No. 00-1307 

In the Supreme Court of the United States 

LARRY G. MASSANARI, ACTING COMMISSIONER 
OF SOCIAL SECURITY, PETITIONER 

v. 

SIGMON COAL COMPANY, INC., AND 
JERICOL MINING, INC. 

ON WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE FOURTH CIRCUIT 

JOINT APPENDIX 

THEODORE B. OLSON* 

Solicitor General 
Department of Justice 
Washington, D.C. 20530-0001 
(202) 514-2217 

Counsel for Petitioner 

*Counsel of Record 
JOHN R. WOODRUM* 

Heenan, Althen & Roles 
1110 Vermont Avenue, N.W. 
Suite 400 
Washington, D.C. 20005 
(202) 887-0800 

Counsel for Respondents 

PETITION FOR A WRIT OF CERTIORARI FILED: FEB. 13, 2001 
CERTIORARI GRANTED: APR. 23, 2001 

TABLE OF CONTENTS 

Page 

Docket entries, United States District Court for 
the Western District of Virginia ............................... 
1 

Docket entries, United States Court of Appeals for 
the Fourth Circuit ....................................................... 
5 

Complaint (June 25, 1996) .................................................. 
7 

Supplemental Complaint (July 2, 1998) ........................... 
13 

Consent of Stockholders of Shackleford Coal Com- 
pany, Inc., to Plan and Agreement for Purchase 
of Assets (May 30, 1973) ............................................. 
16 

Bill of Sale (June 1, 1973), including Plan and Agree- 
ment for Purchase of Assets (May 31, 1973) ........... 
18 

Assignment Letter from Social Security Administra- 
tion to Jericol Mining, Inc. (Sept. 28, 1993) ............. 
44 

Administrative Appeal Letter from John R. Woodrum 
and W. Gregory Mott to Anne Jacobosky, et al., 
of Social Security Administration, Re: With- 
drawal of UMWA Combined Fund Beneficiaries 
Assigned to Jericol Mining, Inc. (Apr. 9, 1997) ...... 
51 

Affidavit of R. Wayne Stratton (Aug. 15, 1996) 
(attached as exhibit to Woodrum and Mott 
Appeal Letter) .............................................................. 
67 

Affidavit of James E. Kelley (Apr. 3, 1997) (attached 
as exhibit to Woodrum and Mott Appeal Letter) .. 
70 

Affidavit of Raymond E. Cole (Aug. 26, 1996) 
(attached as exhibit to Woodrum and Mott 
Appeal Letter) .............................................................. 
74 

Shackleford Coal Company, Inc., Financial State- 
ments (Apr. 30, 1973) (attached as exhibit to 
Woodrum and Mott Appeal Letter) ......................... 76 

(I) 

II 

Table of Contents—Continued: 
Page 

Letter from Raymond Cole to Bart A. Brown, 

July 10, 1973, with Shackleford Coal Company, 
Inc., Balance Sheet (June 1, 1973) (attached as 
exhibit to Woodrum and Mott Appeal Letter) ....... 

79 
Letter from Reeves Lewenthal to James Sigmon 
and Charles Sigmon, Apr. 26, 1973 (attached as 
exhibit to Woodrum and Mott Appeal Letter) ....... 
82 

Report on Shackleford Coal Company by James and 

Charles Sigmon ............................................................ 
83 

Social Security Administration Transmittal No. 9 
(Jan. 1994) ...................................................................... 
99 

Social Security Administration Coal Act Fax 
(Oct. 30, 1995) ................................................................ 
105 

SSA Form 1826 Itemized Statement of Earnings for 

UMWA Retiree John R. Thomas .............................. 
107 

Letter to SSA Southeastern Program Service Center 

Regarding Successor Company and Signatory 
Date Issues in Jericol Mining, Inc. (Aug. 8, 
1994) ............................................................................... 110 

Letter to SSA Northeastern Program Service Center 

Regarding Transfer of Business and Successor 
Issues under the Coal Act (Aug. 9, 1994) ................ 114 

III 

Table of Contents—Continued: 
Page 

NOTICE 

The following items have been omitted in print- 
ing this appendix because they appear on the 
following pages in the printed appendix to the 
petition for a writ of certiorari: 

District Court Order Granting Summary Judgment 
to Respondents (Nov. 19, 1998) ................................. 
63a 

District Court Opinion (Nov. 18, 1998) ............................ 
65a 

District Court Order Denying Government’s Motion 

For Reconsideration (Dec. 18, 1998) ........................ 
79a 

Court of Appeals Opinion (Aug. 29, 2000) ....................... 
1a 

Court of Appeals Order Denying Rehearing and 

Rehearing En Banc (Nov. 15, 2000) ......................... 81a 

UNITED STATES DISTRICT COURT 
WESTERN DISTRICT OF VIRGINIA 
(BIG STONE GAP) 

No. 96-CV-148 

DOCKET ENTRIES 

_________________________________________________ 

DOCKET 
DATE NUMBER DOCKET ENTRIES 

_________________________________________________ 

6/25/96 1 

COMPLAINT Filing Fee $ 120.00 

Receipt # 78733 Service due 
10/23/96 for Commissioner, SS 
(lh) [Entry date 06/28/96] 

10/27/97 19 MOTION for Summary Judg- 
ment by Sigmon Coal Company, 
Jericol Mining, Inc. (1b) 

7/9/98 31 ORDER granting [30-1] motion 
for Leave to File a supple- 
mental complaint (signed by 
Senior Judge Glen M. Williams) 
(lh) [Entry date 07/10/98] 

7/9/98 32 AMENDED (SUPPLEMENTAL) 

COMPLAINT by Sigmon Coal 
Company, Jericol Mining, Inc. 
amending [1-1] complaint (lh) 
[Entry date 07/10/98] 

(1) 

2 

_________________________________________________ 

DOCKET 
DATE NUMBER DOCKET ENTRIES 

_________________________________________________ 

11/18/98 34 MEMORANDUM OPINION (signed 
by Senior Judge Glen M. 
Williams) (lb) 

11/18/98 35 

ORDER granting pltf ’s [19-1] 

motion for Summary Judgment, 
and denying dft’s motion for 
summary judgment; dft ordered 
to Withdraw the assignments 
challenged by pltf Jericol in 
this case and notify Trustees of 
the UMWA Combined Benefit 
Fund that such assignments 
have been withdrawn. Dft en- 
joined from assigning additional 
retirees of Shackleford Coal 
Company, Inc. to pltf Jericol on 
basis that pltf is a related per- 
son to Shackleford Coal Com- 
pany, Inc. (signed by Senior 
Judge Glen M. Williams) (lb) 

11/18/98 – – Case closed (lb) 

3 

_________________________________________________ 

DOCKET 
DATE NUMBER DOCKET ENTRIES 

_________________________________________________ 

12/3/98 36 MOTION for Reconsideration 
of [35-1] order dft ordered to 
Withdraw the assignments 
challenged by pltf Jericol in this 
case and notify Trustees of 
the UMWA Combined Benefit 
Fund that such assignments 
have been withdrawn. Dft en- 
joined from assigning additional 
retirees of Shackleford Coal 
Company, Inc. to pltf Jericol on 
basis that pltf is a related 
person to Shackleford Coal 
Company, Inc. by Commis- 
sioner, SS (lb) [Entry date 
12/08/98] 

12/18/98 39 
ORDER denying [36-1] motion 

for Reconsideration of [35-1] 
order dft ordered to Withdraw 
the assignments challenged by 
pltf Jericol in this case and 
notify Trustees of the UMWA 
Combined Benefit Fund that 
such assignments have been 
withdrawn. Dft enjoined from 
assigning additional retirees of 
Shackleford Coal Company, Inc. 

4 

_________________________________________________ 

DOCKET 
DATE NUMBER DOCKET ENTRIES 

_________________________________________________ 

to pltf Jericol on basis that pltf 
is a related person to Shackle- 
ford Coal Company, Inc. (signed 
by Senior Judge Glen M. 
Williams) (lh) [Entry date 
12/21/98] 

1/6/99 40 MOTION to Stay portion of 
12/21/98 order requiring dft 
to withdraw assignments chal- 
lenged by Jerricol [sic] and 
notify Trustee of UMWA and 
Jericol w/10 days that such 
assignments have been with- 
drawn by Commissioner, SS (lb) 
[Entry date 01/08/99] 

1/21/99 42 ORDER granting [40-1] motion 
to Stay portion of 12/21/98 order 
requiring dft to withdraw as- 
signments challenged by Jerri- 
col [sic] and notify Trustee of 
UMWA and Jericol w/10 days 
that such assignments have 
been withdrawn (signed by 
Senior Judge Glen M. Williams) 
(ls) 

2/12/99 43 

NOTICE OF APPEAL by Com- 
missioner, SS. Order appealed: 
12/18/98 Order by Judge 
Williams) (lmh) 

5 

UNITED STATES COURT OF APPEALS 
FOR THE FOURTH CIRCUIT 

Court of Appeals Docket #: 99-1219 

[Filed: February 22, 1999] 

GENERAL DOCKET ENTRIES 

_________________________________________________ 

DATE PROCEEDINGS_________________________________________________ 

10/26/99 Oral argument heard. Courtroom 

Deputy: jph/cpg. [99-1219] (cpg) 

8/29/00 Published, authored opinion filed. 
[99-1219] (db) 

8/29/00 Judgment order filed. Decision: affirmed. 

EOD Date: 8/29/00. [99-1219] (db) 

10/13/00 Petition filed by Appellant Apfel, Com- 
missioner for rehearing. Number copies 
filed: 20 [3268741-1]., for rehearing en 
banc. Number of copies filed: 20 
[3268741-2] [99-1219] (db) 

10/16/00 Response/answer requested to motion for 
rehearing [3268741-1], motion for re- 
hearing en banc [3268741-2] [99-1219] (db) 

6 

_________________________________________________ 

DATE PROCEEDINGS_________________________________________________ 

11/15/00 COURT ORDER filed denying motion 
for rehearing [3268741-1] EOD Date: 
11/15/00., denying motion for rehearing en 
banc [3268741-2] EOD Date: 11/15/00. 
Copies to all counsel. [99-1219] (db) 

11/27/00 Mandate issued. [99-1219] (db) 

4/26/01 Supreme Court order received granting 
petition certiorari [3337752-1] on 04/23/01. 
[99-1219] (dhb) 

7 

IN THE UNITED STATES DISTRICT COURT 
FOR THE WESTERN DISTRICT OF VIRGINIA 

Big Stone Gap Division 

Civil Case No. 96-CV-148-B 

SIGMON COAL COMPANY, INC. & JERICOL MINING, INC., 
PLAINTIFFS 

v. 

SHIRLEY S. CHATER 
COMMISSIONER, SOCIAL SECURITY, ADMINISTRATION, 
DEFENDANT 

COMPLAINT 

Plaintiffs, Sigmon Coal Company, Inc. and Jericol 
Mining, Inc., seek clarification of their obligations under 
the Coal Industry Retiree Health Benefit Act of 1992, 
26 U.S.C. §§ 9701 et seq. (the “Coal Act”), and request 
that this Court vacate certain beneficiary assignments 
the Commissioner of Social Security made to Plaintiffs 
pursuant to the Coal Act. 

I. THE PARTIES 

1. Plaintiff, Sigmon Coal Company, Inc. (“Sigmon”), 
is incorporated in the Commonwealth of Virginia and 
has its principal place of business in Keokee, Virginia. 
Sigmon currently conducts mining operations in Lee 
County, Virginia. 

8 

2. Plaintiff, Jericol Mining, Inc. (“Jericol”), is incor- 
porated in Kentucky, and has its principal place of 
business in Harlan County, Kentucky. 

3. Defendant, Shirley S. Chater, is the Commissioner 
of Social Security (“Commissioner”). The Social 
Security Administration (“SSA”) administers and en- 
forces various federal programs and performs other 
functions throughout the United States, including loca- 
tions in the Commonwealth of Virginia within the juris- 
diction of this Court. The Commissioner is responsible 
under the Coal Act for assigning beneficiaries in the 
United Mine Workers of America Combined Benefit 
Fund (“Combined Fund”) to responsible operators. The 
Commissioner has delegated to various SSA Service 
Centers certain of her duties under the Act. 

II. JURISDICTION AND VENUE 

4. This Court has jurisdiction over the subject 
matter of this action under 28 U.S.C. §§ 1331 and 2201, 
26 U.S.C. §§ 9706(f) and 9721, and 5 U.S.C. §§ 701-706. 

5. Venue is proper in this district under 28 U.S.C. 
§ 1391(e) in that Plaintiff Sigmon resides in and is 
conducting business in this judicial district. 

III. THE COAL ACT 

6. Section 9706 of the Coal Act requires the Com- 
missioner to assign each Combined Fund beneficiary to 
a signatory coal operator (“assigned operator”). 

9 

7. Section 9704 of the Act requires that assigned 
operators pay an annual per-beneficiary health and 
death benefit premium to the Combined Fund. 

8. Section 9704(a) of the Act provides that any 
related person to an assigned operator shall be jointly 
and severally liable for any premium required to be 
paid by the assigned operator. Thus, with respect to 
obligations imposed by the Coal Act, a related person is 
the same as an assigned operator. 

IV. BACKGROUND FACTS 

9. By letters dated September 28 and October 7, 
1993, the Commissioner assigned 20 Combined Fund 
beneficiaries to Jericol. 

10. None of these beneficiaries ever worked for 
Jericol or for Sigmon. On information and belief, the 
signatory operator that actually employed these retired 
UMWA miners was Shackleford Coal Company, EIN 
61-0606844 (“Shackleford”). On information and belief, 
SSA assigned these individuals (“the Shackleford re- 
tirees”) to Jericol because the Commissioner decided 
that Jericol is a successor in interest to Shackleford 
within the meaning of Section 9701(c)(2)(A) of the Coal 
Act. 

11. Pursuant to section 9706(f) of the Act, by letters 
dated June 9, 1994, Jericol requested the Commissioner 
to reconsider her decision that Jericol is a successor in 
interest to Shackleford. 

12. By letters dated August 30 and September 8, 
1994, the Commissioner rejected Jericol’s request for 
reconsideration and informed the Company that her 

10 

assignment of the Shackleford retirees would not be 
withdrawn. 

13. By letters dated June 30 and September 20, 1995 
the Commissioner assigned 109 additional Shackleford 
retirees to Jericol. As with the initial assignments, 
these beneficiaries were assigned to Jericol on the basis 
that Jericol is a successor in interest to Shackleford. 

14. In May 1996, the Combined Fund filed suit 
against Sigmon and Jericol in the United States District 
Court for the District of Columbia to collect premiums 
allegedly owed with respect to the Shackleford retirees. 
The Combined Fund alleged that Jericol and Sigmon 
are jointly and severally liable for the Shackleford re- 
tirees’ premiums because they are “related persons” 
under the Coal Act. 

V. CAUSES OF ACTION 

First Count: Request for Declaratory Judgment 

15. Paragraphs 1 through 14 above are incorporated 
by reference. 

16. Section 9701(c)(2)(A) of the Coal Act provides 
that a successor in interest to a signatory operator is a 
“related person” to the signatory. The term “successor 
in interest” is not defined in the Coal Act. 

17. The Coal Act is codified in the Internal Revenue 
Code (“IRC”). As a matter of law, the IRC definition of 
successor in interest is controlling for purposes of 
section 9701(c)(2)(A) of the Coal Act. 

18. A “successor in interest” is defined at 26 C. F. R. 
§ 1.1503-2(c)(12) as an acquiring corporation that suc- 
ceeds to the tax attributes of the acquired corporation. 

11 

19. Jericol purchased certain Shackleford assets in 
1973 for fair market value. However, Jericol did not 
accept or assume responsibility or liability for any per- 
son employed by Shackleford, and did not succeed to 
Shackleford’s tax attributes. Sigmon has never had any 
connection to Shackleford. 

20. Neither Sigmon nor Jericol is a successor in 
interest to Shackleford under the IRC, as amended by 
Section 9701(c)(2)(A) of the Coal Act. Therefore, 
neither Plaintiff is a related person to Shackleford. 

21. The Commissioner’s assignment of Shackleford’s 
retirees to Plaintiffs must be vacated because it ex- 
ceeds her authority under the Coal Act and is errone- 
ous as a matter of law. 

Second Count: Review of Agency Action 

22. Paragraphs 1 through 21 are hereby incorpo- 
rated by reference. 

23. The Commissioner’s September and October 
1993 assignment of Shackleford’s retirees to Jericol on 
the basis that Jericol is a successor in interest to 
Shackleford was erroneous. 

24. The Commissioner’s September 30 and August 8, 
1995 rejection of Jericol’s June 9, 1994 request for 
reconsideration of the 1993 assignments was arbitrary 
and capricious and must be reversed because it violates 
the Administrative Procedure Act. 

VI. PRAYER FOR RELIEF 

WHEREFORE, Plaintiffs pray for the following 
relief: 

12 

1. A declaration that neither Jericol nor Sigmon is a 
successor in interest to Shackleford within the meaning 
of 26 U.S.C. § 9701(c)(2)(A) . 

2. An Order which directs the Commissioner to (i) 
withdraw the assignment of Shackleford’s retirees to 
Jericol, and (ii) inform the Combined Fund that such 
assignments have been withdrawn. 

3. An Order which enjoins the Commissioner from 
assigning any Shackleford retirees to Plaintiffs in the 
future. 

4. Such other and further relief as this Court deems 
proper and just. 

Respectfully submitted, 

JOHN R. WOODRUM____________ 

JOHN R. WOODRUM 
W. GREGORY MOTT 

SMITH, HEENAN & ALTHEN 

1110 Vermont Ave., N.W. 
Suite 400 
Washington, D.C. 20005 
(202) 887-0800 

H. RONNIE MONTGOMERY_____ 

H. RONNIE MONTGOMERY 

MONTGOMERY LAW OFFICE 

Highway 58 West 
Jonesville Corporate Limits 
Post Office Box 366 
Jonesville, VA 24263-0366 
(540) 346-2006 

COUNSEL FOR PLAINTIFFS 

13 

IN THE UNITED STATES DISTRICT COURT 
FOR THE WESTERN DISTRICT OF VIRGINIA 

Big Stone Gap Division 

Civil Case No. 96 CV148-B 

SIGMON COAL COMPANY, INC. & JERICOL MINING, INC., 
PLAINTIFFS 

v. 

KENNETH S. APFEL, COMMISSIONER, 
SOCIAL SECURITY ADMINISTRATION, 

DEFENDANT 

SUPPLEMENTAL COMPLAINT 

Leave having been granted, Plaintiffs, Sigmon Coal 
Company, Inc. and Jericol Mining, Inc., file this 
Supplemental Complaint and show: 

1. Paragraphs 1 through 24 of Plaintiffs’ first 
Complaint, filed June 25, 1996, are hereby incorporated 
by reference. 

2. Subsequent to the time when Plaintiffs’ first 
Complaint was filed the U.S. Supreme Court issued its 
decision in Eastern Enterprises v . Apfel, No. 97-42 
(U.S. June 25, 1998). The Eastern decision declared 
§ 9706(a)(3) of the Coal Industry Retiree Health Bene- 
fits Act of 1992 (“Coal Act”), 26 U.S.C. §§ 9701-9722 
unconstitutional as applied to Eastern (the assigned 
operator) in that case. 

14 

3. The Supreme Court found that § 9706(a)(3) was 
unconstitutional as applied to Eastern because it sought 
to impose liability on Eastern for miners Eastern em- 
ployed long before 1974. 

4. The assignments at issue in this case impose 
retroactive liability on Jericol under facts even more 
extreme than those present in Eastern, because the 
miners in question did not even work for Jericol. 

VI. PRAYER FOR RELIEF 

WHEREFORE, Plaintiffs pray for the following 
supplemental relief: 

1. Paragraphs 1 through 4 of Plaintiffs’ Prayer For 
Relief in the first Complaint, filed June 25, 1996, are 
hereby incorporated by reference. 

2. A declaration that, based on the finding of the 
U.S. Supreme Court in Eastern, § 9706(a)(3) of the Coal 
Act is unconstitutional as applies to Jericol and Sigmon 
and the facts of the instant case. 

3. Such other and further relief as this Court deems 
proper and just. 

Respectfully submitted, 

JOHN R. WOODRUM______ 

JOHN R. WOODRUM 
W. GREGORY MOTT 

SMITH, HEENAN & ALTHEN 

1110 Vermont Ave., N.W. 
Suite 400 
Washington, D.C. 20006 
(202) 887-0800 

15 

H. RONNIE MONTGOMERY 
Virginia Bar # 03691 

MONTGOMERY LAW OFFICE 

Highway 58 West 
Jonesville Corporate Limits 
Post Office Box 366 
Jonesville, VA 24263-0366 
(540) 346-2006 

COUNSEL FOR PLAINTIFFS 

July 2, 1998 

16 

CONSENT OF STOCKHOLDERS OF SHACKLEFORD 

COAL COMPANY, INC. 

The undersigned, being the owners of all of the 
outstanding capital stock of Shackleford Coal Company, 
Inc., a Kentucky corporation, with its principal office 
and place of business at Crummies, Harlan County, 
Kentucky, do hereby consent to the following actions on 
behalf of the corporation and of its officers, to-wit: 

(1) For Shackleford Coal Company, Inc., to enter into 
that certain Plan and Agreement for Purchase of 
Assets, dated the 31st day of May, 1973, by and be- 
tween Shackleford Coal Company, Irdell Mining, Inc., 
and The Dale Company, concerning the sale of the coal 
mining operation and the coal leases of Shackleford 
Coal Company, Inc., to Irdell Mining, Inc., and to The 
Dale Company, and hereby consent for its approval by 
the Board of Directors, and the authorization of the 
Board of Directors; for the President and Secretary of 
the Corporation to execute said Plan and Agreement 
for Purchase of Assets on behalf of Shackleford Coal 
Company, Inc., and to execute all documents necessary 
to carry out the obligations of Shackleford Coal 
Company, Inc., under said agreement. 

(2) To permit Irdell Mining, Inc., to use the name of 
Shackleford Coal Company or Shackleford Coal Com- 
pany, Inc., and for the President and Secretary of 
Shackleford Coal Company, Inc., to sign and deliver to 
Irdell Mining, Inc., consent authorizing such use. 

(3) To the amendment of Article I of the Articles of 
Incorporation of Shackleford Coal Company, Inc., so as 
to change the name of the corporation from Shackleford 
Coal Company, Inc., to Kelley & Associates, Inc. 

17 

WITNESS OUR HANDS as of the 30th day of May, 1973. 

HENRY SHACKLEFORD ESTATE 

By RAYMOND COLE__________________ 

RAYMOND COLE 
Co-Executor 

BYRD SHACKLEFORD____________ 

Co-Executor 

SAM SHACKLEFORD_____________ 

Co-Executor 

BYRD SHACKLEFORD____________ 

BYRD SHACKLEFORD 
Co-Executor 

SAM SHACKLEFORD_____________ 

SAM SHACKLEFORD 

JAMES E. KELLEY_______________ 

JAMES E. KELLEY 

REBA KATHRYN COLE ___________ 
REBA KATHRYN COLE 

EVLA SHACKLEFORD____________ 

EVLA SHACKLEFORD 

18 

BILL OF SALE 

For value received, Shackleford Coal Company here- 
by transfers and sells to Irdell Mining, Inc. all rights, 
title and interest in and to the following assets owned 
by it: 

(1) The leasehold improvements, machinery and 
equipment, trucks and automobiles and office equip- 
ment listed and described on Exhibit A attached 
hereto; 

(2) The entire inventory of coal of Shackleford Coal 
Company as of the close of business on May 31, 1973; 
and 

(3) All supplies of Shackleford Coal Company as of 
the close of business on May 31, 1973. 

Dated this 1st day of June, 1973. 

Attest: SHACKLEFORD COAL COMPANY 

JAMES E. KELLEY 

By BYRD L. SHACKLEFORD 

Secretary President 

COMMONWEALTH OF KENTUCKY 

) 

) SS: 

COUNTY OF HARLAN 
) 

I, the undersigned, a Notary Public in and for the 
County and State above written, do hereby certify that 
the foregoing Bill of Sale was this day signed and 
acknowledged before me by the President and Secre- 
tary of Shackleford Coal Company as being executed by 
them for and on behalf of said corporation. 

19 

In Testimony Whereof, I have hereunto subscribed 
my name and affixed my notarial seal on the day and 
year last aforesaid. 

RAYMOND COLE 

My Comm. Expires 9-10-76 
Notary Public 

Receipt of this Bill of Sale from Shackleford Coal 
Company by Irdell Mining, Inc. is hereby acknowledged 
this 1st day of June, 1973. 

IRDELL MINING, INC. 

By JAMES A. SIGMON 

President 

20 

PLAN AND AGREEMENT FOR PURCHASE OF ASSETS 

THIS PLAN AND AGREEMENT FOR PURCHASE 
OF ASSETS (hereinafter referred to as “this Agree- 
ment”) is entered into this 31st day of May, 1973, by 
and between SHACKLEFORD COAL COMPANY 

(hereinafter referred to as “Shackleford”), IRDELL 
MINING, INC. (hereinafter referred to as “Irdell”) and 

THE DALE COMPANY (hereinafter referred to as 
“Dale”); 

WIT N ES S ET H : 

WHEREAS, the officers and Board of Directors of 
Shackleford have determined that it is desirable that 
Shackleford sell certain assets owned by it to Irdell and 
Dale upon the terms and conditions herein set forth; 
and 

WHEREAS, the officers and Board of Directors of 
Irdell and the partners of Dale have determined that it 
is desirable that they purchase these assets of 
Shackleford upon the terms and conditions herein set 
forth; 

NOW, THEREFORE, in order to consummate the 
transactions set forth herein and in consideration of the 
mutual covenants, agreements, representations and 
warranties hereinafter contained, the parties hereto 
agree as follows: 

21 

ARTICLE I 

THE PARTIES TO THIS AGREEMENT 

Section 1.01. Shackleford. Shackleford is a Kentucky 
corporation engaged in the business of mining, pro- 
cessing and selling coal. 

Section 1.02. Irdell. Irdell is a corporation organized 
under the laws of the Commonwealth of Kentucky. It is 
authorized to engage in the business of mining, pro- 
cessing and selling coal. 

Section 1.03. Dale. Dale is a Kentucky partnership 
organized for the purpose of acquiring leases of coal 
properties and subleasing such properties to companies 
engaged in the coal mining business. 

ARTICLE II 

SALE AND TRANSFER OF ASSETS 

Section 2.01. 

Sale of Operating Assets by 

Shackleford. 

(A) At the closing, Shackleford shall sell, convey, 
grant, assign, transfer and deliver to Irdell and Irdell 
shall purchase, accept and receive from Shackleford all 
leasehold improvements, machinery and equipment, 
trucks and automobiles and office equipment, all as 
listed and described on Exhibit A attached hereto and 
used or held by it for use in the production and mining 
of coal. 

(B) The purchase price for the assets set forth on 
Exhibit A attached hereto shall be the book value 

22 

thereof as of the date of closing. This amount shall be 
paid in cash by Irdell to Shackleford at the closing. 

Section 2.02. Sale of Coal Inventory by Shackleford. 

(A) At the closing, Shackleford shall sell, convey, 
grant, assign, transfer and deliver to Irdell and Irdell 
shall purchase, accept and receive from Shackleford the 
coal inventory of Shackleford (exclusive of any coal 
already loaded in railroad cars) as of the date of closing. 

(B) The purchase price for this coal inventory shall 
be such amount as is determined by multiplying the 
coal inventory at the date of closing by $7.50 per ton. 
This amount shall be paid in cash by Irdell to Shackle- 
ford at the closing. 

Section 2.03. Sale of Supplies by Shackleford. 

(A) At the closing, Shackleford shall sell, convey, 
grant, assign, transfer and deliver to Irdell and Irdell 
shall purchase, accept and receive from Shackleford all 
supplies of Shackleford as of the date of closing. 

(B) The purchase price for such supplies shall be the 
cost thereof to Shackleford as of the date of closing. 
This amount shall be paid in cash by Irdell to Shackle- 
ford at the closing. 

Section 2.04. Transfer of Leases, Contracts and 

Commitments. 

(A) At the closing, Shackleford shall transfer to 
Irdell all its rights under the leases set forth on Exhibit 
B attached hereto, plus any additional leases entered 
into by it between the date hereof and the date of 
closing in the ordinary course of business or as to which 

23 

Irdell has consented in writing. Irdell shall correspond- 
ingly assume all the obligations and responsibilities of 
Shackleford under such leases. 

(B) At the closing, Shackleford shall likewise trans- 
fer to Irdell all its rights under the contracts and com- 
mitments (including its employee reserve account and 
rate for Kentucky Unemployment Insurance purposes) 
set forth on Exhibit C attached hereto, plus any 
additional contracts and commitments entered into by 
it between the date hereof and the date of closing in the 
ordinary course of business or as to which Irdell has 
consented in writing. Irdell shall correspondingly as- 
sume all the obligations and responsibilities of Shackle- 
ford under such contracts and commitments. 

Section 2.05. 

Sale of Leases and Subleases by 

Shackleford. 

(A) At the closing, Shackleford shall sell, convey, 
grant, assign, transfer and deliver to Dale and Dale 
shall purchase, accept and receive from Shackleford all 
its right, title and interest in and to the leases and sub- 
leases set forth on Exhibit D attached hereto. At the 
closing, Dale shall assume all the obligations and re- 
sponsibilities of Shackleford under these leases and 
subleases and shall agree to indemnify and hold 
Shackleford harmless in connection with any liability in 
connection therewith. 

(B) The purchase price for the leases and subleases 
set forth on Exhibit D attached hereto shall be Three 
Million Five Thousand Six Hundred Eighty-Three 
Dollars ($3,005,683.00), less the amount of Thirty 
Thousand Dollars ($30,000.00) per month from January 
1, 1973 to the date of closing and also less the amounts 

24 

received by Shackleford under the provisions of Sub- 
paragraph (B) of Section 2.01, Subparagraph (B) of 
Section 2.02 and Subparagraph (B) of Section 2.03. This 
amount shall be paid in cash by Dale to Shackleford at 
the closing. 

Section 2.06. 

Capital Expenditures by Shackleford. 

It is recognized by the parties hereto that, between 
January 1, 1973 and the closing, Shackleford may be 
required to make various capital expenditures. As to 
any such capital expenditures which are approved in 
writing by Irdell, Shackleford shall be entitled to 
reimbursement for its cost of all such assets by Irdell at 
the closing (other than the purchase of equipment from 
Glenbrook Equipment Company) and ownership of all 
such capital assets (including the equipment acquired 
by Shackleford from Glenbrook Equipment Company) 
shall be transferred by Shackleford to Irdell at the 
closing. 

Section 2.07. Proration of Expenses. As to any 
expenses paid by Shackleford, a portion of which is 
attributable to the operation of Irdell or Dale and 
inures to their benefit, the cost thereof shall be 
prorated as of the date of closing. As to any expenses 
paid by Irdell or Dale and attributable to operations of 
Shackleford and inured to its benefit, the cost thereof 
shall be prorated as of the date of closing. 

25 

ARTICLE III 

REPRESENTATIONS AND WARRANTIES OF 
SHACKLEFORD 

Shackleford jointly and severally represents, war- 
rants and covenants as follows: 

Section 3.01. Organization and Standing. Shackleford 
is duly organized, validly existing and in good standing 
under the laws of the Commonwealth of Kentucky. It 
has full power and lawful authority to carry on the 
business of mining, processing and selling coal, in which 
it is now engaged. Shackleford has full power and 
authority to execute and carry out the terms of this 
Agreement. 

Section 3.02. Approval of Plan. The Board of Di- 
rectors of Shackleford has approved this Agreement 
and has called a special meeting of its shareholders to 
be held on May 30, 1973, for the purpose of adopting 
this Agreement in accordance with the governing in- 
struments of Shackleford and the laws of the Common- 
wealth of Kentucky. 

Section 3.03. Title to Properties. Shackleford has 
good and marketable title to all of the personal prop- 
erty and assets reflected on Exhibit A attached hereto. 
There will be no liens or encumbrances (whether by 
mortgage, pledge, lien, conditional sales contract or 
otherwise) against such properties and assets on the 
date of closing. 

26 

Section 3.04. Leases. 

(A) Exhibit D attached hereto lists all the leases and 
subleases pursuant to which real property located in 
Harlan County, Kentucky, is held under lease by 
Shackleford. All of these leases and subleases are valid 
and subsisting and in full force and effect. Shackleford 
is not in default under any of these leases or subleases. 

(B) The leases and subleases set forth on Exhibit D 
cover 3,166 acres of property, more or less, in Harlan 
County, Kentucky, and permit the mining to exhaustion 
of the coal in the seams shown on Exhibit D underlying 
the properties covered by these various leases and 
subleases. 

(C) Exhibit B attached hereto lists all the leases 
pursuant to which personal property is held under lease 
by Shackleford. All of these leases are valid and sub- 
sisting and in full force and effect. Shackleford is not in 
default under any of these leases. 

Section 3.05. Contracts and Commitments. Exhibit 
C attached hereto lists all the contracts, agreements 
and commitments to which Shackleford is a party. All 
of these contracts, agreements and commitments are 
valid and subsisting and in full force and effect. 
Shackleford is not in default under any of these 
contracts, agreements or commitments. 

Section 3.06. Labor Contract. Shackleford has a 
union contract with the United Mine Workers. A copy 
of this union contract is attached hereto as Exhibit E. 
This contract is valid and subsisting and in full force 
and effect. Shackleford is not in default under this 
union contract. 

27 

Section 3.07 Salaries. Exhibit F attached hereto 
lists the names, positions and current salary rates of all 
non-union officers and other employees of Shackleford. 
Exhibit F also sets forth the bonus, additional compen- 
sation and other like benefit arrangements which 
Shackleford has with any such officers and employees. 

Section 3.08. Employee Benefit Plans. Except as 
set forth on Exhibit G hereto and under its United 
Mine Workers labor contract, Shackleford does not 
have any pension, profit-sharing, retirement, insurance, 
incentive, deferred compensation, bonus or other 
employee benefit plans. 

Section 3.09. Litigation. Except as set forth on 
Exhibit H hereto, there is no litigation, investigation or 
proceeding pending or threatened involving Shackle- 
ford. 

Section 3.10. Insurance. Shackleford has and, upon 
the date of closing, will continue to have in effect the 
insurance coverage set forth on Exhibit I attached 
hereto. This insurance protection is adequate in 
amounts, types and risks insured against in accordance 
with normal trade practices in similar businesses. 

Section 3.11. Financial Statements. Attached here- 
to as Exhibit J is an unaudited management balance 
sheet of Shackleford as of September 30, 1972 and an 
unaudited management statement of income for the 
year ended September 30, 1972. Attached hereto as 
Exhibit K is an unaudited management balance sheet of 
Shackleford as of December 31, 1972 and an unaudited 
management statement of income for the three-month 
period ended December 31, 1972. Such balance sheets 
and the statements of income have been prepared in 

28 

substantial conformity with generally accepted account- 
ing principles applied on a consistent basis. Such 
balance sheets and the statements of income fairly pre- 
sent the financial position of Shackleford at September 
30, 1972 and December 31, 1972 and the results of its 
operations for the periods then ending. 

Section 3.12. 

Absence of Changes. 

(A) Except as specifically set forth on Exhibit L 
attached hereto, there have been and will be no mate- 
rial changes in the financial condition, assets, liabilities 
or business of Shackleford from September 30, 1972 to 
the date of closing, other than changes in the ordinary 
course of business, none of which have been or will be 
materially adverse. 

(B) Since September 30, 1972, Shackleford has not 
entered into any transaction or incurred any liabilities 
not in the ordinary course of business. 

Section 3.13. 

Compliance with Laws. Shackleford is 

in substantial compliance with all applicable laws, regu- 
lations and administrative orders of the United States, 
the Commonwealth of Kentucky and every subdivision 
of the Commonwealth of Kentucky to which it is subject 
and, on the date of closing, will be in compliance with all 
such laws (but exclusive of any Bulk Sales Act or 
similar statute). 

Section 3.14. 

Execution and Performance of Agree- 

ment. The execution and performance of the terms of 
this Agreement and the transactions contemplated 
thereby by Shackleford will not violate the provisions of 
any law, contract, agreement or instrument by which 
Shackleford is bound. 

29 

ARTICLE IV 

REPRESENTATIONS AND WARRANTIES OF IRDELL 

Irdell represents, warrants and covenants as follows: 

Section 4.01. Organization and Standing. Irdell is 
duly organized, validly existing and in good standing 
under the laws of the Commonwealth of Kentucky. It 
has full power and lawful authority to carry on the 
business of mining, processing and selling coal. Irdell 
has full power and authority to execute and carry out 
the terms of this Agreement. 

Section 4.02. Approval of this Agreement. The 
Board of Directors of Irdell has approved this Agree- 
ment. 

Section 4.03. Execution and Performance of Agree- 
ment. The execution and performance of the terms of 
this Agreement and the transactions contemplated 
thereby by Irdell will not violate any provision of any 
law (including the applicable laws of the Common- 
wealth of Kentucky), contract, agreement or instru- 
ment by which Irdell is bound. 

ARTICLE V 

REPRESENTATIONS AND WARRANTIES OF DALE 

Dale represents, warrants and covenants as follows: 

Section 5.01. Organization and Standing. Dale is a 
duly organized and validly existing Kentucky part- 
nership. It has full power and lawful authority to 
acquire leases of coal property and sublease such prop- 

30 

erties to companies engaged in the coal mining 
business. 

Section 5.02. Approval of this Agreement. The 
partners of Dale have approved the execution of this 
agreement. 

Section 5.03. 

Execution and Performance of Agree- 

ment. The execution and performance of the terms of 
this Agreement and the transactions contemplated 
thereby by Dale will not violate any provisions of any 
law (including the applicable laws of the Common- 
wealth of Kentucky), contract, agreement or instru- 
ment by which Dale is bound. 

ARTICLE VI 

CONDUCT OF BUSINESS PENDING CLOSING 

Section 6.01. Conduct of Business of Shackleford. 
Except as otherwise agreed to in writing by Irdell and 
Dale, Shackleford covenants and agrees that, from the 
date hereof to the date of closing: 

(A) The business of Shackleford will be conducted in 
the usual manner in which it has been conducted; 

(B) No increases will be made in the compensation 
payable by Shackleford to any of its employees; 

31 

(C) No contract or other commitment will be entered 
into by or on behalf of Shackleford, except any contract 
or commitment entered into in the ordinary course of 
business and involving less than Ten Thousand Dollars 
(10,000.00); 

(D) No sale, transfer or other disposition and no 
mortgage, pledge or other encumbrance of any asset 
will be made or entered into by or on behalf of Shackle- 
ford; and 

(E) Shackleford will use its best efforts to preserve 
its business and keep its business organization intact; 
attempt to keep available to Shackleford the services of 
its present employees and agents; and preserve for 
Shackleford the goodwill of its customers, suppliers and 
others having business relations with it. 

Section 6.02. Access and Information. Shackleford 
will cause Irdell and Dale, their counsel, accountants 
and other representatives, to have full access, during 
normal business hours, throughout the period prior to 
the date of closing, to all the books, leases, contracts, 
commitments, minutes and records of Shackleford and 
shall cause to be furnished to Irdell and Dale and their 
representatives during such period all such information 
concerning the affairs of Shackleford as Irdell and Dale 
and their representatives may reasonably request. 

32 

ARTICLE VII 

CONDITIONS PRECEDENT TO THE OBLIGATIONS 
OF IRDELL AND DALE 

All obligations of Irdell and Dale under this Agree- 
ment shall be subject to the fulfillment, prior to the 
date of closing, of each of the following conditions, 
except to the extent any such conditions are expressly 
waived in writing by Irdell and Dale prior to the date of 
closing: 

Section 7.01. Accuracy of Representations and 
Warranties. All of the representations and warranties 
made by Shackleford shall be true as of the date of this 
Agreement and shall likewise be true in all material 
respects as of the date of closing. Shackleford shall also 
have furnished to Irdell and Dale a duly authorized 
certificate signed on its behalf by its President and 
Secretary and dated as of the date preceding the date of 
closing which shall certify to the truth of all such 
representations and warranties. 

Section 7.02. Opinion of Counsel. Shackleford shall 
have furnished to Irdell and Dale an opinion or opinions 
of Messrs. Greene & Forester, Harlan, Kentucky, 
counsel for Shackleford, in form and substance satis- 
factory to Irdell and Dale, dated as of the date pre- 
ceding the date of closing, to the effect that: 

(A) Shackleford is duly organized, validly existing 
and in good standing under the laws of the Common- 
wealth of Kentucky; has corporate powers sufficient to 
carry on its business as presently conducted; and has 

33 

corporate power to enter into and carry out the terms 
of this Agreement; 

(B) The execution, delivery and performance of the 
terms of this Agreement by Shackleford have been 
authorized and approved by all requisite action of its 
Board of Directors; this Agreement has been duly 
adopted by the stockholders of Shackleford; this 
Agreement has been duly executed and delivered by 
Shackleford; and, assuming proper execution and de- 
livery by Irdell and Dale, this Agreement constitutes a 
valid and binding obligation of Shackleford in accor- 
dance with its terms; 

(C) This Agreement complies with the requirements 
of the laws of the Commonwealth of Kentucky for the 
sale of the assets covered by this Agreement (but not 
including any Bulk Sales Act or similar statute); 

(D) That, upon the sale becoming effective, the 
property and assets of Shackleford covered by this 
Agreement will become the property of Irdell or Dale 
as provided for herein; 

(E) There are no liens or encumbrances of record 
upon any real or personal property of Shackleford; and 

(F) Counsel does not know of any material litigation, 
proceeding or governmental investigation pending or 
threatened against or relating to Shackleford, its pro- 
perties, its business or the transactions contemplated 
by this Agreement or of any contract, agreement or 
instrument by which Shackleford is bound which would 
be violated by the execution and performance of this 
Agreement. 

34 

Section 7.03. Additional Documents. Shackleford 
shall have furnished Irdell and Dale with the following: 

(A) The Employment Agreements attached hereto 
as Exhibits M, N, O, P and Q, signed respectively by 
Raymond E. Cole, James E. Kelley, Sam A. Shackle- 
ford, Douglas B. Shackleford and Thomas Shackleford; 

(B) The Agreement Not to Compete attached hereto 
as Exhibit R signed by Byrd L. Shackleford; 

(C) A title opinion of Messrs. Green & Forester, 
Harlan, Kentucky, counsel for Shackleford, or other 
counsel acceptable to Dale, covering the coal leases 
owned by Shackleford sufficient to enable Dale to 
obtain title insurance covering such leases at customary 
premium rates; 

(D) A properly executed Consent for Irdell to use 
the corporate name “Shackleford Coal Company” and a 
properly executed Amendment to the Articles of Incor- 
poration of Shackleford changing its corporate name to 
Kelley & Associates, Inc.; 

(E) A certified copy of resolutions duly adopted by 
the Board of Directors of Shackleford approving this 
Agreement, authorizing its execution and delivery and 
approving the transactions contemplated hereby; 

(F) A certified copy of resolutions duly adopted by 
the holders of all the outstanding stock of Shackleford 
adopting this Agreement; and 

(G) Such other documents as may be reasonably 
required by Irdell and Dale and their counsel to perfect 
the consummation of the transactions hereunder duly 
executed by Shackleford. 

35 

ARTICLE VIII 

CONDITIONS PRECEDENT TO THE OBLIGATIONS 
OF SHACKLEFORD 

All obligations of Shackleford under this Agreement 
shall be subject to the fulfillment, prior to the date of 
closing, of each of the following conditions, except to the 
extent any such conditions are expressly waived in 
writing by Shackleford prior to the date of closing: 

Section 8.01. Accuracy of Representations and 
Warranties. All of the representations and warranties 
made by Irdell and Dale shall be true as of the date of 
this Agreement and shall likewise be true in all 
material respects as of the date of closing. Irdell and 
Dale shall also have furnished to Shackleford a duly 
authorized certificate signed, on behalf of the cor- 
poration, by the President of Irdell and dated as of the 
date preceding the date of closing and Dale shall have 
furnished to Shackleford a duly authorized certificate 
signed, on behalf of the partnership, by a General 
Partner of Dale and dated as of the date preceding the 
date of closing, both of which shall certify to the truth of 
all such representations and warranties. 

Section 8.02. Opinion of Counsel. Irdell shall have 
furnished to Shackleford an opinion or opinions of 
Messrs. Dinsmore, Shohl, Coates & Deupree, Cin- 
cinnati, Ohio, counsel for Irdell, or other counsel accept- 
able to Shackleford, in form and substance satisfactory 
to Shackleford, dated as of the date preceding the date 
of closing, to the effect that: 

(A) Irdell is duly organized, validly existing and in 
good standing under the laws of the Commonwealth of 

36 

Kentucky and has corporate powers sufficient to carry 
on its business as presently conducted; 

(B) The execution, delivery and performance of the 
terms of this Agreement by Irdell have been authorized 
and approved by all requisite action of the Board of 
Directors of Irdell; and, assuming proper execution and 
delivery by Shackleford, this Agreement constitutes a 
valid and binding obligation of Irdell in accordance with 
its terms; and 

(C) Irdell has complied with any requirements of the 
laws of the Commonwealth of Kentucky for the 
acquisition by it of the assets of Shackleford covered by 
this Agreement and the performance of the provisions 
of this Agreement will not violate any laws of the 
Commonwealth of Kentucky. 

Section 8.03. Opinion of Counsel. Dale shall have 
furnished to Shackleford an opinion or opinions of 
Messrs. Dinsmore, Shohl, Coates & Deupree, Cin- 
cinnati, Ohio, counsel for Dale, or other counsel ac- 
ceptable to Shackleford, in form and substance satis- 
factory to Shackleford, dated as of the date preceding 
the date of closing, to the effect that: 

(A) Dale is a duly organized and validly existing 
Kentucky partnership and has power sufficient to carry 
on its business of leasing and subleasing coal properties; 

(B) The execution, delivery and performance of the 
terms of this Agreement by Dale have been authorized 
and approved by all requisite action of the partners of 
Dale; and, assuming proper execution and delivery by 
Shackleford, this Agreement constitutes a valid and 

37 

binding obligation of Dale in accordance with its terms; 
and 

(C) Dale has complied with any requirements of the 
laws of the Commonwealth of Kentucky for the acquisi- 
tion by it of the assets of Shackleford covered by this 
Agreement and the performance of the provisions of 
this Agreement will not violate any laws of the Com- 
monwealth of Kentucky. 

Section 8.04. 

Additional Documents. Irdell and Dale 

shall have furnished Shackleford with the following: 

(A) A certified copy of resolutions duly adopted by 
the Board of Directors of Irdell approving this Agree- 
ment, authorizing its execution and delivery and ap- 
proving the transactions contemplated hereby; 

(B) The Employment Agreements and Non-Com- 
pete Agreement attached hereto as Exhibits M, N, O, 
P, Q and R each signed by an officer of Irdell; and 

(C) Such other documents as may be reasonably 
required by Shackleford and its counsel to perfect the 
consummation of the transactions hereunder duly exe- 
cuted by the appropriate officers of Irdell. 

38 

ARTICLE IX 

ENFORCEMENT OF REPRESENTATIONS, 
WARRANTIES & AGREEMENTS 

Section 9.01. Enforcement Against Shackleford. The 
representations, warranties and agreements made by 
Shackleford herein, except as they may be fully per- 
formed prior to or on the date of closing, shall survive 
the closing for a period of three years and shall be fully 
enforceable at law or in equity against Shackleford and 
its assigns, by Irdell and Dale and their successors and 
assigns. 

Section 9.02. Right to Defend. If any claim should be 
made against the property or assets covered by this 
Agreement by any third party, Irdell or Dale agree to 
promptly notify Shackleford or its assigns of such claim. 
If Shackleford (or such assigns) desires to do so, it may 
either join in the defense of such case or it may assume 
the full responsibility for the defense of such case. Any 
such action by Shackleford or its assigns shall be at its 
cost and expense. 

ARTICLE X 

CLOSING 

Section 10.01. Date. The closing hereunder shall 
take place at 11:00 A.M. on June 1, 1973, or as soon 
thereafter as is practicable but, in any event, not later 
than June 30, 1973, at the offices of Shackleford in 
Harlan, Kentucky, or at such other time or place as the 
parties hereto shall mutually agree upon in writing. 

39 

Section 10.02. Delivery of Documents at the Closing. 

(A) At the closing, Shackleford shall deliver to Irdell 
such bills of sale, assignments and other documents of 
transfer as shall be necessary to transfer ownership of 
the properties described on Exhibit A attached hereto 
and the coal inventory and supplies of Shackleford of 
the date of closing. At the closing, Shackleford shall 
likewise deliver to Irdell such bills of sale, assignments 
and other documents of transfer as shall be necessary 
to transfer to Irdell all its rights under the leases, 
contracts and commitments set forth on Exhibits B and 
C attached hereto. 

(B) At the closing, Irdell shall deliver to Shackleford 
the cash payments provided for in Sections 2.01, 2.02, 

2.03, 2.04 and 2.06 of Article II of this Agreement. At 
the closing, Irdell shall likewise deliver to Shackleford 
the agreements assuming all the obligations and 
responsibilities of Shackleford under the leases, 
contracts and commitments set forth on Exhibits B and 
C attached hereto. 

(C) At the closing, Shackleford shall deliver to Dale 
such assignments and other documents of transfer as 
shall be necessary to transfer to Dale all its rights 
under the leases set forth on Exhibit D attached hereto. 

(D) At the closing, Dale shall deliver to Shackleford 
the cash payment provided for in Section 2.05 of Article 
II of this Agreement. At the closing, Dale shall like- 
wise deliver to Shackleford its agreements assuming all 
the obligations and responsibilities of Shackleford 
under the leases set forth on Exhibit D attached hereto. 

40 

ARTICLE XI 

GENERAL PROVISIONS 

Section 11.01. Broker Fees. 

(A) Shackleford warrants to Irdell and Dale that it 
has not employed any broker or finder in connection 
with this transaction; and 

(B) Irdell and Dale warrant to Shackleford that they 
have not employed any broker or finder in connection 
with this transaction. 

Section 11.02. Amendment. This Agreement shall 
not be amended or modified except by means of a 
written instrument executed by Shackleford, Irdell and 
Dale. 

Section 11.03. Parties and Interest. This Agreement 
shall inure to the benefit of and be binding upon 
Shackleford, Irdell and Dale and their respective 
successors and assigns. Nothing in this Agreement, 
expressed or implied, is intended to confer upon any 
other person, other than the parties hereto, any rights 
or remedies under or by reason of this Agreement. 

Section 11.04. Termination of this Agreement. 

(A) This Agreement and the transactions contem- 
plated hereby may be terminated at any time prior to 
the date of closing: 

(1) By mutual consent of the Boards of Directors 
of Shackleford and Irdell and the partners of Dale; 

41 

(2) By Shackleford if any of the conditions of 
Article VIII of this Agreement have not been met or 
have not been waived and/or there shall have been a 
material misrepresentation or breach of warranty on 
the part of Irdell and Dale in the representations and 
warranties set forth in Articles IV and V of this 
Agreement; or 

(3) By the Board of Directors of Irdell and the 
partners of Dale if any of the conditions provided in 
Article VII of this Agreement have not been met or 
have not been waived and/or there shall have been a 
material misrepresentation or breach of warranty on 
the part of Shackleford in the representations and 
warranties set forth in Article III of this Agreement. 

Section 11.05. Notices. All notices, requests, de- 
mands and other communications hereunder shall be in 
writing and shall be deemed to have been duly 
delivered if delivered in person or mail, first class 
postage prepaid or by telegram as follows: 

(A) If to Shackleford, to: 

Mr. Raymond C. Cole 
Harlan, Kentucky 40831 

with a copy to: 

Mr. James S. Greene, Jr., 
Greene & Forester 
Horton Building 
Harlan, Kentucky 40831 

(B) If to Irdell, to: 

Mr. James A. Sigmon 
Post Office Box 501 
Pineville, Kentucky 40977 

42 

with a copy to: 

Mr. Bart A. Brown, Jr. 
Dinsmore, Shohl, Coates & Deupree 
2100 Fountain Square Plaza 
511 Walnut Street 
Cincinnati, Ohio 45202 

(C) If to Dale, to: 

Mr. James A. Sigmon 
Post Office Box 501 
Pineville, Kentucky 40977 

with a copy to: 

Mr. Bart A. Brown, Jr. 
Dinsmore, Shohl, Coates & Deupree 
2100 Fountain Square Plaza 
511 Walnut Street 
Cincinnati, Ohio 45202 

Section 11.06. Entire Agreement. This Agreement 
sets forth the entire understanding of the parties 
hereto and supersedes any and all prior agreements, 
arrangements and understandings relating to the 
subject matter hereof. No party shall be deemed or 
construed to have made any representation or war- 
ranty as a result of execution of this Agreement nor 
shall any representation or warranty be implied from 
such execution except representations and warranties 
which are expressly set forth herein. 

Section 11.07. Counter Parts. This Agreement may 
be executed simultaneously in several counter parts, 
each of which shall be deemed any original part which 

43 

together shall constitute one and the same instrument. 

IN WITNESS WHEREOF, the parties have duly exe- 
cuted this Agreement as of the date written above. 

Attest: SHACKLEFORD COAL COMPANY 

By __ illegible_______ By __ illegible_______ 

Secretary President 

Attest: IRDELL MINING, INC. 

By __ illegible_______ By __ illegible_______ 

Secretary President 

THE DALE COMPANY 

By __ illegible_______ 

General Partner 

44 

Social Security Administration 

Important Information 

Southeastern Program Service Center 
P.O. Box 10728 
Birmingham, Alabama 35202 
Date: 09/28/93 

JERICOL MINING INC 
RT 1 BOX 1000 
CUMBERLAND GAP 
TN 37724-9801 EIN: 61-0844927 

We are writing to you about the Coal Industry Retiree 
Health Benefit Act of 1992. Under this law, we must 
assign responsibility as explained below for the pay- 
ment of health and death benefit premiums for retired 
miners and their relatives who qualify. To qualify, the 
miners or their relatives must have been qualified for 
and receiving benefits under a prior United Mine 
Workers of America (UMWA) benefit plan as of July 
20, 1992. 

We have reviewed our earnings records of retired coal 
miners identified by the UMWA benefit plans and 
decided that you are the operator responsible for the 
premiums for the beneficiaries named on the enclosed 
list. This list also explains why we have assigned you 
responsibility for the benefit premiums of these 
beneficiaries. 

You will hear from the UMWA Combined Benefit Fund 
with more information about the benefit premiums. We 
will let you know of any other assignments we may 
make to you. 

45 

To Whom We May Assign Responsibility for Premiums 

We may assign responsibility for premiums to either: 

• a signatory operator that formerly employed 
the miner, or 

• a company related to such signatory operator 
that is no longer in business. 

Who is a Signatory Operator and Its Related Company 

A signatory operator is an employer who signed an 
agreement with the UMWA meeting certain 
requirements of the new law. A related company is 
either: 

• a member of the controlled group of cor- 
porations (within the meaning of 26 United 
States Code (U.S.C.) 52(a)) that includes the 
signatory operator; or 

• a trade or business under common control (as 
determined by 26 U.S.C. 52(b)) with the 
signatory operator; or 

• any other person, other than a limited partner, 
having a partnership interest or joint venture 
with a signatory operator in a business within 
the coal industry that employed the miner; or 

• a successor in interest to any of the companies 
described above. 

A related company must have met one of the four 
conditions defined above as of July 20, 1992, or if 
earlier, right before the signatory ceased to be in 
business. 

46 

How We Assign Responsibility 

We assign responsibility to an operator who our 
records show employed the miner in the coal indus- 
try under an UMWA agreement. The operator must 
still be in business. If the operator is no longer in 
business, we assign responsibility to the operator’s 
related company that is still in business. We assign 
responsibility using the following order of priority: 

• the last operator to employ the miner under an 
agreement for at least two years if that 
operator was also a signatory to a 1978 or later 
agreement; or 

• the last operator to employ the miner under an 
agreement if that operator was also a signatory 
to a 1978 or later agreement; or 

• the operator who employed the miner under an 
agreement for the longest period of time before 
1978. 

If the signatory operator that employed the miner is 
no longer in business, its premium responsibility 
must be assumed by any related company still in 
business. 

If You Disagree 

If you disagree with the assignment to you of anyone 
on the enclosed list, you have the right to ask us to 
review the assignment. But first, you may want to 
write us at the address at the top of this letter and 
ask to see the miner’s earnings record and the basis 
for the assignment. After looking at this informa- 

47 

tion, if you still disagree, you can write to us at the 
same address and ask us to review the assignment. 

To ask for a review, you must explain in writing why 
you disagree and either give us evidence that, 
standing alone, shows our assignment was in error or 
ask for extra time to gather evidence. If you do not 
give us evidence, we will not review the assignment. 

Some examples of evidence we would consider 
include federal, State or local tax records and legal 
documents such as incorporation, merger and bank- 
ruptcy papers, health and safety reports filed with 
federal or State agencies that regulate mining activ- 
ity, payroll and other employment business records, 
and information in trade journals and newspapers. 

• You have 30 days from the day you receive this 
letter to either request the earnings record and 
the basis for the assignment or ask for a 
review. 

• If you request the earnings record and the 
basis for the assignment, the 30 days to ask for 
a review start the day after you receive them. 
If you do not request this information, the 30 
days to ask for a review start the day after you 
receive this letter. 

• If you want extra time to gather evidence, you 
must ask for it in your written request for 
review. You will then have 90 days from the 
day you request a review to give us the 
evidence you want us to consider. 

48 

Unless you show otherwise, we assume that you 
receive any letter from us within 5 days of the date 
on the letter. 

If You Have Any Questions 

If you have any questions about this letter, please 
call us at 205-801-2600. If you do call please have this 
letter with you. It will help us answer your 
questions. 

You can also write us at the address shown at the top 
of this letter. Please write to us if you want us to 
review the assignment. 

If you have any questions about your responsibilities 
as an assigned operator under this new law, you 
should contact the UMWA Combined Benefit Fund 
at the address below: 

UMWA Combined Benefit Fund 
4455 Connecticut Ave. N.W. 
Washington, D.C. 20008 
(202) 895-3700 

/s/ CAROLYN W. NEYMAN 

Assistant Regional Commissioner 
Processing Center Operations 

49 

EIN: 61-0844927 

Page 1 

List of Assigned Miners and Other Beneficiaries 

Below we identify the miner(s) and their eligible relatives that we have assigned to 
you. We also show the reason we believe you are responsible for the coal industry 
health and death benefit premiums for those individuals. 

Our records and UMWA records indicate that you are related to the signatory operator 
named below who is no longer in business. This operator would have been responsible 
under the law for the miner named below under the rules for how we assigned 
responsibility explained on page 2. Therefore, as a related company you must assume 
responsibility. 

NOTE: Entries under “Dates Miner Employed” that display only the month and year 
indicate that the miner worked for one or more months in the calendar quarter ending 
with the month displayed. 

50 

Asterisk (*) denotes miner. 

Dates Miner Signatory 
Employed by Operator 

Miners and Other Beneficiaries 
SSN Signatory Company Name 

* FLEENOR WHEELER E 
9/64-12/68, 6/69 

SHACKLEFORD COAL CO INC 

FLEENOR MAGDALENE 

* KELLY CLARENCE 

12/65-6/73 SHACKLEFORD COAL CO 

KELLY JUANITA 

* LONGG L 6/64-12/76, 6/77 SHACKLEFORDCOALCO. 
LONG GEORGIA 
LONG SHAWN D 
LONG BRANNON D 

82 

RAY RESOURCES CORPORATION 

630 Commerce Square 

CHARLESTON, WEST VIRGINIA 25301 

PLEASE ADDRESS YOUR REPLY TO 

3 East 54th Street 
New York, New York 
10021 

April 26, 1973 

Messrs. James and Charles Sigmon 
Middlesboro, Kentucky 

Dear James and Charles: 

Pursuant to the authorization of the Board of Dir- 
ectors at the meeting held on April 12, 1973, the 
Executive Committee has given further consideration 
to the possibility of Ray Resources Corporation 
acquiring Shackleford Coal Company of Harlan County, 
Kentucky. 

As a result of such further consideration, Ray Re- 
sources Corporation has concluded that the company 
would not be interested in acquiring any interest in this 
company or its assets. 

Yours Sincerely, 

REEVES LEWENTHAL 

REEVES LEWENTHAL 

RL:lal 

83 

SHACKLEFORD COAL COMPANY 

We have been investigating a number of possibilities 
for acquisition of operating coal properties. We con- 
sidered the most promising of these to be Shackleford 
Coal Company, Harlan County, Kentucky, and have, 
therefore, concentrated our recent efforts on it. 

These efforts included a physical inspection of their 
properties, including visits to their operating mines, 
their washer and preparation plant and the seams of 
coal they are not presently mining; review of their mine 
maps; and a review of their relevant financial data. 

Following this review, we met with Henry Shackle- 
ford, President and principal shareholder of the Com- 
pany, and Raymond Cole, Secretary-Treasurer and a 
shareholder of the Company, on January 5, 1973, to 
negotiate terms under which the Company might be 
acquired. 

Following extensive discussions and negotiations, we 
agreed that a fair price for all the stock of the Company 
based on its December 31, 1972 situation would be 
$3,230,000. This price would be increased by earnings 
of the Company from December 31, 1972 to the date of 
closing or decreased by any losses for this period. A 
summary of the essential terms under which the 
Company can be acquired is attached hereto as Exhibit 
A. A target date for closing is March 1, 1973. 

As described in detail hereinafter, we believe this to 
be an excellent acquisition at this price. We strongly 
recommend that you authorize us to pursue this matter 
and work out a definitive Purchase Agreement to be 
submitted to this Board for its consideration. 

84 

To realize the full potential from an acquisition of the 
Shackleford Coal Company, additional capital expendi- 
tures amounting to approximately $1,500,000 must be 
incurred. By making these expenditures, the pro- 
duction of Shackleford can be roughly doubled and the 
profits of the Company can be more than doubled. 
Thus, we believe that this Board should consider this as 
an approximately $4,800,000 acquisition. In connection 
therewith, we recommend that the Board consider now 
where the funds to make this acquisition will be ob- 
tained so that the necessary funds will be available by 
March 1, 1973. 

A summary of relevant information as to Shackleford 
Coal Company is as follows: 

The Shackleford Coal Company operates the Glen 
Brooke mines which are located approximately 31 miles 
east of Harlan, Kentucky, in Harlan County. The 
properties being mined are covered by two separate 
leases covering contiguous properties as follows: 

(1) The Blackwood Lease covers an approxi- 
mately 1,909 acre tract and permits the mining to 
exhaustion of all seams of coal located on this 
property. The principal seams are the High Splint, 
Middle Splint, Low Splint, Creech and Darby. 
Other seams are located on this property but they 
have not been mined or prospected. The royalty 
rate is 15 cents per ton, but there is some possibility 
[illegible] would be to lock in the 15 cents per ton 
royalty rate. 

(2) The Penn Virginia Lease covers an approxi- 
mately 1,257 acre tract and permits the mining to 
exhaustion of only the High Splint seam. It is 
unlikely that a lease of the other seams could be 

85 

obtained. The royalty with respect to this property 
is 15 cents per ton and is not subject to change. 

Shackleford is presently mining the High Splint and 
Low Splint seams located on these properties. This coal 
is an extremely high-quality metallurgical coking coal. 
With washing, the BTU content will run 13,200 to 
13,500, the ash content is less than 6 percent and the 
sulphur content averages .62 percent. The coal in the 
High Splint seam runs approximately six feet in thick- 
ness and we estimate the recoverable reserves from 
this seam at approximately 12,000,000 tons. The coal in 
the Low Splint seam runs seven to nine feet in thick- 
ness with two small partings and we estimate the 
recoverable tonnage at between 6,000,000 and 7,000,000 
tons. Consequently, recoverable reserves from just 
these two seams would amount to approximately 
18,000,000 tons. 

The mining operations in these two seams consist of 
two mines located in the High Splint seam and one mine 
located in the Low Splint seam. All of these mines have 
excellent mining conditions and are well-laid out, well- 
developed mining operations. There is good compliance 
with the mine safety rules. The equipment is in ex- 
cellent shape and is well maintained. Some of the 
miners are now three to four years old and production 
could be materially increased by exchanging these 
miners for the latest mining equipment. If this were 
done, the new equipment would more than pay for itself 
within a very short period of time through increased 
production. Moreover, the capacity of two of these 
mines could be more than doubled by putting a new 
mining unit in each mine. The cost of each new 
complete mining unit would run approximately $400,000 

86 

and, again, more than pay for itself through increased 
production within a very short period of time. 

We also inspected the washer and preparation facili- 
ties and found them to be well built and well main- 
tained. The Company is presently running only a single 
shift at the washer and preparation plant and pro- 
cessing approximately 330,000 tons of clean coal per 
year. With some minor changes in the conveyor 
system, we believe this tonnage could be increased to 
approximately 400,000 tons for a single shift and to as 
much as 800,000 tons per year by going to a double 
shift. Moreover, the labor force used to operate this 
washing plant can be reduced somewhat with certain 
mechanical changes. The Company has no water or 
waste pollution problem. 

Other equipment and facilities of the Company are 
well maintained and in excellent condition. They have 
sufficient equipment on hand to put in any desired new 
mines, roads, etc. 

In addition to the High Splint and Low Splint seams 
that are presently being mined, the Middle Splint, 
Creech and Darby seams on the Blackwood property 
represent very substantial future mining opportunities. 

The Middle Splint seam is approximately 50 inches in 
height; the coal has essentially the same characteristics 
as the coal from the High Splint and Low Splint seams; 
and the mining conditions are excellent. This seam 
should probably be mined along with the Low Splint, as 
it is located only about 30 to 35 feet above the Low 
Splint seam. If we acquired this property, we would 
want to have a mine consulting firm review this seam 
and the Low Splint seam and then advise us as to the 
means by which the maximum tonnage could be 

87 

produced from both seams. Then, working with the 
land owner, we could jointly develop a program for 
mining both seams. 

The Creech seam is about five feet in height and has 
two small partings. Consequently, this coal would have 
to be washed. The quality of this coal is not as high as 
the other seams located on this property but, with 
blending, could possibly be sold as metallurgical coal or 
would at least be saleable as a high-quality steam coal. 
Mining operations in connection with this seam are 
excellent and a tremendous tonnage could be mined 
from this seam at a relatively low cost per ton. 

The Darby seam is approximately 50 inches in height 
and is the highest quality coal on this property. It 
represents the largest undeveloped area of Darby seam 
coal in all of Harlan County. This coal has a BTU 
content of more than 14,000; ash of less than 3 percent; 
and a sulphur content of less than .6 percent. Unfortu- 
nately, mining conditions for this seam are quite poor. 
Because of the poor mining conditions, we would not 
recommend that this seam be mined at this time. 
However, one of these days, this seam will be mineable 
at a very substantial profit. 

Management of this Company consists of four 
Shacklefords. Henry and Byrd Shackleford are 67 and 
65 years of age, respectively, and want to retire. Both, 
however, would agree to be available on a consulting 
basis. Sam Shackleford is 54 years of age and is general 
mining superintendent. Tom Shackleford is approxi- 
mately 43 years of age and supervises the operations of 
the preparation plant and loading operations. Both 
Sam and Tom Shackleford will stay on to continue the 
day-to-day mining operations. 

88 

For years, the Shacklefords have run only a United 
Mine Workers operation. However, the entire labor 
force has been carefully screened and represents an 
extremely loyal group of employees. The over-all 
quality of the Company’s labor force is much higher 
than the usual UMW labor force. With Tom and Sam 
Shackleford staying on, we believe the same high- 
quality labor force can be maintained. Supervisory per- 
sonnel are loyal and highly competent. All of the super- 
visory personnel would stay on. 

Since 1970, more than 90 percent of the coal mined 
from this property has been sold to United States Steel. 
The price today is $11.99 per ton and, after January 1, 
1973, will be increased to cover increased workmen 
compensation costs. 

United States Steel is willing to take as much coal 
from this property as can be produced. Thus, there is a 
waiting market for any increased production. If pro- 
duction could be roughly doubled, freight costs could be 
decreased $1.00 to $1.25 per ton which would likely 
increase the price United States Steel would be willing 
to pay for the coal. Finally, based on present market 
conditions, the price to United States Steel for this 
quality coal is somewhat low. Consequently, a price 
increase is possible, particularly if the freight cost could 
be decreased. 

89 

Financial Data 

Balance Sheet Analysis 

The Company uses a September 30 fiscal year. Its 
balance sheet as of September 30, 1972 reflects the 
following: 

Current Assets 
$ 616,780 

Fixed Assets 4,392,250 
Less: Accumulated Depreciation 
(1,921,189 

Total Assets 

$ 3,087,841 

Current Liabilities 
$ 323,092 

Net Worth 2,764,749 

$ 3,087,841 

Book value of fixed assets reflect straight-line 
depreciation except for assets acquired in fiscal 1972 
where accelerated depreciation was used. The use of 
accelerated depreciation resulted in a decrease of book 
value of the assets acquired in fiscal 1972 by some 
$28,000 more than would have resulted had straight- 
line depreciation been used. 

Also, the balance sheet reflects no supplies inventory. 
The accountant estimates that mine supplies now on 
hand amount to more than $100,000. In our opinion and 
based on our inspection of the mines, this estimate is 
probably conservative. 

In addition, the Company has followed the same 
practice that we followed of expensing all mine develop- 
ment costs. Thus, none of these costs are reflected on 
its balance sheet. 

90 

Taking into account book value at September 30, 
1972, earnings for the last three months of 1972, the 
excess depreciation over straight-line depreciation, a 
true supplies inventory and the true unamortized mine 
development costs, the purchase price is undoubtedly 
something less than what a true book value would be. 

Profit and Loss Analysis 

In its fiscal year ended September 30, 1970, the 
Company began the development of its relationship 
with United States Steel. By the end of this fiscal year, 
substantially all its production was being sold to United 
States Steel. With United States Steel being virtually 
its solo customer for only fiscal 1971 and 1972, we be- 
lieve its operating results for these years are of 
primary importance and its operating results for other 
years should be disregarded. 

The Company’s operations for these years can be 
summarized as follows: 

91 

Year Ended September 30 

1971 1972 

Tonnage Sold 
Sales 

316, 386 
$ 3,456,879 

327,940 
$ 3,766,309 

(2,625,175) 
(319,022) 

Other Costs (279,236) (322,303) 
Interest ___(16,271) _____--____ 

Income From Coal 

Operations $ 662,768 $ 499,748 
Other Income 13,761 $ 19,706 
Income Before 

Income Tax $ 676,529 $ 519,456 
Income Taxes (129,431) (109,451) 
After-Tax Profit $547,098 [illegible] 

On a per ton basis, operations for these years reflect 
the following: 

Year Ended September 30 

1971 1972 

Sales $10.93 $11.48 
Less: Cost of Sales 
(7.19) (8.00) 

Depreciation ( .71) ( .97) 
Selling (.88) ( .98) 

& Other Costs 
Interest (.05)__--__ 
Income From Coal 

Operations $ 2.10 $ 1.53 

(2,273,480) 
(225,124) 

Less: Cost of Sales 
Depreciation 
Selling & 

92 

Expenses for fiscal 1971 and 1972 include $33,000 per 
year in rent which is paid to a related partnership for 
rental of some mining equipment. The after-tax profit 
therefrom amounted to about $20,000 per year. These 
partnership assets are to be included in the deal. Con- 
sequently, considering both the Company and the 
partnership, earnings for fiscal 1971 and 1972 amounted 
to about $567,000 and $430,000, respectively, or an 
average of about $500,000 per year in after-tax earn- 
ings. 

In connection with these profits, it is to be noted that, 
in fiscal 1972, the UMW went on strike for approxi- 
mately 50 days. Therefore, the profit for this year 
represents only a ten-month operation. Also, for fiscal 
1972, the Company thought it had a substantial problem 
because of its price freeze situation. As a result, the 
Company held down production and attempted to 
increase its costs to the maximum extent possible. This 
accounts for the tremendous build-up of supplies that 
was previously mentioned. (In this connection, the 
Company has now determined that its profit margins 
for the base period years were high enough to cover its 
price increases through 1972. However, if we acquire 
Shackleford and their profits are combined with those 
of Ray and Coal Resources, the average profit margins 
are such that the Company could continue to increase 
its prices substantially without any price freeze pro- 
blem.) 

The original asking price for the Company was 
$4,300,000 which, as previously mentioned, has been re- 
duced to $3,230,000. Based on average after-tax earn- 
ings of $500,000, this price represents slightly less than 
6 1/2 times earnings. Taking into account average 
depreciation for those two years of about $275,000, this 

93 

price would be recovered through earnings and depre- 
ciation in about 4.2 years. 

However, as previously mentioned, the real value of 
these properties is in the potential for substantially in- 
creased production. Thus, if these properties are 
acquired, we would want to add approximately 
$1,500,000 in capital improvements to these properties 
($800,000 to add two complete new mining units to the 
present mines; $400,000 for the newest model miners in 
existing mines; and $300,000 for belt feeders, haulage 
equipment and miscellaneous capital additions). With 
these capital improvements, we would anticipate a 
minimum annual production of 800,000 tons. 

Because of the delivery time needed for this new 
equipment, we would anticipate that it would be to- 
wards the end of 1973 before we could get production to 
the annual level of 800,000 tons. Assuming a March 1 
completion date for this acquisition, we would antici- 
pate production in the area of 500,000 tons for 1973. 
Beginning with 1974, the level of 800,000 tons or more 
could be attained. 

Following our acquisition of these properties, we 
believe that a conservative profit per ton before our 10 
percent bonus would be $1.75 per ton. For 1974, in 
which the level of 800,000 tons of production can be 
reached and using a profit of $1.75 per ton, we believe 
the following results are conservative but reasonable: 

94 

Profit & 
Loss 
_Statement_ 
Cash 
Flow 

Profit of $1.75 per ton x 
800,000 tons 
Less: 10% Bonus to 
Sigmons 
$1,400,000 

(140,000) 

$ 1,400,000 

(140,000) 

Before-Tax Profit 
Income Taxes at 26% 
1,260,000 
(327,600) 
1,260,000 
(327,600) 

Net Profit After Taxes 
$ 932,400 $ 932,400 
Depreciation (estimated) 500,000 
Cash Flow After Taxes & 

Interest Cost 
$ 1,432,400 

Thus, we believe that, by 1974, these properties 
would provide Ray with a profit representing a 19.4 
percent on its investment of $4,800,000 and a recovery 
of this cost through earnings and depreciation in less 
than 3 1/2 years. 

In connection with the estimate of the per ton profit 
at $1.75 per ton, Shackleford estimates its per ton profit 
for 1973 at $1.8182 based on production of 330,000 tons 
and at $2.2917 based on production of 360,000 tons. See, 
in this regard, Exhibit B attached. This, of course, 
reinforces our belief that a per ton profit of $1.75 is very 
conservative. 

As you can see from this report, we are very 
impressed with the Shackleford coal properties. This is 
one of the finest blocks of coal in Harlan County. We 
think that, with Sam and Tom Shackleford staying on, 
continuity of management and the excellent relations 
that the Company has with its employees can be 
maintained. The one problem that has concerned us is 

95 

our ability to run a union operation with Shackleford 
Coal Company and a non-union operation at Coal Re- 
sources. Knowing, however, the people involved and 
through the use of separate corporations, we believe 
this separation can be maintained. Finally, we believe 
the asking price has been reduced to a point where this 
is a very attractive acquisition in the light of the profits 
it will generate. 

James A. Sigmon 
Charles E. Sigmon 

96 

EXHIBIT A 

UNDERSTANDING 
WITH 
SHACKLEFORD COAL COMPANY 

(1) Prior to the closing, Glenbrook Equipment Com- 
pany will sell to Shackleford Coal Company its 
equipment at its then book value. 

(2) At the closing, the shareholders of Shackleford 

Coal Company will sell to Ray Resources Cor- 
poration and Ray will purchase from these share- 
holders all the outstanding stock of Shackleford 
Coal Company. The price for this stock will be 
$3,230,000 plus the after-tax profits of Shackleford 
Coal from December 31, 1972 to the date of closing 
or minus the after-tax losses of Shackleford Coal 
for this same period. Profits or losses after 
December 31, 1972 will be calculated in the same 
manner and using the same accounting principles 
as Shackleford Coal Company is now using. This 
entire purchase price will be paid in cash at the 
closing. 

(3) Conditions to closing will be as follows: 

(a) Westmoreland will relinquish its right of 
first refusal; 

(b) Ray can obtain an engineering study certi- 
fying to proved reserves of at least 
8,500,000 tons of coal and probable reserves 
of at least 15,000,000 tons of coal from the 
Shackleford properties; 

97 

(c) Shackleford’s counsel will furnish to Ray his 
opinion as to title to the Shackleford lease- 
holds that will enable Ray to obtain title 
insurance on the properties at usual pre- 
mium rates; 

(d) Shackleford and its key employees (Sam 

Shackleford, Raymond Cole and perhaps 
others) will enter into three-year manage- 
ment contracts mutually acceptable; 

(e) Henry and Byrd Shackleford will enter into 

Agreements Not to Compete with Shackle- 
ford mutually acceptable; 

(f) Ray is satisfied as to the royalty arrange- 
ment with Blackwood Land Company. In 
this connection, Ray and its representatives 
will not discuss this matter with Blackwood 
or any other third parties without the 
expressed consent of Shackleford Coal 
Company; and 

(g) Shareholders of Shackleford will warrant 

Balance Sheet of Shackleford as of Decem- 
ber 31, 1972. They will reimburse Ray for 
any undisclosed liabilities (including taxes 
other than arising out of “roll-over” adjust- 
ments) exceeding $25,000. The December 
31, 1972 Balance Sheet of Shackleford Coal 
will be prepared in the same manner and 
using the same accounting principles as 
Shackleford Coal used in the preparation of 
its September 30, 1972 Balance Sheet. 

(4) Pending closing, Shackleford Coal will be oper- 
ated in the usual manner and in accordance with 

98 

its regular business practices. No raises to em- 
ployees or dividend payments will be made pend- 
ing closing. Shackleford Coal will not make any 
commitments (other than for items it has already 
agreed to purchase) without the written consent 
of Ray pending the closing. Also, pending the 
closing, Shackleford Coal will give Ray and its 
agents access to any and all information con- 
cerning its affairs as Ray and its agents may rea- 
sonably request. 

(5) Final arrangement is subject to definitive agree- 
ment containing usual warranties being worked 
out and properly executed and agreement of 
Ray’s Board of Directors. 

(6) Target date for closing is March 1, 1973. 

99 

TRANSMITTAL No. 9 
Audience: 

SSA Pub. No. 68-0101402 
NEPSC, SEPSC, GLPSC, 

January 1994 

WNPSC—CA, CATA, BA, 

PETE, CIES, RCOVTA, 
RECOVR, RECONR 
OCRO—DCCRC, DCCAIC, 
DCCERC, DCCPA, 
DEAPA, OSSPA, 

Originating Office: ORSI 

PROGRAM OPERATIONS MANUAL SYSTEM 
Part 01 -- Records Maintenance 
Chapter 014 -- Furnishing Earnings Information 
Subchapter 02 -- General Information Regarding 
Furnishing Earnings Record Information Under 

Agreements 

New Material No. of 

No. of 

Pages Discard Pages 

Table of Contents 

Table of Contents 

(T01402.001- 

T01402.057) .....…… 1 
(T01402.001- 

T01402.010) ... 1 

RM T01402.050B. - 
———- 
RM T01402.057-7 ....... 
62 

Background 

This transmittal introduces guides and procedures 
for the reviews of assignment decisions that SSA is 
required to make under the Coal Industry Retiree 
Health Benefit Act (The Coal Act) of 1992. Under the 
Coal Act, an assigned operator (or related company) 
may request the miner’s detailed earnings history and 

100 

the basis for the assignment. If an operator (or related 
company) disagrees with the assignment decision, it 
may then request review of the assignment decision 
and submit evidence which demonstrates the assign- 
ment is incorrect. SSA’s review decisions are final. 
Since all of this material is new, the transmittal should 
be read carefully. 

Some of the notices referred to in this transmittal 
have not yet been cleared and approved by the Notice 
Policy staff but will be added as exhibits in a later 
transmittal. 

U.S. Department of 

Effective Date: Upon Receipt 

Health and Human Services 
Social Security Administration 

Selective Distribution 
Office of Policy 

PSC 

SSA PUB. No. 68-0101402 

I.C.N. NONSTOCK 

101 

FURNISHING EARNINGS INFORMATION 

_______________________________________________ 

Successor A company is a successor com- 
Company pany if it was a signatory to an 

UMWA coal wage agreement 
and either: 

Expressly assumed health and 
death benefit obligations of 
retired persons last employed by 
the predecessor company by 
(for example): 

o payment of health care 
bills or death benefits; or 

o execution of a contract 
with a health carrier pro- 
viding coverage for such 
persons; or 

Implicitly assumed these obli- 
gations through promises of 
coverage or similar acts. 

If no explicit or implicit as- 
sumption of obligations has oc- 
curred, then a company is a 
successor company if: 

o the new company has 
signed an UMWA wage 
agreement; and 

o a majority of the em- 
ployees presently work- 

102 

ing for the successor 
company formerly work- 
ed for the predecessor 
company; and 

o the location is the same 
geographical area and 
the work functions have 
continued relatively un- 
changed; and 

o operations are/were not 
suspended for longer 
than six months (not 
counting a strike period); 
and 

103 

FURNISHING EARNINGS INFORMATION 

_______________________________________________ 

Successor (or 
A successor in interest is one 

Successors) in 
Interest 
(or more) successive owners 
who follow another in owner- 
ship or control of property. In 
order to be a successor in 
interest, a party must continue 
to retain the same rights as the 
original owner. The term 
ordinarily indicates statutory 
succession as, for instance, 
when a corporation changes its 
name but retains the same 
property. As used in a statute 
affecting transfers of property 
with intent to defraud creditors 
and making such transfers void 
as against all creditors and 
their “successors in interest,” 
the term also includes the 
assignees of such creditors. 

Time of 

The time of determining rela- 
Determining tionships between signatory 
the Relationships 

tory operators, related persons 
and successors is July 20, 1992. 
In such a case, the relationship 
shall be determined as of the 
time immediately before the 
signatory operator ceased to be 
in business. Relationships that 
arise after July 20, 1992, cannot 
be considered for assign- 

104 

ment/reassignment purposes. 
(Also see RM T01402.002, “re- 
lated company.”) 

105 

COAL ACT FAX 

Date : October 30, 1995 

TO : Don Buckley, NEPSC 

PHONE: (718) 557-3607 
FAX: (718) 557-5014 

Annette Lovett, SEPSC 
PHONE: (205) 801-2238 
FAX: (205) 801-2262 

Mark Rekoske, GLPSC 
PHONE: (312) 353-4274 
FAX: (312) 353-0403 
Shirley Murphy, WNPSC 
PHONE: (510) 970-1429 
FAX: (510) 970-1424 

COVER +: 2 

SUBJECT: Changes to Supplemental Coal Act Review 

Instructions #4 

All six examples provided in Section G. of Sup #4 are 
intended to illustrate how to handle “alter ego” and 
“successor” relationship situations. However, Example 
6, in Section B. of Sup #4, and the clarifications pro- 
vided to NEPSC in my August 17, 1995 FAX are 
partially erroneous. Therefore, I have prepared two 
replacement pages for Sup #4 as follows: 

Page 2: 
Explains the definition for “alter ego,” and 

clarifies that the “alter ego” relationship in- 
volves the corporate “death” (at least in its 
original form) of the signatory operator 
which is then resurrected under a new 
corporate identity; and 

Page 8: 

FROM : Sam Washington, OPBP 

PHONE: (410) 965-5042 
FAX: (410) 966-9214 

Changes Example 6 to (a) incorporate the 

“alter ego” clarification, and (b) include the 

106 

status of the non-mining operation which 
then explains its relationship to the mining 
operation and the signatory operator. 

Attached are the two replacement pages. Please 
destroy the original July 1995 versions of these pages 
and insert these in their place. 

If you have any questions or wish to discuss this 
further, please give me a call. 

cc: Ernestine Durham, Edie Lee 

Rich Harron, Mary Lea, Rodger Waldman 

107 

108 

109 

110 

[DATE AND TRANSMITTAL INFORMATION OMITTED] 

TO : Southeastern Program Service Center 
ATTN: Annette Lovette 

SUBJECT: Successor Company and Signatory Date 

Issues in Jericol Mining, Inc., 

[REDACTED] 

We have the following general comments: 

¡ The basic criteria for determining when a 
company is a successor to another is discussed in 
our memorandum to NEPSC dated August 9, 
1994 (attached). Ordinarily, the application of 
these criteria to the evidence presented by the 
assignee-appellant and other available SSA and 
UMWA Fund evidence should suffice in reaching 
the review decision. Bills of sale/transfer, incor- 
poration, and similar business documents should 
be taken literally, so there ought to be little need 
for “interpreting” them. However, if such docu- 
ments contain unfamiliar terms, refer to pre- 
cedent law cases, or raise other issues—and 
these affect the review decision—you may sub- 
mit them to us for advice. 

¡ The Coal Act does not permit us to impute a 
related company’s signatory status to that of the 
signatory operator; that is, a pre-1978 signatory 
cannot be treated as a 1978 (or later) signatory 
simply because its parent or “sister” company is 
a 1978 (or later) signatory. Section 9706(a) of the 
Coal Act makes it clear that assignments to 1978 

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signatories are made to “the most recent signa- 
tory operator to employ the coal industry re- 
tiree” (emphasis supplied). Nor does the 
definition of “signatory operator” in Section 
9701(c)(1) include a “related person”. Once a 
company is found to be a related company of an 
operator, only its active status is material– 
except in the uncommon case described in POMS 
RM T01402.003D when we can combine the 
miner’s work periods for the signatory operator 
and the related company if he worked for both. 

¡ In the case of a “successor” or “successor in 
interest”, we may speak of them as “related” but, 
in fact, these entities are treated as continuing 
the predecessor business activities. That is, 
successors or successors in interest are treated 
for assignment purposes as if there had been no 
change of ownership. When the Hot List was 
created, SSA had very limited information about 
the type of relationship that existed between a 
signatory operator and its “related company”. 
All that was known, generally, was that some 
type of relationship existed and, most probably 
these would prove to be parent-child or sister 
company relationships. Original assignments 
had to be based on these “best” assumptions. 
Now, as additional evidence of company relation- 
ships is becoming available during the admini- 
strative review process, it appears that this 
assumption was correct but that some re- 
lationships actually involve successors or even 
just name changes for the signatory operator. 
Such new evidence may well lead to reversal of 

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some assignment decisions, but this was ex- 
pected to be the case. 

We have these specific comments: 

¡ Jericol Mining—In this case, Jericol (formerly 

Irdell Mining, Inc.) was assigned as the 
successor to Shackleford Coal Company. The 
assignee has submitted a copy of its purchase 
agreement with Shackleford from 1973. The 
review is based upon a claim that not all of 
Shackleford’s assets were purchased but that 
some were purchased by Dale Company; other 
allegations about the nature of the purchase 
clearly contradict the plain wording of the 
purchase agreement. Evidence in file shows 
Jericol adopted use of the Shackleford name, 
continued operations under Shackleford’s 
UMWA agreement, and met other criteria tend- 
ing to show it is the successor. We agree with 
your analysis of the evidence and your conclusion 
that Jericol is in fact the successor to 
Shackleford. 

The assignee referred to the precedent case of 
Cox v. Feeders Supply Company in support of 
its review request. We have reviewed the case 
and found it was decided “under the facts of this 
case” which are so different that it would not 
support the assignee’s appeal. 

REDACTED MATERIAL OMITTED 

113 

If you need to discuss this, you may call me on 
(410)-965-7887. 

/s/ RAY WORLEY 

RAY WORLEY 

Attachment 
cc: NEPSC 
GTLPSC 
WNPSC 

bcc: Sam Washington 

Final:RWorley:vdobbins:8/18/94 
wp:RAY:se-misc.epa 

114 

AUG 09 1994 
ER 20-2 

TO : Northeastern Program Service Center 

ATTN: Jim Downey 

SUBJECT: Transfer of Business and Successor 

Issues under the Coal Act, 

[MATERIAL REDACTED] REPLY 

We have the following general comments: 

¡ The basic criteria for determining whether a 
business transfer was made to a successor or 
some other party [MAERIAL REDACTED] 

material is: when a transfer is made to another 
owner who continues the former owner’s 
operation with little or no interruption or 
change, the new owner is a successor. 

¡ The decision as to whether a transfer was to a 
successor or another is often a difficult matter 
of judgement. Most business transfers have 
common elements that do not clearly identify 
successors from others; such elements include: 

—Sale of the owner’s operating equipment and 
sale or lease of land used in the former 
operation; 

—“Hold harmless” agreements that exempt 
the buyer from liabilities incurred by the 
former owner prior to the transfer; 

115 

—Obligation of former owner to continue 
operations between the transfer agreement 
date and final closing of the transfer; and 

—Completion by the buyer of any contracts of 
the former owner that are still pending at 
final closing of the transfer. 

¡ The elements that tend to support a finding 
that a business transfer was to a successor 
are these: 

-–Employees of the former owner continue to 
work for the new owner with little or no 
interruption after the transfer. Where the 
former owner’s operations were covered by a 
UMWA wage agreement, UMWA Fund 
records may show work continued for the 
new owner at the same mine after the trans- 
fer. In other cases, scouting to SSA’s earn- 
ings records will show whether most of the 
former owner’s employees continued to work 
for the new owner after the transfer; 

—The former owner transferred the business 
trade name to the new owner. This is often 
evidenced by the former owner agreeing to 
file of “cancellation of fictitious name” with 
the State corporation registration agency, so 
the new owner can use the same company 
name. In some cases, the new owner may 
adopt a name similar to the former owner’s 
business name; 

116 

—The former owner agrees not to compete 
with the new owner’s business, or not to 
compete in the same geographical area; 

—The transfer includes sale of “good will” 
reputation with customers and others), or the 
turning over of customer records, business 
records, contracts, leases, and the like; 

—The prior owner agrees to work for the new 
owner as a consultant or employee; 

—The transfer changes ownership of a whole 
subsidiary or division previously owned by 
the transferring corporation; or 

—The transfer is between related persons in a 
family business or the new owner was an 
employee of the former business. 

[MATERIAL REDACTED] 

FAXED TO ALL PSCs 8/10/94