EX-3.15 11 y86037exv3w15.txt THIRD AMENDED AND RESTATED PARTNERSHIP AGREEMENT EXHIBIT 3.15 BLACK BEAUTY COAL COMPANY THIRD AMENDED AND RESTATED PARTNERSHIP AGREEMENT BLACK BEAUTY RESOURCES, INC. THOROUGHBRED, L.L.C. TABLE OF CONTENTS ARTICLE 1..................................................................................... 3 1.1 Continuation and Admission..................................................... 3 1.2 Name and Insignia.............................................................. 3 1.3 Principal Office............................................................... 5 1.4 Term........................................................................... 5 1.5 Property Ownership............................................................. 5 ARTICLE 2..................................................................................... 6 2.1 Purposes....................................................................... 6 2.2 Other Activities............................................................... 8 2.3 Coal Marketing................................................................. 9 ARTICLE 3..................................................................................... 10 3.1 Capital Contributions.......................................................... 10 3.2 Debt: Additional Capital Contributions......................................... 11 3.3 Interest on Capital Contributions.............................................. 12 3.4 Withdrawal of Capital.......................................................... 12 3.5 Capital Accounts............................................................... 12 ARTICLE 4..................................................................................... 14 4.1 Books and Records.............................................................. 14 4.2 Fiscal Year.................................................................... 14 4.3 Reports........................................................................ 15 4.4 Tax Returns.................................................................... 16 4.5 Partner's Request for Additional Information................................... 17 4.6 Tax Matters Partner............................................................ 17 ARTICLE 5..................................................................................... 18 5.1 Bank Accounts.................................................................. 18 5.2 Investment of Excess Funds..................................................... 18 ARTICLE 6..................................................................................... 19 6.1 Net Income and Net Loss........................................................ 19 6.2 Allocation of Excess Nonrecourse Liabilities................................... 20 6.3 Allocations in Event of Transfer............................................... 20 6.4 Allocation of Gain of CIPS Transaction......................................... 21 ARTICLE 7..................................................................................... 22 7.1 Distributive Shares............................................................ 22 7.2 Elections...................................................................... 22 7.3 Partnership Treatment.......................................................... 22 ARTICLE 8..................................................................................... 23 8.1 Net Cash Flow.................................................................. 23
8.2 Distribution of Net Cash Flow.................................................. 24 8.3 Recoupment Distribution........................................................ 24 8.4 Thoroughbred Recoupment Distribution........................................... 25 8.5 Property Distributions......................................................... 25 8.6 Minimum Distributions.......................................................... 25 ARTICLE 9..................................................................................... 27 9.1 Partnership Committee.......................................................... 27 9.2 Chief Executive Officer........................................................ 30 9.3 Service Agreements; Compensation............................................... 31 9.4 Related Party Transactions..................................................... 32 9.5 Acts by Partners............................................................... 33 ARTICLE 10.................................................................................... 33 10.1 Continuance.................................................................... 33 10.2 Events Causing Dissolution..................................................... 33 10.3 Election Following Event Causing Dissolution................................... 35 10.4 Alternative to Liquidation..................................................... 36 10.5 Liquidation and Winding Up Upon Dissolution.................................... 36 10.6 Distributions Upon Dissolution................................................. 37 ARTICLE 11.................................................................................... 39 11.1 Assignment of Partner's Interest............................................... 39 11.2 Transfer to Affiliates......................................................... 39 ARTICLE 12.................................................................................... 41 12.1 Information.................................................................... 41 12.2 Good Faith of Partners and Affiliates.......................................... 42 12.3 Applicant Violator System...................................................... 42 ARTICLE 13.................................................................................... 43 13.1 Nature of Obligations Among Partners........................................... 43 13.2 Indemnification................................................................ 44 ARTICLE 14.................................................................................... 47 ARTICLE 15.................................................................................... 47 ARTICLE 16.................................................................................... 48 16.1 General Buy-Sell............................................................... 48 16.2 Conversion of Partnership to Corporation and Sale of Initiating Partner's Shares in New Corporation................................. 51 ARTICLE 17.................................................................................... 56 17.1 Addresses...................................................................... 56
17.2 Effective Date................................................................. 56 ARTICLE 18.................................................................................... 57 18.1 Binding on Successors.......................................................... 57 18.2 Amendments..................................................................... 57 18.3 Waiver and Consent............................................................. 57 18.4 Limitation on Right to Purchase Partnership Interest........................... 58 18.5 Waiver of Dissolution under the Uniform Partnership Act........................ 58 18.6 Relationship of the Partners................................................... 58 18.7 Further Assurances............................................................. 58 18.8 Severability................................................................... 58 18.9 Agreement in Counterparts...................................................... 59 18.10 Entire Agreement............................................................... 59
1 THIRD AMENDED AND RESTATED PARTNERSHIP AGREEMENT THIS THIRD AMENDED AND RESTATED PARTNERSHIP AGREEMENT (this "Agreement") is signed this __ day of ______, 1999 but not effective until the 1st day of January, 1999 by and among (i) BLACK BEAUTY RESOURCES, INC., an Indiana corporation ("BBR"), and (ii) THOROUGHBRED, L.L.C., a Delaware limited liability company ("Thoroughbred") (BBR and Thoroughbred are hereinafter collectively referred to as the "Partners" and each individually as a "Partner"). For purposes of this Agreement, the term "Partner" shall include any party then acting in such capacity in accordance with the terms of this Agreement. RECITALS A. Pursuant to a Partnership Agreement dated May 25, 1990 (the "Original Agreement"), BBR and The Pittsburg & Midway Coal Mining Co., a Missouri corporation ("P&M") formed a general partnership under the Indiana Uniform Partnership Act known as "Black Beauty Coal Company" (the "Partnership") for the limited purposes set out in the Original Agreement. Pursuant to an Amended and Restated Partnership Agreement dated August 23, 1994 (the Amended Agreement) Thoroughbred was admitted as a general partner in the Partnership. Pursuant to a Second Amended and Restated Partnership Agreement dated January 1, 1998 (the "Second 2 Amended Agreement") Thoroughbred increased its interest in the Partnership to 43 1/3%. B. Thoroughbred and P&M have entered into an Agreement effective January 1, 1999, pursuant to which Thoroughbred will acquire, subject to the terms and conditions thereof, P&M's entire interest in the Partnership, (the "Definitive Agreement") and pursuant to the terms of a certain agreement (the "First Amendment to the Interest Acquisition Agreement" or the "Option") between Thoroughbred and BBR, effective January 1, 1999, Thoroughbred agreed to exercise an option to purchase an additional five percent (5%) interest in the Partnership contingent on the Closing of the Definitive Agreement. The consummation of the transactions set out in the Definitive Agreement and the Option result in Thoroughbred acquiring an additional 38 1/3% interest in the Partnership (for an adjusted interest of 81 2/3%) and BBR owning an adjusted interest in the Partnership equal to 18 1/3%. Upon the closing of the Definitive Agreement, P&M will no longer be a partner in the Partnership. C. BBR, P&M and Thoroughbred desire to set out in this Agreement the adjusted ownership percentages of BBR and Thoroughbred and the respective rights, duties and liabilities of the Partners with respect to the Partnership. This Agreement is intended by the Partners as an amendment and restatement of the Second Amended Agreement. 3 D. The execution and delivery of this Agreement is in connection with the consummation of the transactions contemplated by the Definitive Agreement and the Option. NOW, THEREFORE, in consideration of the Recitals and the mutual covenants and undertakings set forth herein, BBR and Thoroughbred agree as follows: ARTICLE 1 FORMATION AND ADMISSION 1.1 CONTINUATION AND ADMISSION. The Partners do hereby continue the general partnership known as Black Beauty Coal Company, formed pursuant to the Original Agreement, as amended by the Amended Agreement and the Second Amended Agreement, under the Indiana Uniform Partnership Act (the "IUPA"), for the purposes and term set out in this Agreement. The terms of the Second Amended Agreement shall be amended and restated to the extent of matters addressed in this Agreement. 1.2 NAME AND INSIGNIA. The Partnership shall do business under the name "Black Beauty Coal Company" and, where appropriate, may describe itself as "A Partnership of Black Beauty Resources, Inc., and Thoroughbred, LLC." ("Partnership Description"). BBR hereby consents to use of the name "Black Beauty Coal Company" by the Partnership. This name shall continue to be registered in Indiana under applicable Indiana law 4 and in such other states as the Partnership may do business. The Partners shall execute, and the Partnership shall file, such certificates of assumed name as shall be required by law. (a) BBR agrees that the name "Black Beauty Resources, Inc." may be used by the Partnership in the Partnership Description and that the current logo of BBR may be used by the Partnership in connection with its business. Thoroughbred agrees that the name "Thoroughbred, LLC" may be used by the Partnership in the Partnership Description. The use of the name and logo of "Black Beauty Resources, Inc." and the name and "Thoroughbred, LLC" shall be limited to business documentation of the Partnership and, where appropriate, to its marketing publications and on or in connection with the products or services to be sold or rendered by the Partnership. (b) Unless approved in writing by Thoroughbred, the Partnership shall not be permitted at any time to use the logo or any other emblem used by Thoroughbred or its Affiliates to identify it or its business, assets or products or to use any other indicia which might be confused with any such logo or other emblem or which might indicate a connection with Thoroughbred or its Affiliates. (c) If the Partnership is terminated either in accordance with any of the provisions of Article 10 hereof or by the sale by a Partner of its Partnership Interest to any person 5 other than an Affiliate (as defined in Section 11.2 hereof), the Partnership shall make no further use of the privileges made available by such former Partner pursuant to this Section 1.2 unless specifically authorized by such former Partner. 1.3 PRINCIPAL OFFICE. The principal office of the Partnership shall be at 414 S. Fares Ave., Evansville, Indiana. The principal office may hereafter from time to time be moved to such other place as may be designated by the Partnership Committee (which committee is described in Section 9.1 hereof). The books and records of the Partnership shall be maintained at the Partnership's principal place of business. 1.4 TERM. The term of the Partnership shall continue until December 31, 2100, unless sooner terminated as herein provided or pursuant to law. 1.5 PROPERTY OWNERSHIP. All assets and property owned by the Partnership, whether real or personal, tangible or intangible, shall be held in the name of the Partnership unless otherwise determined by the Partnership Committee. 6 ARTICLE 2 PURPOSES AND NON-COMPETITION 2.1 PURPOSES. The Partnership is formed to conduct, or own all or part of, coal mining, processing, marketing, loading, trucking and shipping businesses in and from Indiana, Illinois, Kentucky (West of Interstate 65), Iowa and Missouri (collectively, the "Illinois Basin") and such other locations as the Partnership Committee may approve. The purposes of the Partnership are limited to the following coal-related purposes: (a) The acquisition, by lease, sublease, purchase or otherwise, of coal reserves; (b) The development and conduct of mining, processing, loading, trucking and shipping operations relative to the Partnership's coal reserves, either directly with employees of the Partnership or through contract miners; (c) The permitting and bonding of all coal mining, processing, loading, trucking and shipping operations on or relating to the Partnership's coal reserves and the completion of reclamation obligations relative to the coal mining, processing, loading, trucking or shipping operations conducted on or relating to the Partnership's coal reserves; 7 (d) The purchasing, selling, brokering, processing, loading, trucking and/or shipping of coal from whatever source and the marketing, selling and/or delivery of coal from whatever source, both within and outside of the Illinois Basin; (e) The acquisition of all or portions of existing businesses, relating to the mining, processing, selling, loading, trucking or shipping of coal; including, without limitation, the formation of partnerships, corporations, limited liability companies or joint ventures relative to any of the foregoing; (f) To employ personnel necessary for the conduct of the business of the Partnership; (g) To form entities to undertake any actions or business authorized to be undertaken by the Partnership directly. (h) The investment of the income earned by the Partnership prior to distribution to the Partners; and (i) All other activities necessary, appropriate, incidental or desirable in connection with the foregoing, or otherwise contemplated in this Agreement. The purposes of the Partnership shall not be extended, by implication or otherwise, beyond the purposes set forth in this Section 2.1 without the approval of the Partnership Committee. 8 2.2 OTHER ACTIVITIES. The Partners each acknowledge that Thoroughbred, and its Affiliates, own, lease or otherwise control coal reserves, coal mines and related facilities in the Illinois Basin. Nothing in this Section 2.2 shall prohibit any Partner and its Affiliates from (i) acquiring coal properties or coal businesses near and in connection with their active or suspended coal mines or coal reserves and (ii) selling or leasing coal reserves or coal mines or hiring a contract miner. It is also the intent of the Partners that the Partnership should continue to expand its coal mining operations in Indiana and Illinois. Except as provided below, for a period of five (5) years from August 23, 1994, if a Partner or an Affiliate of a Partner (except Peabody Coal Company with respect to Thoroughbred) has a coal-related business acquisition or merger opportunity within Indiana or Illinois ("Opportunity"), it shall be obligated to present such Opportunity to the Partnership Committee for consideration by the Partnership. If the Partnership does not elect to pursue an Opportunity, the Partner who brought the Opportunity to the attention of the Partnership Committee, if such Partner voted in favor of the Partnership pursuing such Opportunity, shall be free to pursue such Opportunity. With the exceptions of the items listed in this Section 2.2 and the acquisition of a coal business opportunity located partially in Indiana or Illinois and partially in another state(s), neither Partner nor any Affiliate (except Peabody Coal Company with respect to Thoroughbred) shall compete with the Partnership in 9 the acquisition of coal businesses or coal reserves in Indiana and Illinois. 2.3 COAL MARKETING. The Partners each acknowledge that Thoroughbred, and its Affiliates, may compete from time to time with the Partnership in the marketing and selling of coal to customers. The Partners and the Partnership have no agreement regarding such competition in the marketing and selling of coal, other than the provisions of this Section 2.3 regarding confidentiality and consent to pursuit of common sales opportunities. Neither BBR nor Thoroughbred, nor their Affiliates, shall use any information gained from the Partnership as a result of being a Partner for its own gain to the detriment of the Partnership. Without limiting the foregoing, in the event the Partnership has a sales opportunity which is also being pursued by another Partner or an Affiliate of a Partner for its own account, such Partner shall be deemed to consent to the pursuit by the Partnership of the sales opportunity on such terms as may be approved by the other Partner through the Partnership Committee or as are within the general authority of the officers of the Partnership. 10 ARTICLE 3 CAPITAL CONTRIBUTIONS 3.1 CAPITAL CONTRIBUTIONS. (a) Pursuant to the terms of the Original Agreement, BBR and P&M made capital contributions to the Partnership, and thereafter, the capital accounts of BBR and P&M have been administered in accordance with the Original Agreement and the Amended Agreement. Pursuant to the terms of the Definitive Agreement and the Option respectively, Thoroughbred has acquired the interest in the Partnership held by P&M and five percent (5%) of the interest in the Partnership held by BBR. (b) Upon completion of the transaction described or referred to in Section 3.1(a) hereof, Thoroughbred shall own a 81 2/3% interest in the Partnership and BBR shall own a 18 1/3% interest in the Partnership (the interests of Thoroughbred and BBR in the Partnership shall be referred to herein as their "Percentage Interests, or individually as their Percentage Interest) and the terms of this Agreement shall be construed consistent with the stated Percentage Interests of the Partners. 11 3.2 DEBT; ADDITIONAL CAPITAL CONTRIBUTIONS. (a) It is contemplated by the Partners that the Partnership shall borrow from whatever source funds sufficient to support (i) the Partnership's short term working capital needs, (ii) the acquisition of coal related businesses and (iii) the development of its coal properties, which developments may include, without limitation, preparation plants, loading facilities, mining equipment and other mine improvements. It is the intent of the Partners that capital for maintenance or replacement of existing Partnership operations shall be funded out of operating cash flow. As among the Partners, each Partner shall be responsible for its Percentage Interest of all Partnership indebtedness. It is contemplated by the Partners that no Partner will, by capital contributions, finance its respective share of the cost of acquisitions or of developing the coal properties of the Partnership. Furthermore, no Partner shall be obligated by this Agreement to obtain financing on behalf of the Partnership, should the Partnership be unable on its own to obtain such financing. Any loan or other financing agreements of the Partnership (excluding obligations of less than $500,000 relating to the lease or acquisition of equipment, trade payables, permit and bond liability and coal and surface leases) shall specifically provide that joint and several liability of the Partners is waived, and that recourse against each Partner and its respective Affiliates shall not in total exceed each 12 Partners Percentage Interest of the outstanding balance (including principal, accrued interest and loan expenses) of said financing. (b) No Partner shall be required to make additional capital contributions to the Partnership. If any additional capital contributions to the Partnership are approved by the Partnership Committee, such contributions shall be in cash unless otherwise approved by the Partnership Committee. 3.3 INTEREST ON CAPITAL CONTRIBUTIONS. No Partner shall be entitled to interest on any capital contributions made to the Partnership. 3.4 WITHDRAWAL OF CAPITAL. No Partner shall be entitled to withdraw any part of its capital contributions to the Partnership, or receive any distributions from the Partnership, except as provided in this Agreement. No Partner shall be entitled to demand or receive any property from the Partnership other than cash, except as otherwise expressly provided for herein. 3.5 CAPITAL ACCOUNTS. There shall be established on the books of the Partnership a capital account ("Capital Account") for each Partner. It is the intention of the Partners that such Capital Account be maintained in accordance with the provisions of Treas. Reg. 1.704-l (b)(2)(iv), and this Agreement shall be so 13 construed. Accordingly, such Capital Account shall initially be credited with the initial capital contribution of the Partner, and shall thereafter be increased by (i) any cash or the fair market value of any property contributed by such Partner (net of any liabilities assumed by the Partnership or to which the contributed property is subject), and (ii) the amount of all net income (whether or not exempt from tax) allocated to such Partner hereunder, and decreased by (i) the amount of all net losses allocated to such Partner hereunder (including expenditures described in section 705(a)(2)(B) of the Internal Revenue Code of 1986, as amended ("Code"), or treated as such an expenditure by reason of Treas. Reg. ' 1.704-1(b) (2) (iv) (i)), and (ii) the amount of cash, and the fair market value of property (net of any liabilities assumed by such Partner or to which the distributed property is subject) distributed to such Partner. If a Partner transfers all or any portion of such Partner's interest in the Partnership in accordance with the terms of this Agreement, the Capital Account of the transferor shall become the Capital Account of the transferee to the extent of the Partnership interest transferred. The transfer from P&M to Thoroughbred under the Definitive Agreement and from BBR to Thoroughbred under the Option has each effected a change in the capital accounts of P&M, BBR and Thoroughbred in accordance with the foregoing sentence. 14 ARTICLE 4 ACCOUNTING 4.1 BOOKS AND RECORDS. The Partnership Committee shall cause the Partnership to maintain full and accurate books and records at the Partnership's principal place of business, showing all receipts and expenditures, assets and liabilities, net income or loss, and all other records necessary for recording the Partnership's business and affairs, including those sufficient to record the allocations and distributions to the Partners provided for in this Agreement. Such books and records shall be maintained in accordance with generally accepted accounting principles; provided that, adequate records concerning tax allocations shall be simultaneously maintained by the Partnership. Such books and records shall be open to the inspection and examination of each Partner by its duly authorized representatives at all reasonable times. 4.2 FISCAL YEAR. The fiscal year of the Partnership shall be the calendar year ("Fiscal Year"). 15 4.3 REPORTS (a) Within 90 days after the close of each Fiscal Year of the Partnership, the Partnership shall furnish to each Partner a report of the business and operations of the Partnership during such Fiscal Year. Unless otherwise agreed to by the Partnership Committee, such report shall contain financial statements prepared by the Partnership which are audited by the certified public accountants employed by the Partnership. Any financial statement submitted pursuant to this Section 4.3(a) shall be deemed correct, binding and conclusive upon the Partners unless objection thereto is made by a Partner within 45 days after the statement is received by such Partner. (b) Within 10 business days after the close of each calendar month, the Partnership shall furnish to each Partner a report of the business and operations of the Partnership for such calendar month. Unless otherwise agreed to by the Partnership Committee, such report shall contain unaudited financial statements prepared by the Partnership, be in such form as the Partnership Committee may require and shall include a balance sheet as of the end of such calendar month, a statement of the net income or net loss of the Partnership for such calendar month and such other information as in the judgment of the Partnership Committee shall be reasonably necessary for the Partners to be advised of the results of the Partnership's operations and its financial condition. 16 (c) Each Fiscal Year the Partnership Committee shall establish the date by which the Chief Executive Officer shall submit to the Partnership Committee an annual budget and a business plan for the next succeeding Fiscal Year of the Partnership as well as longer term business plans for the Partnership which are requested by the Partners. The date for submission established by the Partnership Committee shall accommodate the budgeting process of all Partners; provided that, the Partnership shall have at least 60 days advance notice from the Partners of the date for submission of the budget and business plans. All budgets and business plans required to be submitted by the Chief Executive Officer to the Partnership Committee pursuant to this Section 4.3(c) shall be approved, or modified and then approved, by the Partnership Committee, and the Chief Executive Officer shall thereafter conduct the business of the Partnership in accordance with the annual budget, business plan and delegation of authority approved by the Partnership Committee, unless otherwise directed by the Partnership Committee. Any Partner may designate in the budget capital projects which must be specifically approved by the Partnership Committee prior to the commencement of expenditures for such project. 4.4 TAX RETURNS. The Partnership Committee shall cause all required federal, state and local partnership income, franchise, property and other tax returns, including information returns, to 17 be filed with the appropriate office of the relevant taxing jurisdiction or agency. In order to accommodate the following provision regarding review of drafts of the Federal and state income tax returns of the Partnership, the Partnership shall seek each year a three month extension of the date on which such returns must be filed. With respect to the Federal and state income tax returns of the Partnership, the Partnership shall submit to each Partner, or, with the consent of each Partner, make available for review, drafts of the proposed returns, including the related work papers, books, records and any other documents used in the preparation of such returns, as soon as possible, but by no later than April 30 of each year, to permit review and approval of such returns by each Partner prior to filing. All expenses incurred In connection with such tax returns and information returns, as well as for the reports referred to in Section 4.3 hereof, shall be expenses of the Partnership. 4.5 PARTNER'S REQUEST FOR ADDITIONAL INFORMATION. The Chief Executive Officer shall also furnish to any Partner such other reports of the Partnership's operations and conditions as may reasonably be requested by such Partner. 4.6 TAX MATTERS PARTNER. Thoroughbred shall be the Tax Matters Partner for the Partnership as defined in Section 6231(a) of the Internal Revenue Code of 1986, as amended (the "Code"). The Tax Matters Partner shall not take any action in such 18 capacity without first notifying, and receiving the concurrence of, the other Partners. ARTICLE 5 BANK ACCOUNTS AND EXCESS FUNDS 5.1 BANK ACCOUNTS. All funds of the Partnership shall be deposited in its name into such checking or savings accounts, time certificates or short-term money market funds as shall be designated by the Partnership Committee. Withdrawals therefrom shall be made upon such signature or signatures (or other authorization form) as determined by the Partnership Committee. 5.2 INVESTMENT OF EXCESS FUNDS. The Partnership may invest excess funds not required in the Partnership's business, and not required to be distributed pursuant to the terms of this Agreement, in short-term United States Government obligations maturing within 1 year or in other securities approved by the Partnership Committee. 19 ARTICLE 6 ALLOCATION OF NET INCOME AND LOSS 6.1 NET INCOME AND NET LOSS. (a) Except as specified in Section 6.4, the net income and net loss of the Partnership for each of the next five Fiscal Years (beginning with calendar year 1998) shall be allocated 100% to Thoroughbred, except the allocation for Fiscal Year 1998 shall be allocated 67 2/3% to Thoroughbred and 33 1/3% to P&M. The net income and net loss of the Partnership for each fiscal year beginning after the 2002 fiscal year shall be allocated to the partners in accordance with their respective Percentage Interest. (b) For Federal, state and local income tax purposes only, depreciation (cost recovery) and cost depletion deductions to which the Partnership is entitled with respect to the assets of the Partnership and gains and losses from sales or other dispositions of assets of the Partnership shall be determined based upon the provisions of section 704(c) of the Code with respect to that portion of assets which was contributed by a Partner, and using the principles of section 704(c) of the Code with respect to that portion of the Partnership's book value of the assets which is attributable to the revaluation of the assets 20 which occurred in contemplation of the admission of Thoroughbred to the Partnership. All such allocations shall be made in accordance with the "traditional method" (within the meaning of Treas. Reg. ' 1.704-3(b)). (c) For Federal, state and local income tax purposes only, percentage depletion shall be allocated pursuant to Section 6.1 (a) hereof. 6.2 ALLOCATION OF EXCESS NONRECOURSE LIABILITIES. For purposes of section 752 of the Code and the regulations thereunder, the excess non-recourse liabilities of the Partnership, within the meaning of Treas. Reg. 1.752-3(a)(3), if any, shall be allocated to each Partner in accordance with its respective Percentage Interest. 6.3 ALLOCATIONS IN EVENT OF TRANSFER. In the event of the transfer of a Partner's interest (in accordance with and subject to the provisions of this Agreement) in the Partnership at any time other than at the end of a Fiscal Year, or the admission of a new Partner at any time other than the end of a Fiscal Year, the periods before and after such transfer or admission shall be treated as separate fiscal years, and the Partnership's net income, net loss and credits for each of such deemed separate fiscal years shall be allocated in accordance with Section 6.1 (a) for each of such deemed separate fiscal years. 21 6.4 ALLOCATION OF GAIN OF CIPS TRANSACTION. For Federal, state and local income tax purposes only, the deferred income to be recognized by the Partnership with respect to prepayments made pursuant to the CIPS Transaction (as hereinafter defined), which deferred income has been transferred to the Partnership with recourse to BBR shall continue to be allocated entirely to BBR and none of the deferred income shall be allocated to the other Partner. The Partners acknowledge that this item should not be governed by the provisions of Code Section 704(c) and related regulations. However, in the event the IRS or any state, local or other taxing authority reallocates the deferred income to P&M or Thoroughbred, BBR will indemnify P&M or Thoroughbred, as applicable for all Adverse Consequences resulting from such reallocation. For purposes of this Agreement, the term "CIPS Transaction" shall mean the transactions referenced in (i) an Extension and Amendment to Coal Sale and Purchase Agreement dated September 7, 1989 between BBR and Central Illinois Public Services Company ("CIPS"), as amended by a letter dated December 8, 1989, and (ii) a Memorandum of Understanding dated August 17, 1989 among CIPS, BBR and Gibco Motor Express, Inc. 22 ARTICLE 7 DISTRIBUTIVE SHARES AND FEDERAL INCOME TAX ELECTION 7.1 DISTRIBUTIVE SHARES. For purposes of Subchapter K of the Code, the distributive shares of the Partners of each item of Partnership taxable income, gains, losses, deductions or credits for any Fiscal Year shall be in the same proportions as their respective shares of the net income or loss of the Partnership allocated to them pursuant to Section 6.1 hereof. Notwithstanding the foregoing, to the extent not inconsistent with the allocation of gain provided for in Section 6.1(a) and Section 6.1(b) hereof, gain recognized by the Partnership which represents ordinary income by reason of recapture of depreciation, cost recovery or depletion deductions for Federal income tax purposes shall be allocated to the Partner to whom such depreciation, cost recovery or depletion deduction to which such recapture relates was allocated. 7.2 ELECTIONS. Any and all elections required or permitted to be made by the Partnership under the Code, including the election provided for in section 754 of the Code, shall be made in accordance with the decisions of the Partnership Committee. 7.3 PARTNERSHIP TREATMENT. The Partnership shall be treated as a partnership for purposes of Federal, state and local income tax and other taxes, and the Partners shall not take any 23 position or make any election, in a tax return or otherwise, inconsistent with such treatment. ARTICLE 8 DISTRIBUTIONS 8.1 NET CASH FLOW. For purposes of this Agreement, the term "Net Cash Flow" for any period shall mean the excess, if any, of (a) the sum of (i) the gross receipts (excluding loan proceeds) of the Partnership for such period plus (ii) any funds released by the Partnership Committee from previously established reserves referred to in (b)(v) of this Section 8.1, over (b) the sum of (i) all cash operating expenses paid by the Partnership for such period, including, but not by way of limitation, salaries, taxes, interest, insurance premiums, royalties, rentals, utilities and fees, (ii) all cash capital expenditures paid for such period for maintenance or replacement of existing Partnership operations, (iii) all amounts paid by the Partnership in such period on account of amortization of the principal of any debts or liabilities of the Partnership, (iv) the amount of any distribution payable to BBR under Section 8.3 hereof or Thoroughbred under Section 8.4 hereof, and (v) reasonable reserves to maintain Partnership finances in compliance with financing covenants, as shall be determined from time to time by the Partnership Committee. Notwithstanding the foregoing, to the extent that any of the payments described in (b)(i), (ii) or 24 (iii) above are paid from capital contributions, from loan proceeds or from previously established reserves, such payments shall not be taken into account in determining Net Cash Flow for such period. 8.2 DISTRIBUTION OF NET CASH FLOW. The Net Cash Flow for all Fiscal Years shall be distributed at such time or times as shall be determined by the Partnership Committee; provided that, unless otherwise agreed to by all Partners, the Net Cash Flow for each Fiscal Year, to the extent not previously distributed, shall be distributed within 90 days following the close of each Fiscal Year. It is the intention of the Partners that the Net Cash Flow be distributed quarterly if the Partnership Committee deems such quarterly distribution prudent. All such distributions of Net Cash Flow shall be distributed to the Partners in accordance with their respective Percentage Interests. 8.3 RECOUPMENT DISTRIBUTION. The Partnership shall distribute to BBR on a monthly basis (by the 20th of each month for the preceding month) an amount equal to all advance royalty payments actually recouped by the Partnership during the preceding month arising from advance royalty payments relating to any coal lease contributed to the Partnership by BBR made on or prior to the date of the Original Agreement. For purposes hereof, the Partnership shall be deemed to recoup advance royalties chronologically, beginning with advance royalties paid 25 first and continuing up to the advance royalties most recently paid. 8.4 THOROUGHBRED RECOUPMENT DISTRIBUTION. The Partnership shall distribute to Thoroughbred on a monthly basis (by the 20th of each month for the preceding month) an amount equal to all advance royalty payments actually recouped by the Partnership during the preceding month arising from advance royalty payments relating to any coal lease contributed to the Partnership by either P&M or Thoroughbred, made on or prior to the date of this Agreement. For purposes hereof, the Partnership shall be deemed to recoup advance royalties chronologically, beginning with advance royalties paid first and continuing up to the advance royalties most recently paid. 8.5 PROPERTY DISTRIBUTIONS. If any property of the Partnership, other than cash, is distributed by the Partnership to a Partner (in connection with the liquidation of the Partnership or otherwise), then the fair market value of such property shall be used for purposes of determining the amount of such distribution. The fair market value of the property distributed shall be agreed to by the Partners; provided that, if the Partners cannot so agree, the issue shall be submitted to arbitration as provided in Article 15 hereof. 8.6 MINIMUM DISTRIBUTIONS. If the aggregate of all Net Cash Flow distributions made by the Partnership to the Partners 26 for any Fiscal Year does not equal or exceed the following Minimum Distribution Amount, the Partnership shall, on or before 90 days following the close of each Fiscal Year of the Partnership, distribute to the Partners the amount by which the aggregate of all Net Cash Flow distributions during the preceding Fiscal Year is less than the following amount (the "Minimum Distribution Amount"). The Minimum Distribution Amount is equal to the sum of (i) the aggregate net income for Federal income tax purposes of the Partners as reflected, or which shall be reflected, on the Schedule K-l for the Partnership for such preceding Fiscal Year, multiplied by the highest marginal Federal corporate tax rate for the applicable Fiscal Year plus 4% and (ii) $6,000,000; provided that, the Minimum Distribution Amount for any Fiscal Year shall not exceed the net income (before income taxes) of the Partnership for such Fiscal Year. Any distribution made pursuant to this Section 8.6 shall be made to the Partners in accordance with their respective Percentage Interests. 27 ARTICLE 9 Partnership Management 9.1 PARTNERSHIP COMMITTEE. (a) The Partnership shall be managed by a committee (the "Partnership Committee") comprised of representatives of the Partners. The Partnership Committee shall have authority over all Partnership actions, including, but not limited to, the "Major Decisions" set forth on Exhibit "9.1" to this Agreement. (b) The regular members of the Partnership Committee shall consist of three representatives of Thoroughbred and two representatives of BBR (herein "Representatives") of each Partner. Each Partner shall designate in writing to the other Partners such Partner's Representatives, and each Partner agrees to fill any vacancies within 15 days. Representatives may also be employees of the Partnership. By written notice, each Partner may designate up to the same number of alternate Representatives to act in the absence of its regular Representatives. The Representatives shall serve for indefinite terms at the pleasure of the appointing Partner and may be removed by such Partner at any time and for any reason. With regard to any action or decision by the Partnership Committee, the Representatives appointed by each Partner shall cast votes in accordance with each Partner's respective Partnership Interest. Any action taken 28 by the Partnership (through its officers or employees, including the Chief Executive Officer) in compliance with the direction or decision of the Partnership Committee shall be binding upon the Partnership and each Partner. (c) Only the decisions listed on Exhibit 9.1 "Major Decisions" attached hereto shall require the approval of all Partners acting through their appointed Representatives. All other decisions of the Partnership shall be made by majority vote. An action of the Partnership Committee shall be by a resolution adopted at a Partnership Committee meeting or, without a meeting, by a written consent signed by at least one Representative of each Partner. The Secretary of the Partnership Committee and any Assistant Secretary may execute certificates setting forth actions taken by the Partnership Committee or which reflect delegation of authority by the Partnership Committee to employees of the Partnership. (d) Meetings of the Partnership. Committee shall be held at least quarterly. Meetings of the Partnership Committee shall also be held upon call by any member of the Partnership Committee. Unless waived by at least one Representative of each Partner, the calling of a meeting of the Partnership Committee shall require a minimum of three (3) days' notice. At least one Representative of each Partner must be present to constitute a quorum and convene a meeting of the Partnership Committee. Each Partner may invite to the meetings of the Partnership Committee 29 such attorneys and advisors as such Partner deems appropriate. Meetings of the Partnership Committee may, if at least one Representative of each Partner consents, be held by telephone conferences in which each participating Representative can hear all other participating Representatives, or in such other manner as shall be agreed to by the Representatives. Unless otherwise agreed by at least one Representative of each Partner, all meetings shall be held at the principal office of the Partnership. (e) The Partnership Committee is authorized to adopt rules concerning the conduct of the affairs of the Partnership Committee and the Partnership. (f) The chair of the Partnership Committee (who shall be a Representative of one of the Partners) shall rotate among the Partners. A Representative of Thoroughbred shall be the chair of the Partnership Committee during 1999, and a Representative of BBR shall be the chair of the Partnership Committee during 2000 (and thereafter such chair shall rotate annually in that sequence). The Partnership Committee shall appoint a Secretary and one or more Assistant Secretaries to keep complete minutes of the proceedings and decisions of the Partnership Committee and take such other actions as may be authorized under this Agreement or by the Partnership Committee. 30 (g) No Partner, shall have any right, power or obligation to exercise any control over the hiring of miners or over the work force of the Partnership, including, but not limited to, any employment benefits or other terms and conditions of employment for the employees of the Partnership, and all such matters are delegated to the management employees of the Partnership. Thoroughbred and BBR shall take no part in, and shall have no right, power or obligation with respect to, any matter relating to the hiring of miners. 9.2 CHIEF EXECUTIVE OFFICER. (a) The Partnership Committee shall select an individual to be the Chief Executive Officer for the Partnership (the "Chief Executive Officer"). The current Chief Executive Officer is Steven E. Chancellor. Upon the Chief Executive Officer's ceasing to so act for any reason, a replacement Chief Executive Officer shall be elected by the Partnership Committee. (b) Within the scope of authority delegated by the Partnership Committee to the Chief Executive Officer, day to day control and management of the business of the Partnership shall be vested in the Chief Executive Officer; provided that, the Chief Executive Officer shall be subject to control and direction at all times by the Partnership Committee. The Chief Executive Officer may not take any action on behalf of the Partnership if authority for such action is not delegated (either specifically 31 or generally) to the Chief Executive Officer by the Partnership Committee. (c) The Chief Executive Officer may be removed upon the decision of the Partnership Committee to remove the Chief Executive Officer, subject to any employment contract between the Partnership and the Chief Executive Officer. Further, unless otherwise agreed to by the Partnership Committee, the term of office of the Chief Executive Officer shall be at the pleasure of the Partnership Committee. Any extension or renewal of the term of office of any Chief Executive Officer shall require the approval of the Partnership Committee. The decision of the Partnership Committee not to renew or not to extend the term of any Chief Executive Officer shall not alter the. Partnership's obligations under any employment contract approved by the Partnership Committee. The Chief Executive Officer may delegate responsibility and grant authority to other employees of the Partnership, subject to the limitations on the authority of the Chief Executive Officer set out herein and actions or directives from the Partnership Committee. 9.3 SERVICE AGREEMENTS; COMPENSATION. To the extent and for the period that it is not practicable or economic to include in the staff of the Partnership personnel capable of providing certain management and staff services required by the Partnership, the Partnership, through the Partnership Committee, may enter into appropriate service agreements with BBR and/or 32 Thoroughbred for such services. The Partnership Committee shall establish policies as to the use of BBR's and Thoroughbred's services. Further, the Partnership, through the Partnership Committee, may contract with any Partner for the temporary assignment of one or more employees of any Partner to the Partnership. Such loaned employees shall work for the Partnership for the period of the temporary assignment by the Partner, but shall remain employees of the assigning Partner and shall be paid by the assigning Partner, although the Partnership shall reimburse to the assigning Partner the cost of such employee. Except with regard to service agreements and loaned employees described above, no Partner shall be entitled to compensation for services rendered to the Partnership. Representatives on the Partnership Committee shall receive no compensation for acting as Representatives on the Partnership Committee. The Partnership may, on terms approved by the Partnership Committee, enter into employment agreements with the Chief Executive Officer and other senior management of the Partnership. 9.4 RELATED PARTY TRANSACTIONS. The fact that one of the Partners is directly or indirectly interested in, or connected with, any person, firm or corporation employed by the Partnership to render or perform a service, or to or from whom the Partnership may purchase, sell or lease property, shall not prohibit the Chief Executive Officer from causing the Partnership to employ such person, firm or corporation, or from otherwise 33 dealing with him or it, provided (i) it is on terms no less advantageous to the Partnership than are available from an unrelated third party and (ii) the Chief Executive Officer has received approval of each such transaction in advance from the Partnership Committee if the proposed transaction is material and is other than in the ordinary course of business. 9.5 ACTS BY PARTNERS. No Partner shall take, or commit the Partnership to take, any action, either in its own name in respect of the Partnership or in the name of the Partnership, unless the Partnership Committee has approved the same. ARTICLE 10 DISSOLUTION AND LIQUIDATION 10.1 CONTINUANCE. The Partnership shall continue until its expiration as provided in Section 1.4 hereof, or until it is earlier dissolved by law or by the mutual consent of the Partners in writing or in accordance with the provisions of this Article 10. 10.2 EVENTS CAUSING DISSOLUTION. The Partnership shall, as provided below, dissolve upon, but not before, the first to occur of the following: 34 (a) Proceedings are commenced by or against any of the Partners for any relief under any bankruptcy or insolvency law, or any law relating to the relief of debtors, readjustment of indebtedness, reorganization, arrangement or extension and such proceedings have not been dismissed, nullified or otherwise rendered ineffective within 60 days after such proceedings have commenced; or (b) A decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, trustee or assignee in bankruptcy or insolvency of any of the Partners, or of a substantial part of its property, or for the winding-up or liquidation of its affairs, has been entered, and such decree or order has remained in force undischarged for a period of 60 days; or (c) Any Partner shall make a general assignment for the benefit of creditors; or (d) The sale, condemnation, taking by eminent domain or other disposition of all or substantially all of the assets of the Partnership and the sale and/or collection of any evidence of indebtedness received in connection therewith; or (e) The conclusion of the term of the Partnership under Section 1.4 hereof; or 35 (f) The withdrawal by a Partner from the Partnership without the written consent of the other Partner; or (g) The breach by a Partner of any of the covenants contained herein, and, if such breach is remediable, such Partner fails to remedy the breach within 45 days after written notice from either of the other Partner to remedy such breach or, in the case of a dispute as to the existence or occurrence of such breach, within 45 days after a final determination (through arbitration or allowed judicial proceedings) that there has been a breach; or (h) The transfer (directly, indirectly or by operation of law) of greater than a 50% equity interest in a Partner, except as specifically allowed under Section 11.2 hereof; or (i) Any Partner becomes Permit Blocked, as that term is defined in the Surface Mining Control and Reclamation Act of 1977 ("SMCRA"), due to the action or inaction of any Partner and such Permit Block continues to exist for a period of twenty (20) days. Any Partner who becomes Permit Blocked shall notify the other Partner within five (5) days of the occurrence of such event. 10.3 ELECTION FOLLOWING EVENT CAUSING DISSOLUTION. Unless required by applicable law, the occurrence of any event under 36 Section 10.2 hereof, other than under Sections 10.2(d) and (e) hereof, shall not require the winding up of the Partnership if the Partners not initiating or causing the event to occur (the "Electing Partner") make the election provided for in Section 10.4 hereof. Such election to pursue an alternative to winding up of the Partnership must be made by the Electing Partners within 60 days of the Electing Partner's becoming actually aware of the occurrence of the event causing dissolution. If (i) such election is not made by written notice to the other Partner within the time required, (ii) the event under Section 10.2(d) hereof occurs, or (iii) the event under Section 10.2(e) hereof occurs, then the provisions of Section 10.5 hereof regarding liquidation and winding up of the affairs of the Partnership shall govern. 10.4 ALTERNATIVE TO LIQUIDATION. To avoid the winding up of the Partnership as provided in Section 10.3 hereof, the Electing Partner, if allowed by applicable law, may elect (for events other than events under Sections 10.2 (d) or 10.2 (e) hereof) to have the Partnership continue as if such event had not occurred; provided that, any waiver shall not be deemed to require such a waiver in regard to any future or other event. In addition, any Partner may at any time invoke the Buy-Sell provisions of Article 16 of this Agreement. 10.5 LIQUIDATION AND WINDING UP UPON DISSOLUTION. If the Partnership is dissolved and if the Electing Partners do not make the election provided for in Section 10.4 hereof, the Partnership 37 shall be wound up and liquidated in accordance with the requirements of law and the following provisions: (a) The right to wind up the Partnership's affairs and to supervise its liquidation shall be exercised jointly by all Partners (the "Liquidators"). (b) Upon dissolution, the Liquidators shall ensure that an account is taken as soon as practicable of all property, assets and liabilities of the Partnership. (c) Each Partner shall pay to the Partnership all amounts owed by it to the Partnership, together with such Partner's share of contributions required by law and this Agreement to be made by the Partners for the payment of liabilities. (d) The assets and property of the Partnership or the proceeds of any sale thereof, together with contributions received pursuant to Section 10.5 (c) hereof, shall be applied by the Liquidators in accordance with Section 10.6 hereof. 10.6 DISTRIBUTIONS UPON DISSOLUTION. Upon the dissolution of the Partnership, the properties of the Partnership to be sold shall be liquidated in an orderly fashion, and the proceeds thereof and any other property remaining shall be distributed in kind as soon as practical, as follows: 38 FIRST: To the payment and discharge of all of the Partnership's debts and liabilities (other than to the Partners), to the necessary expenses of liquidation, to a cash reserve for the completion of the reclamation obligations of the Partnership and to the establishment of a cash reserve which the Partnership Committee determines to create for unmatured and/or contingent liabilities and obligations of the Partnership. SECOND: To the payment and discharge of all of the Partnership's debts and liabilities to Partners, pro-rata in accordance with their respective unpaid principal balances. THIRD: To the Partners, pro rata in accordance with their respective Capital Accounts on the date of distribution (after adjustment for all items of income and expense through that date). If, upon the liquidation of the Partnership, or upon the liquidation of the partnership interest of a Partner (in each case determined as provided in Treas. Reg. 1.704-1(b) (2) (ii) (g)), after crediting all income upon sale of the Partnership's assets 39 which have been sold, and after making all allocations provided for herein, a Partner (the Partner whose partnership interest has been liquidated, if applicable) has a negative Capital Account, such Partner shall be obligated to contribute to the Partnership at or before the later to occur of (i) the close of the Partnership's taxable year, or (ii) 90 days following such liquidation, an amount equal to such negative Capital Account for distribution in accordance with the terms of this Agreement. ARTICLE 11 ASSIGNMENT AND TRANSFERS TO AFFILIATES 11.1 ASSIGNMENT OF PARTNER'S INTEREST. Except as provided in this Agreement and except to provide for the Partners to pledge their Partnership Interests to their lenders, a Partner may not withdraw, nor sell, assign, transfer, pledge, grant a security interest in, encumber or otherwise dispose of, all or any part of its interest in the Partnership. Any Partner may grant a security interest in its right to receive distributions from the Partnership in connection with a financing by such Partner. Any attempted withdrawal or transfer not permitted by the terms of this Agreement shall be null and void ab initio and is of no force and effect unless consented to in writing by all Partners. 11.2 TRANSFER TO AFFILIATES. With the prior written consent of the other Partner, a Partner ("Transferring Partner") 40 may sell, assign, transfer or dispose of all, or a portion, of its interest in the Partnership to any of its Affiliates as defined below; provided that, the other Partner ("Non-Transferring Partner") shall not unreasonably withhold consent thereto if the Transferring Partner: (i) enters into a guarantee of the liabilities and obligations of its Affiliate; (ii) indemnifies and holds harmless the Non-Transferring Partner, in form and substance satisfactory to the Non-Transferring Partner, against all costs and obligations of any nature whatsoever, including, without limitation, obligations under the Code and the Employee Retirement Income Security Act of 1974, as amended from time to time, such that the Non-Transferring Partner shall be in the same position as it would have been in if no such transfer had occurred, and (iii) satisfies the Non-Transferring Partner that such transfer will not result in a termination of the Partnership for Federal income tax purposes under Section 708(b) of the Code. Any Affiliate to which such right, title and interest shall be sold, assigned, transferred or disposed of shall execute a copy of this Agreement and such other documents as are necessary to assume all the duties, liabilities and obligations of the Transferring Partner concerning the Partnership. Thereupon, the Affiliate shall be a Partner in succession to the Transferring Partner, and the Transferring Partner shall cease to have any right, title or interest in, or duties, liabilities or obligations in respect of, the Partnership to the extent of any such transfer, except as provided above in this Section 11.2 or which may arise by operation of law. For 41 purposes of this Agreement, the term "Affiliate" shall mean any individual, corporation, partnership or other entity which, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, another individual, corporation, partnership or other entity. For purposes of this Agreement the interest of any Affiliate assignee(s) of a Partner shall be aggregated with such Partner and the original named Partner and all Affiliate assignees of such Partner shall be treated as a single Partner. ARTICLE 12 RELATIONSHIP WITH PARTNERSHIP 12.1 INFORMATION. Subject to any applicable restriction of law, all Partners shall be fully and currently informed of the activities of the Partnership. To the extent that there are any applicable laws or regulations which would have the effect of limiting the right of a Partner to be so informed, the other Partners shall use all reasonable efforts to obtain waivers thereof in favor of the Partnership and the Partner so limited and, failing the obtaining of such waivers, the Partners shall make such arrangements as shall be practicable to preserve to the Partnership the benefits of the contracts or projects to which any secrecy agreements or laws or regulations relate. Each Partner shall not, except as required by law and except for disclosure to its attorneys, accountants, and Affiliates (who 42 shall be bound by the confidentiality provisions of this Agreement), divulge to any person any confidential or proprietary information concerning the business of the Partnership. 12.2 GOOD FAITH OF PARTNERS AND AFFILIATES. Each of the Partners shall act in good faith with respect to the Partnership in any matter which involves the interests of any of its Affiliates. Without derogating from the obligations of a Partner and its Affiliates to the Partnership and the other Partner, a Partner shall not subordinate the interests of the Partnership to the separate interests of itself or its Affiliates. 12.3 APPLICANT VIOLATOR SYSTEM. Each Partner represents and warrants that such Partner, and its officers, shareholders, subsidiaries, affiliates and any other entity that can be attributed to it under the "ownership and control" regulations issued by the Office of Surface Mining (collectively, "Partner Entities") are not currently permit blocked under the Surface Mining Control and Reclamation Act of 1977 ("SMCRA"). No Partner will allow to exist any violation of SMCRA or any comparable state law at any operation of a Partner Entity that would cause the other Partner or its Partner Entities to be permit blocked. Any Partner Entity which becomes permit blocked under SMCRA or any comparable state law shall provide written notice of such event to the other Partner within five (5) days and shall take any and all actions necessary for the removal of such permit block within twenty (20) days; provided, however, that if the 43 permit block does not then or thereafter adversely affect the other Partner (by permit block or otherwise), the permit blocked entity may contest the permit block in good faith and by appropriate legal proceedings. ARTICLE 13 SCOPE OF PARTNERSHIP 13.1 NATURE OF OBLIGATIONS BETWEEN PARTNERS. Except as otherwise provided in this Agreement, a Partner shall not act for, or assume any obligation or responsibility on behalf of, any other Partner or the Partnership. Each Partner hereby acknowledges, as among the Partners and the Partnership, a personal responsibility for its respective Percentage Interest of the liabilities and obligations of the Partnership incurred in accordance with the terms of this Agreement, except as otherwise expressly provided in this Agreement. In furtherance of the foregoing, if a Partner, pursuant to a final judgment of a court of applicable jurisdiction, pays any amount on behalf or for the account of the Partnership with respect to (i) any liability, obligation, undertaking, damage or claim for which the Partnership shall or may, pursuant to this Agreement or other contract or applicable law, be liable or responsible, or (ii) making good any loss or damage sustained by, or paying any duty, cost, claim or damage incurred by, the Partnership (such items referenced in clauses (i) and (ii) above called "Liabilities"), then the Partnership shall reimburse such Partner for the amount 44 so paid by that Partner. If the Partnership fails fully to reimburse the paying Partner, the other Partner (a "Reimbursing Partner") shall indemnify the paying Partner by paying to it an amount necessary to cause the Reimbursing Partner to have incurred its Percentage Interest of the excess of (x) the aggregate payments by the paying Partner as to such Liabilities over (y) the aggregate reimbursement, if any, which the paying Partner has received from the Partnership as to such payments. For purposes of this Article 13, all Liabilities arising as a result of the insufficiency of any reserve established in connection with the dissolution of the Partnership shall in each case be deemed to be Liabilities of the Partnership. 13.2 INDEMNIFICATION. (a) The Partnership shall indemnify, defend and hold harmless each Partner and its employees, officers, directors and agents (the "Other Indemnified Persons") from and against all loss, cost, liability and expense which may be imposed upon or reasonably incurred by such Partner or Other Indemnified Persons, including reasonable attorneys' fees and disbursements and reasonable settlement payments, in connection with any claim, action, suit or proceeding or threat thereof, made or instituted in which such Partner or Other Indemnified Persons may be involved or be made a party by reason of such Partner's being a Partner, or by reason of any action alleged to have been taken or omitted by such Partner in such capacity, or by such Other 45 Indemnified Persons acting on behalf of such Partner or the Partnership, if such Partner or Other Indemnified Person was acting in good faith and with reasonable care in what it reasonably believed to be its scope of authority set forth in this Agreement and in the best interests of the Partnership. (b) Nothing in this Section 13.2 shall be construed to require the Partnership to reimburse, defend, indemnify or hold harmless any Partner or Other Indemnified Persons with respect to any loss, cost, liability or expense in any circumstance in which this Agreement requires a Partner to reimburse, defend, indemnify or hold harmless any other Partner or the Partnership. (c) Each Partner shall indemnify and hold harmless the Partnership and the other Partner, and the Other Indemnified Persons, from and against all loss, cost, liability and expense which may be imposed upon or reasonably incurred by the Partnership, such other Partner, or Other Indemnified Persons, including reasonable attorneys' fees and disbursements and reasonable settlement payments, in connection with any claim, action, suit or proceeding or threat thereof arising out of any breach by such indemnifying Partner of its obligations and agreements under this Agreement. (d) Promptly after receipt by a person or entity indemnified under any provision of this Agreement (the 46 "indemnified Party") of notice of the commencement of any action against the Indemnified Party, such Indemnified Party shall give notice to the person or persons or entity or entities obligated to indemnify the Indemnified Party pursuant to the provisions of this Agreement (the "Indemnifying Party"). The Indemnifying Party shall be entitled to participate in the defense of the action and, to the extent that it may elect in its discretion by written notice to the Indemnified Party, to assume control of the defense and/or settlement of such action; provided, however, that (i) both the Indemnifying Party and the Indemnified Party must consent and agree to any settlement of any such action, except that it the indemnifying Party has reached a bona fide settlement agreement with the plaintiff(s) in any such action and the Indemnified Party does not consent to such settlement agreement, such settlement agreement shall act as an absolute maximum limit on the indemnification obligation of the Indemnifying Party, and (ii) if the defendants in any such action include both the Indemnifying Party and the Indemnified Party and if the Indemnified Party shall have reasonably concluded that there are legal defenses available to it which are in conflict with those available to the Indemnifying Party, then the Indemnified Party shall have the right to select separate counsel to assert such legal defenses and otherwise to participate in the defense of such action on its own behalf, and the fees and disbursements of such separate counsel shall be included in the amount which the Indemnified Party is entitled to recover under the terms and subject to the conditions of this Agreement. 47 ARTICLE 14 GOVERNING LAW This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Indiana. The Partners agree that if any litigation occurs between the Partners regarding the Partnership, such action shall be maintained only in the United States District Court for the Southern District of Indiana, subject to applicable jurisdictional limitations. If due to jurisdictional limitations, such action cannot be brought in the Southern District of Indiana, such action may be maintained in any other Federal district court in Indiana, or in an appropriate state court in Indiana. ARTICLE 15 ARBITRATION Any claim or dispute between the Partners which arises out of or relates to this Agreement shall be arbitrable; provided that no matter requiring the approval of the Partnership Committee shall be arbitrable. Further, any Partner may bring an action in law or in equity for an injunction against a violation of this Agreement pending resolution of the dispute by arbitration. All such arbitrable matters shall be governed 48 solely by Exhibit "15" hereto. The pendency of any arbitration proceeding shall stay any right of a Partner to take any action in regard to the other Partner which is based upon a claim involved in the matter being arbitrated, but such stay shall not affect the obligations of the parties hereunder to continue with performance of this Agreement except to the extent of the matter being arbitrated. ARTICLE 16 BUY-SELL PROVISIONS 16.1 GENERAL BUY-SELL. As and when provided in Section 10.4 hereof, and at any time after August 31, 1995, any Partner may implement the Buy-Sell procedures set out in this Article 16. Any Partner (the "Initiating Partner") shall have the right to notify the other Partner ("Non-Initiating Partners") that it offers to sell all of the right, title and interest of the Initiating Partner in and to the Partnership (the "Initiating Partner's Interest") on the basis set forth in this Section 16.1 at a price equal to the greater of (i) the Initiating Partners Percentage Interest of the product reached by multiplying nine (9) times the average of the Adjusted Net Income of the Partnership for each of the immediately preceding two completed fiscal years of the Partnership and the then current fiscal year based upon the approved budget for that fiscal year and actual experience to the date of such calculation or (ii) in the case of 49 BBR, $77,915,250 and, in the case of Thoroughbred,$347,084,750, in each case, as adjusted by changes in the Capital Account of the Initiating Partner after January 1, 1999 and as reflected on the financial statements of the Partnership prepared in accordance with generally accepted accounting principles consistently applied (the "Sale Price"). As used in this Agreement, the term "Adjusted Net Income" shall mean, with respect to each fiscal year, the net income of the Partnership for such fiscal year, determined in accordance with generally accepted accounting principles consistently applied, plus (i) interest expense incurred during such fiscal year, plus (ii) extraordinary or nonrecurring items of expense during such fiscal year, less (iii) extraordinary or nonrecurring items of income during such fiscal year; in each case to the extent such items are deducted from or included within income in determining net income. Such notification by the Initiating Partner shall: (i) advise the Non-Initiating Partner that the Initiating Partner is willing to sell Initiating Partner's Interest; (ii) state the Sale Price; and (iii) give the Non-Initiating Partner the option to purchase all right, title and interest of the Initiating Partner in and to the Partnership (the "Initiating Partner's Interest") at the Sale Price. Within 90 days after the date such notification is received by the Non-Initiating Partner, the Non-Initiating Partner shall notify the Initiating Partner that it: (a) has elected to purchase the Initiating Partner's Interest at the Sale Price; or 50 (b) has elected not to purchase the Initiating Partner's Interest. If the Non-Initiating Partner does not so notify the Initiating Partner within such 90 day period, the Non-Initiating Partner shall be deemed to have elected not to purchase the Initiating Partner's Interest. If the Non-Initiating Partner elects, or is deemed to have elected, not to purchase the Initiating Partner's Interest then the Initiating Partner shall no sooner than 30 days (to provide for a period of negotiation), but in no event later than 60 days, after such notice of election is given, or is deemed to have been given, notify the Non-Initiating Partner that the Initiating Partner elects not to sell its Interest in the Partnership or invokes the provisions of Section 16.2 hereof relative to the sale of the Initiating Partner's Interest. The closing of any purchase and sale under this Section 16.1 shall take place at the principal office of the Partnership within 90 days after the Non-Initiating Partner gives notice to the Initiating Partner of its commitment to buy under this Section 16.1. At that closing, the Partnership and the Partners shall execute such instruments as are appropriate to transfer the interest in the Partnership which is being sold, free and clear of all liens and encumbrances, and to indemnify the selling Partner as to all liabilities of the Partnership. At such closing, the purchasing Partner shall pay the entire Sale Price in cash to the selling Partner. 51 16.2 CONVERSION OF PARTNERSHIP TO CORPORATION AND SALE OF INITIATING PARTNER'S SHARES IN NEW CORPORATION. If the Initiating Partner invokes the provisions of this Section 16.2 pursuant to Section 16.1 hereof, the following procedures shall be followed, all at the sole cost and expense of the Initiating Partner: (a) The Partnership shall be converted to a corporation under the laws of the State of Indiana, with the Partners being shareholders with the same interests as they had under the Partnership. The terms of the Articles of Incorporation and By-Laws of the new corporation shall be those which are customary in Indiana for a corporation of this type and shall be agreed to by all Partners and consistent with the rights and privileges set out in this Agreement, with any dispute settled by arbitration under Article 15 hereof. The conversion of the Partnership shall be accomplished in the most tax efficient manner available in order to minimize tax liability to the Partners. (b) The new corporation shall register for public sale all of the outstanding shares of stock of the new corporation under and in compliance with all applicable federal and state securities laws. (c) Prior to the registration and initial public offering of the shares of stock of the Initiating Partner in the new corporation as described in Section 16.3(d) hereof, the 52 Initiating Partner shall request that the Non-Initiating Partner direct, in writing, the Initiating Partner to market to the public either (i) all of the shares of stock of the Initiating Partner in the new corporation and constituting it's Percentage Interest of the total outstanding shares of the new corporation, or (ii) a portion of the shares of stock of the Initiating Partner in the new corporation, constituting 19% of the total outstanding shares of the new corporation. The Non-Initiating Partners shall respond to such request, in writing, within 10 days. If the Non-Initiating Partner fails to respond, it shall be deemed to have directed the Initiating Partner to offer all of the Initiating Partner's shares. If the Non-Initiating Partner directs the Initiating Partner to market only 19% of the total outstanding shares of the new corporation, the Non-Initiating Partners shall then be obligated to purchase directly from the Initiating Partner all of the shares of stock in the new corporation held by the Initiating Partner which are not offered to the public (the "Required Purchase"). The purchase price per share to be paid by the Non-Initiating Partner to the Initiating Partner in any such Required Purchase shall be the average price per share realized in the initial public offering of 19% of the total outstanding shares of the new corporation owned by the Initiating Partner, net of, commissions (the "Purchase Price"). The Purchase Price for all of the remaining shares owned by the Initiating Partner shall be paid by the Non-Initiating Partner to the Initiating Partner, in cash, within 15 days of the completion of the initial public offering. 53 (d) The shares of stock of the Initiating Partner in the new corporation to be marketed pursuant to Section 16.2(c) hereof, shall be marketed by an underwriter chosen by the Initiating Partner on a "best efforts" basis, or such other basis as the Initiating Partner may approve. The Initiating Partner shall accept any price for the shares so offered. (e) The conversion of the Partnership to a corporation and the completion of such offering shall occur within 240 days of the date the Initiating Partner elects to invoke the provisions of this Section 16.2. 16.3 (a) PURCHASE OF PARTICIPATING RIGHTS. Subject to the time limit set out in the following sentence, as extended pursuant to subsection (c), Thoroughbred may irrevocably notify BBR in writing (a "Participating Rights Purchase Notice") of its intent to acquire from BBR certain voting rights of BBR in the Partnership (the "Participating Rights"), by replacing the list of "Major Decisions" set out on Exhibit 9.1 to this Agreement with the list of "Major Decisions" set out on Exhibit 16.3 to this Agreement. If a Participating Rights Purchase Notice is given at any time during the period commencing on February 26, 1999 and ending 36 months from such date, the transfer of the Participating Rights and the adoption of the list of Major Decisions set out on Exhibit 16.3, shall be effective upon the payment of an amount to be negotiated in good faith by the Partners which shall be considered a premium over the Interest Purchase Price as defined in Section 16.3(b) hereof and shall 54 further reflect the fact of gaining control and marketability of the Partnership (typically between 25% and 40% of the Interest Purchase Price of the partnership) (the "Participating Rights Purchase Price") in immediately available funds by wire transfer to an account designated by BBR. Upon the payment of the Participating Rights Purchase Price, which shall be made within ten (10) days of the giving of a Participating Rights Purchase Notice, BBR and Thoroughbred shall execute an amendment to this Agreement substituting the list of major Decisions set out on Exhibit 16.3 for the list set out on Exhibit 9.1. No other right, interest or privilege of BBR shall be transferred, waived or relinquished by BBR in connection with the transfer of the Participating Rights. (b) PURCHASE OBLIGATION. Without limiting the obligation of Thoroughbred to complete the acquisition of the Participating Rights and pay the Participating Rights Purchase Price in the time period specified above, if a participating Rights Purchase Notice is given, BBR in its sole option, at any time during the twelve (12) month period following the giving of the Participating Rights Purchase Notice, may irrevocably notify Thoroughbred in writing (a "Sale Notice") that BBR elects to sell to Thoroughbred the BBR Partnership Interest for the sum of seventy-seven million nine hundred sixteen thousand nine hundred fifty dollars ($77,916,950.00)(the "Interest Purchase Price"). A Sale Notice shall be binding upon both BBR and Thoroughbred. If a Sale Notice is given, BBR shall transfer to Thoroughbred, on 55 the tenth (10th) business day following the Sale Notice, the BBR Partnership Interest. On such day (i) BBR shall deliver an assignment of all right, title and interest of BBR in and to the Partnership and (ii) Thoroughbred shall deliver to BBR the Interest Purchase Price in immediately available funds by wire transfer to an account designated by BBR. If BBR so elects and gives a Sale Notice within ten (10) days of Thoroughbred giving a participating Rights Purchase Notice, the purchase of the Participating Rights and the BBR Partnership Interest shall be accomplished by a purchase by Thoroughbred of the unencumbered capital stock of BBR for the Interest Purchase Price plus the Participating Rights Purchase Price, on terms and conditions negotiated in good faith by the parties in the negotiation of the Participating Rights Purchase Price. At the time of the purchase of the capital stock of BBR, BBR shall only consist of its ownership interest in the Partnership. The obligation to pay the Participating Rights Purchase Price and the Interest Purchase Price are separate and one shall not reduce or offset the other. (c) TIME EXTENSION. If at the end of the 36 month period referenced in Section 16.3(a) hereof, Thoroughbred requires an extension of the time period necessary to maintain the rights and obligations of Section 16.3(a) and (b) hereof, the parties agree to negotiate in good faith toward an extension of the time period necessary to maintain such economic rights and obligations. Thoroughbred shall not be obligated to pay any consideration to BBR for such an extension. 56 ARTICLE 17 NOTICES 17.1 ADDRESSES. All notices, consents, elections, requests, reports, demands and other communications hereunder shall be in writing and shall be personally delivered or mailed by registered or certified, first-class mail, postage prepaid, or sent by attested facsimile transmission or by a reputable overnight courier service such as. Federal Express, to BBR; Black Beauty Resources, Inc. 414 South Fares Ave. Evansville, Indiana 47714 Attention: Chairman to Thoroughbred: Thoroughbred, L.L.C. 701 Market Street, Suite 815 St. Louis, Missouri 63101-1826 Attention: Chairman or to such other address or to such other person as a Partner shall have last designated by notice to the other Partners. 17.2 EFFECTIVE DATE. All notices, consents, elections, requests, reports and other documents authorized or required to be given pursuant to this Agreement shall be effective as of the date received by the recipient or addressee for purposes of 57 calculating the time within which the other Partners are obligated to respond. If a Partner refuses to accept delivery of any notice sent in accordance with Section 17.1 hereof, such Partner shall nevertheless be deemed to have received such notice for purposes of this Section 17.2 on the date such refusal first occurred. ARTICLE 18 MISCELLANEOUS 18.1 BINDING ON SUCCESSORS. Except as otherwise provided in this Agreement, this Agreement shall be binding upon and inure to the benefit of the Partners and their successors and assigns. 18.2 AMENDMENTS. This Agreement shall not be amended or modified except by a written instrument executed by all Partners. 18.3 WAIVER AND CONSENT. No consent or waiver, express or implied, by a Partner to or of any breach or default by the other Partners in the performance of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by the other Partner of the same or any other obligation of such Partners hereunder. Failure by any Partner to complain of any act or failure to act of the other Partner or to declare any such other Partner in default, irrespective of how long such failure continues, shall not constitute a waiver by such Partner of its rights hereunder. 58 18.4 LIMITATION ON RIGHT TO PURCHASE PARTNERSHIP INTEREST. Notwithstanding anything in this Agreement to the contrary, the right of a Partner to purchase the Partnership Interest of the other Partner shall cease 20 years and 11 months after the death of the last survivor of the descendants living as of the date hereof of George H. W. Bush, immediate past President of the United States of America. 18.5 WAIVER OF DISSOLUTION UNDER THE UNIFORM PARTNERSHIP ACT. Any dissolution of the Partnership shall occur only as provided in Article 10 hereof, and each Partner hereby waives and renounces its rights under the IUPA to seek a court decree of dissolution, to seek the appointment of a liquidator of the Partnership, and to seek a partition of any Partnership property. 18.6 RELATIONSHIP OF THE PARTNERS. Nothing herein shall be construed to authorize a Partner to act as general agent for the other Partner. 18.7 FURTHER ASSURANCES. The Partners shall execute and deliver such further instruments and do such further acts and things as may be required to carry out the intent and purpose of this Agreement. 18.8 SEVERABILITY. If any provision of this Agreement or the application thereof to any person or circumstance is invalid 59 or unenforceable to any extent, the remainder of this Agreement and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. 18.9 AGREEMENT IN COUNTERPARTS. This Agreement may be executed in as many counterparts as may be deemed necessary and convenient. Each counterpart when so executed shall be deemed an original, but all counterparts shall constitute one and the same instrument. 18.10 ENTIRE AGREEMENT. This Agreement contains the entire agreement between the parties hereto relative to the Partnership. Exhibits 8.4, 9.1, 15 and 16.3 are incorporated into this Agreement by reference. IN WITNESS WHEREOF, the parties hereto have duly caused the execution of this Agreement by their duly authorized officers, as of the day and year first above written. BLACK BEAUTY RESOURCES, INC. By: /s/ David S. Hermann ------------------------ Title: President 60 THOROUGHBRED, L.L.C. By: /s/ David C. Hegger ---------------------- Title: Vice President 61 EXHIBIT LIST 9.1 Major Decisions 15 Arbitration 16.3 Major Decisions 62 EXHIBIT 16.3 AMENDED MAJOR DECISIONS 1. Any amendment to, or modification of, any term or provision of the Partnership Agreement. 2. Any contract or arrangement between the Partnership, on the one hand, and one Partner or an Affiliate of such Partner, on the other hand. 3. The incurrance of any indebtedness of the Partnership outside of the ordinary course of business or execute any guarantee which secures any indebtedness of any Partner or any Affiliate of any Partner. 4. Approval of all significant tax returns of the partnership before filing. 5. Any change or modification of the policy or practices of the Partnership regarding distributions to Partners. 6. Any merger, consolidation, dissolution, wind-up or any sale of all or a substantial portion of the assets of the Partnership, and the decision as to whether any of the Partnership assets are to be distributed to the Partner "in kind" in connection with any dissolution or winding up of the business of the Partnership. 7. Any decision to file a voluntary petition in bankruptcy. 8. Any action taken which would not proportionally benefit all Partners and would materially impair the value of the interest of any Partner holding a minority interest in the Partnership. (BLCKBEAUTY AGRMT.) EXHIBIT "9.1" MAJOR DECISIONS 1. Any change in, addition to, or exclusion from, the purposes of the Partnership, or the setting up or substantial alteration or divestment of any major business activity or activities of the Partnership. 2. The approval of, and any material change in, the annual budget and business plan of the Partnership. 3. Any specific capital project or capital expenditure not covered by an approved budget and business plan, or any decision requiring the Partners to make additional capital contributions to the Partnership. 4. Any contract or other commitment which cannot be cancelled by the Partnership without penalty and requiring, or potentially requiring, the expenditure of more than $25,000 or having, or potentially having, a material impact upon the business of the Partnership, except contracts or other commitments in respect of which authority to commit the Partnership shall have been approved in an annual budget and business plan or is delegated to the Chief Executive Officer by general or specific action of the Partnership Committee. 5. Any contract or arrangement between the Partnership, on the one hand, and one Partner or an Affiliate of such Partner, on the other hand, if such arrangement is subject to Partnership Committee approval under Section 9.4 of the Agreement. 6. The commencement or settlement of litigation or the settlement of any claim or environmental proceeding involving or potentially involving $25,000 or more in value at issue plus costs. 7. The appointment of any person as Chief Executive Officer or the removal or dismissal of any person holding that office; or the establishment of salary and employee benefits for the Chief Executive Officer; or the approval of any contract of employment for the Chief Executive Officer. 8. The appointment of any person to, or the removal or dismissal of any person from, a senior managerial position with the Partnership; the designation of which positions constitute senior managerial positions; or the establishment of salaries and employee benefits for the holders of such positions. 9. Any borrowing by the Partnership, other than the incurrence of trade payables in the ordinary course of business, the imposition of any mortgage or other encumbrance on assets of the Partnership for any financing transaction, including any incurrence of a contingent liability with respect thereto and any lease commitment which is either noncancelable or only cancelable at a penalty or the incurrence of liabilities approved in an annual budget and business plan. Also, any decision by the Partnership to prepay any long-term indebtedness of the Partnership or a loan by a Partner to the Partnership. 10. Any sale or other disposal of one or more capital assets of the partnership having an aggregate value on the books of the partnership in excess of $100,000 in any one year. 11. Any matter relating to company, corporate or partnership titles, names or trade names, designations; descriptions, designs, emblems or insignia used or to be used by the Partnership. 12. Adoption or amendment of pension or other employee benefit plans. 13. Approval of all significant tax returns of the Partnership before filing. 14. The approval of any labor contract, amendment thereto or the settlement of any significant work stoppage, except for the acceptance of the application of the JOBS MOU pursuant to the terms of the Consent and General Release dated as of January 1, 1999 between the Partners. 15. Questions of business ethics. 16. Any merger, consolidation, dissolution, wind-up or any sale of all or a substantial portion of the assets of the Partnership, and the decision as to whether any of the Partnership assets are to be distributed to the Partner "in kind" in connection with any dissolution or winding-up of the business of the Partnership. 17. Acquisition by the Partnership of any interest in any corporation, partnership joint venture or other unincorporated association. 18. The determination whether the Partnership should join any industrial bargaining group or trade association having similar functions. 19. The voting of any interest of the Partnership in any other entity, including, without limitation, United Minerals, LLC, Sugar Camp Coal, LLC and Enterprise Mine, LLC. 20. The establishment of any "reserve" under Section 8.1 of the Partnership Agreement in connection with determining the Net Cash Flow of the Partnership. 21. Any other matter which may have a material affect on the business or prospects of the Partnership, whether or not enumerated in this list of Major Decisions. EXHIBIT 15 ARBITRATION AGREEMENT I. MATTERS SUBJECT TO ARBITRATION Any claim or dispute between any of the Partners which arises out of or relates to that certain Amended and Restated Partnership Agreement between BBR and Thoroughbred dated March, 1999 ("Partnership Agreement"), other than certain matters excluded under Article XV shall be arbitrable. The Partners hereby agree that, as to all arbitrable claims or disputes, these provisions provide the exclusive remedy(ies) and bar any court proceeding on the same question; provided that, any Partner may pursue any judicial remedy in any court having jurisdiction to compel arbitration or to enforce or appeal any decision, award, remedy or sanction of the arbitration panel ("Panel") pursuant to Article VIII, X or XI hereof. Unless prohibited by applicable law, the Panel shall decide whether a claim or dispute is arbitrable under the Agreement. II. CHOICE OF FORUM AND LAW A. Choice of Forum Unless otherwise agreed in writing by the Partners, the arbitration and all meetings and hearings relative thereto shall be held in Evansville, Indiana. B. Choice of Law All decisions, awards, orders, proceedings and procedures pursuant to this Agreement shall be governed, as a matter of contract, by Articles I through XVIII. Where such a proceeding or procedure is not addressed by this Agreement, the Federal Arbitration Act as presently in effect shall apply, as a matter of contract. To the extent not in conflict with either this Agreement or the Federal Arbitration Act, the law of the State of Indiana, including its substantive law, shall apply to such decisions, awards, orders, proceedings and procedures. III. ARBITRATORS A. Number and Method of Selection Three arbitrators shall comprise the Panel for any proceeding or procedure under this Agreement. The Partner invoking arbitration shall include in the notice thereof a list of the names, business addresses, and affiliations of three neutral arbitrators acceptable to it. Upon receipt of that notice, each of the other Partners, in their respective answers thereto shall include, as provided in Article VI. A, the names, business addresses and affiliations of three neutral arbitrators acceptable to it. Upon receipt of that answer, the Partner invoking arbitration shall contact the other Partners, and they shall attempt to mutually select three neutral arbitrators. Upon request by any Partner, the Partners shall participate in interviewing each proposed arbitrator. If the Partners fail to agree on the selection of one or more arbitrators within 14 days from the date the Partner invoking the arbitration receives the other Partners' answers, then any Partner may refer the selection of those Panel members not so selected to a judge of the Federal District Court for the Southern District of Indiana, Evansville Division. When the three arbitrators are finally selected, they shall promptly notify each Partner of their respective mailing addresses and affiliations. B. Minimum Qualification The Panel shall consist of at least one arbitrator who, at the time of his/her selection, is an attorney currently licensed to actively practice in at least one state or is a retired federal or state judge. C. Selection of Chair The Panel shall be chaired by an attorney/judge who meets the minimum qualification in Article III.B. If more than one Panel member is such an attorney/judge, a majority of the Panel shall determine which attorney/judge shall chair the Panel. D. Vacancies If any Panel member is unable or unwilling to continue to serve at any time prior to the issuance of the Panel's decision and award, the remaining two Panel members shall mutually select a replacement. Upon their failure to make that selection within 7 days of such vacancy, any Partner may request a judge of the Federal District Court for the Southern District of Indiana, Evansville Division, to select that replacement. E. Compensation Whoever selects an arbitrator shall determine, at the time of selection, that arbitrator's compensation. The compensation of the arbitrators shall be borne equally by the Partners, unless otherwise apportioned by the Panel as provided in Article XI. F. Oath At the Panel's first meeting, and in any event before proceeding with the preliminary hearing described in Article VI.C, each arbitrator shall take the oath of office, which shall be in the form of the "Arbitrator's Oath" set forth in the American Arbitration Association's then "Notice of Appointment." 1. Powers The Panel shall have the powers stated in this Agreement, as well as any power reasonably necessary to exercise or implement any such stated powers. All powers of the Panel shall be exercised by a majority of the Panel. G. No Liability to Any Partner The Partners hereby agree that no arbitrator shall be liable to any Partner for any act or omission in connection with any arbitration, proceeding or procedure conducted under, or any decision, award or order with respect to, this Agreement. IV. USE AND COMPENSATION OF CONSULTANTS Whenever the Panel desires, it may use one or more consultants to enable it to more clearly understand any technical, financial or scientific matters related to any claim or dispute at issue; provided that, the cost thereof shall not exceed an amount previously agreed to in writing by the Partners. In making its decision and award, the Panel may fully or partially use, or may disregard, any information or report prepared or developed by any such consultant. The cost of all consultants shall be borne equally by the Partners, unless otherwise awarded by the Panel as provided in Article XI. V. REPRESENTATION BY COUNSEL Any Partner, at its sole election, may be represented by counsel of its choice at any and all times during the arbitration. VI. PROCEDURES A. Commencement Any Partner may invoke arbitration by notifying the other Partner, within one year of the date the claim or dispute first arose. The date such notice is mailed shall be the effective date the arbitration is invoked for all purposes of this Agreement. In addition to listing its three proposed neutral arbitrators in that notice as required by Article III.A, the notice shall state with reasonable specificity each claim or dispute and the relief sought. Within 20 days of the receipt of the notice, the receiving Partner shall send its written answer thereto by certified mail, return receipt requested, to the other Partner. Each answer shall include the list of that answering Partner's three proposed neutral arbitrators and a reasonably specific statement of its view of each such claim or dispute, including all defenses, offsets, counterclaims, and any relief sought which arise out of or relate to each such claim or dispute. B. Closed Hearings All proceedings under this Agreement, including the preliminary and final hearings, shall be closed to the public, including, without limitation, the print and electronic media, unless otherwise agreed to in writing by the Partners. C. Preliminary Hearing 1. Setting the Hearing: Prehearing Statement Following the selection of the third member of the Panel and receipt of the other Partner's answer, the Panel shall set a date, time and place for a preliminary hearing and shall so notify the Partners in writing. Such notice shall be submitted to each Partner within 10 days of the date the third member of the Panel is selected. The preliminary hearing shall occur no sooner than 14 days and no later than 28 days from the date such notice is received by each Partner. Not later than 2 days prior to the commencement of the preliminary hearing, each Partner shall submit a copy of its proposed prehearing report to each Panel member and to the other Partner. Each prehearing statement shall identify: a. every claim or dispute to be arbitrated; b. every legal issue involved in the arbitration; c. every relevant fact and legal issue which can be stipulated; d each witness that Partner intends to call at the final hearing, a summary of that testimony, and each document that Partner intends to offer into evidence at that hearing, but such matter shall be subject to revision as a result of any second preliminary hearing requested by a Partner and deemed warranted and scheduled by the Panel; and e. all discovery that Partner intends to undertake in accordance with Article VII. A Partner may amend its proposed prehearing report at the preliminary hearing. After the close of the last preliminary hearing, any change to a proposed prehearing report shall be within the Panel's discretion; provided that, no such change shall be permitted by the Panel less than 15 days prior to the commencement of the final hearing, or at any time without prior written notice to, and an opportunity to object by, the Partners. 2. Panel's Duties at Preliminary Hearing The Panel shall perform the following tasks, seriatim, at the preliminary hearing: a. require each Panel member, if not previously sworn, to take the oath of office; b. identify every claim or dispute to be arbitrated; c. identify every stipulated fact and issue of law; d. identify the discovery each Partner intends to undertake and establish a date for its completion in accordance with Article VII, which date shall not be less than 20 days nor more than 60 days from the date of the Panel's initial preliminary hearing report; e. determine the matters in Article VI.C.3 relative to the Partners' final hearing briefs; f. set the date, place, time and duration for the final hearing, which shall be consistent with Article IX.B and which date shall not be less than 30 days nor more than 60 days from the date discovery is required to be completed as provided in Article VI.C.2.d; g. establish an agenda for the final hearing; and h. issue its initial or final preliminary hearing report, as the case may be. Any objection to the Panel's actions on any of these tasks shall be raised by a Partner at the preliminary hearing, followed by notice to the Panel and the other Partner within 5 days after the conclusion of that hearing, failing which such Partner shall be conclusively deemed to have waived any objection thereto. If, on motion by a Partner, the Panel believes a second preliminary hearing is warranted, the Panel may schedule such a hearing so long as that hearing does not increase by more than 10 days what otherwise would have been the duration of the entire arbitration procedure under this Agreement had no second preliminary hearing ever been held. Within 15 days from the completion of the last preliminary hearing, the Panel shall send a written copy of the Panel's final preliminary hearing report to each Partner by certified mail, return receipt requested. This report shall contain the Panel's decisions with respect to tasks a. through h. in Article VI.C.2. The Panel may amend this report, but no such amendment shall occur less than 15 days prior to the commencement of the final hearing, or at the time without prior written notice to, and a reasonable opportunity to object by, each Partner. 3. The Partners' Final Hearing Briefs Each Partner shall submit to the Panel and to the other Partner its final hearing brief on or before the date set by the Panel in its final preliminary hearing report, which date shall be no later than 20 days prior to the commencement of the final hearing. In its final preliminary hearing report, the Panel shall determine what this brief shall address and shall establish a page limitation therefor, but, unless mooted by the second preliminary hearing, each brief shall: a. identify all witnesses, by name, address, title and affiliation, that Partner intends to call at the final hearing; b. contain a summary in reasonable detail of the nature of each such witness' testimony; and c. include by way of attachment a photocopy of each document that Partner intends to introduce at the final hearing. Any witness not so identified shall not be permitted to testify at the final hearing, and any photocopy of a document not so attached shall not be admitted into evidence at that hearing. Within 7 days of its receipt of each other Partner's final hearing brief, each Partner shall submit to the Panel and to the other Partner an amendment to its final hearing brief, which shall contain all objections that Partner has to the authenticity of any of the photocopied documents attached to the other Partners' final hearing briefs. Any such photocopied document not so objected to shall be deemed authenticated for purposes of the final hearing. VII. DISCOVERY AND SUBPOENAS If there are material facts in dispute, any Partner may pursue any method of discovery permitted by the Federal Rules of Civil Procedure, notwithstanding Rule 81(a)(3) thereof; provided that, in no event shall the duration of all discovery, including all discovery requests and responses, exceed the time established by the Panel pursuant to Article VI.C.2.d. Discovery costs may be awarded by the Panel as provided in Article XI. The Panel at any time may issue subpoenas for the attendance of witnesses and the production of books, records, documents and other evidence for any proceeding or procedure under this Agreement. The Panel may issue a discovery order to reasonably protect a Partner's competitive and confidential information. VIII. INTERLOCUTORY POWERS OF PANEL A. Decisions The Panel may decide any matter in advance of the final hearing, including, without limitation, any matter which may be dispositive of the claim or dispute being arbitrated. B. Hearings and Sanctions Notwithstanding anything in this Agreement to the contrary, if a Partner fails to fully and timely comply with this Agreement or with any reasonable order of the Panel, the Panel may hold a hearing on the default. The defaulting Partner shall be notified by the Panel of the date, time, location and nature of that hearing and of the sanctions the Panel may impose. Such notice shall be sent not less than 10 days prior to the commencement of the hearing. If the defaulting Partner fails to appear at that hearing, the Panel may conduct an ex parte hearing, then or later, which it deems desirable to remedy such default. Following any such ex parte hearing, the Panel shall notify each Partner in writing of its decision and award. Such award shall be consistent with Articles X and XI. IX. FINAL HEARING A. Final Prehearing Order Not later than 15 days prior to the commencement of the final hearing, the Panel shall submit a copy of its final prehearing order to each Partner. The final prehearing order shall: 1. resolve any matter not finalized in the Panel's final preliminary hearing report, as originally issued or amended; and 2. finalize each of the matters set forth in the Partners' final hearing briefs, as originally submitted or amended. B. Procedure The final hearing shall occur in one continuous session over a period not to exceed 5 days, with no recess in excess of 15 hours except for Saturdays, Sundays and Holidays. The Panel shall conduct the final hearing in accordance with its final prehearing order. A transcript and an electronic recording shall be made of all testimony and proceedings at the final hearing. The Panel shall arrange for a reporter to make such a transcript and recording. Except as provided in the last paragraph of Article VI.C.3, the Panel shall consider all evidence presented by a Partner which is relevant to any claim or dispute being arbitrated and which is not unduly repetitious of any previous evidence presented by that Partner. No other rules of evidence shall apply. The Panel chair shall administer the oath to each witness before the witness testifies. The Panel may require that each Partner submit a short opening and/or closing brief. At the close of all evidence, the Partners shall be given a reasonable period, but not to exceed 3 days, in which to make one final attempt to settle all claims and disputes being arbitrated before the Panel issues its decision and award as provided in' Article X. Only evidence offered and admitted at the final hearing shall be considered by the Panel hi reaching its decision and award. X. THE PANEL'S DECISION AND AWARD Not later than 14 days after the completion of the final hearing, the Panel shall submit to each Partner a copy of its written decision and award on each arbitrated claim and dispute. The decision and award shall be concise, and shall include findings of fact, conclusions of law, and a reasoned decision. It also shall include the remedies in Article XI which are awarded, including the time and method for payment of all awards. All members of the Panel shall sign the decision and award. However, if a Panel member dissents in whole or in part from the decision and award, that member shall so indicate by appropriate notation thereon or by a separate signed, written dissenting opinion attached thereto within that same 14-day period. The decision and award shall be final, and judgment may be entered thereon in any court having jurisdiction thereof. Where required by applicable law, the decision and award shall be acknowledged, and a copy of the oaths of each Panel member shall be attached thereto. XI. REMEDIES The Panel may grant, award, modify or vacate any remedy deemed appropriate, including, without limitation, specific performance, damages, costs and expenses of the arbitration proceeding, and pre- and post-decision and award interest. The Panel shall not award any punitive damages. The actual damages, the costs and expenses of the arbitration proceeding, and interest shall be separately identified in the Panel's decision and award. The Panel may apportion such damages, costs, expenses and interests between or among the Partners as it deems equitable. XII. COMMUNICATIONS BETWEEN THE PARTNERS AND THE PANEL No oral communications between a Partner and any Panel member shall occur unless the other Partner is present during that communication. Written communication between a Partner and any Panel member is permissible only if the other Partners and all other Panel members timely receive a copy of such written communication. XIII. NOTICES All notices and correspondence from any member of the Panel to a Partner, or from a Partner to the other Partners or to any member of the Panel, shall be in writing and shall be sent by certified mail, return receipt requested. If given to a Partner, such notice and correspondence shall be sent to the addressee's mailing address stated in Section 17.1 of the Partnership Agreement or to such address as otherwise designated. If given to a Panel member, it shall be sent to the mailing address provided by that member to the Partners as provided in Article III.A. Except for the one-year deadline for invoking arbitration in Article VI.A, and except as otherwise may be provided in this Agreement, all notices and correspondence shall be effective and deemed delivered when received by the addressee or any employee or agent thereof. XIV. COMPUTATION OF TIME LIMITS All time limits set forth in this Agreement include Saturdays, Sundays and Holidays, except where the last day falls on one of those days. In that event, such time limit shall be extended to include the next weekday immediately following that last day which is not a Saturday, Sunday or Holiday. XV. WAIVER If a Partner participates in any arbitration proceeding or procedure with actual or constructive knowledge that any provision or requirement of this Agreement has not been complied with, and fails to timely object thereto in writing to the Panel, that Partner shall be deemed to have waived the right to object to such noncompliance. XVI. APPEAL Any appeal of the Panel's decision and award to any court having jurisdiction thereof shall be governed exclusively by this Article XVI. A. Time for Appeal No such appeal from the Panel's decision and award shall be timely unless filed with the clerk of the court on or before the 15th day following the date of the appealing Partner's receipt of that decision and award; provided that, if the appeal is predicated on corruption or fraud, it shall be made on or before the 15th day following the first date such grounds are known or should have been known. B. Grounds for Appeal 1. Vacation The Panel's decision and award shall be vacated only if: a. it was procured by corruption, fraud or other undue means; or b. there was partiality or misconduct by two or more Panel members, which substantially prejudiced the appealing Partner; or c. the Panel exceeded its powers under this Agreement, which substantially prejudiced the appealing Partner; or d. the Panel failed to follow some of the procedures in this Agreement, including, without limitation, those in Article VI, or failed to meet some of the time limits set forth in this Agreement, and that failure substantially prejudiced the appealing Partner. 2. Modification The Panel's decision and award shall be modified only if: a. there was an evident material miscalculation of figures contained in the decision and award, or an evident material mistake in the description of any person, thing or property referred to therein; or b. the decision and award included a matter not submitted to the Panel, but such modification shall apply only to that matter; or c. the reason for the modification is to give full force and effect to the Panel's decision and award. XVI. SURVIVAL OF THE TERMS AND CONDITIONS The terms and conditions of this Agreement shall survive the termination or expiration of the Partnership Agreement to the extent necessary for their complete enforcement and for the full protection of the Partner in whose favor they run. XVII. SEVERABILITY If any portion of this Agreement is unenforceable for any reason, the remainder of this Agreement shall be severed from such portion, and, as severed, shall be binding on and enforceable against the Partners; provided that, if Article VII is unenforceable in whole or in substantial part, this Agreement shall automatically terminate and shall be unenforceable against the Partners.