at will, entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract;

(l) except in the Ordinary Course of Business, adopted, amended, modified or terminated any bonus, profit-sharing, incentive, severance or other compensatory plan, contract or commitment for the benefit of any of the directors, officers and Employees of the Sellers, or taken any such action with respect to any other Employee Benefit Plan;

(m) made any other change in employment terms for any of the officers and Employees of the Sellers outside the Ordinary Course of Business;

(n) suffered any damage, destruction or loss, whether or not covered by insurance, that has had or would reasonably be expected to have a Material Adverse Effect;

(o) implemented or adopted any change in its accounting methods or principles or the application thereof;

(p) amended any of its Organizational Documents; or

(q) entered into any agreement, arrangement or understanding with respect to any of the foregoing.

5.2 Financial Statements . Section 5.2 of the Disclosure Schedule sets forth the complete and correct copies of the following financial statements (collectively, the “Financial Statements”): (i) unaudited fiscal year balance sheets and statements of income, changes in financial position and cash flows for each Seller as of and for the fiscal year ending 2003; (ii) unaudited consolidated fiscal year balance sheets and statements of income, changes in financial position and cash flows for each Seller as of and for the fiscal year ending 2004 (the “Most Recent Fiscal Year End”); and (iii) unaudited interim consolidated balance sheets and statements of income, changes in financial position and cash flows of each Seller (the “Most Recent Financial Statements”) as of and for the period ended December 31, 2004. The Financial Statements are complete and correct and present fairly the financial condition of each Seller as of such dates and the results of operations of each Seller for such periods in accordance with GAAP. The Financial Statements have been prepared from and are in accordance with the accounting Books and Records, and the Federal income tax basis of accounting using the accrual method to recognize revenues and expenses.

5.3 Real Property .

(a)  Section 5.3(a)(i) of the Disclosure Schedule contains the location, size and recording information of all tracts, parcels and lots in which either Seller has an ownership interest. Section 5.3(a)(ii) of the Disclosure Schedule contains the location, date and parties of all tracts, parcels and lots in which either Seller has a leasehold interest, including all Real Property leases.

(b) Neither Seller has received written notice alleging that it is in default under any lease. Neither Seller is in default under any lease r